WASHINGTON (Legal Newsline) - Two certified public accountants have filed a class action lawsuit against the United States, claiming the Internal Revenue Service's regulations requiring tax preparers to pay annual fees to the agency.
Adam Steele and Brittany Montrois claim as certified public accountants, they are required to register and pay annual fees to the IRS to renew a preparer tax identification number to be placed on tax returns prepared by tax return repairers for others for compensation and to prohibit the U.S. Treasury Department from charging such fees in the future, according to a complaint filed Sept. 8 in the U.S. District Court for the District of Columbia.
In 2010 and 2011, Steele and Montrois each filed IRS Form W-12 and each paid the U.S. Treasury Department $64.25 to receive a PTIN for utilization, according to the suit. To renew their PTINs the following years, they each paid the Treasury $63 each time.
"Their PTINs did not change from the PTINs received for 2011 and 2012," the complaint states. "Prior to March 2, 2014, Adam Steele filed three (3) separate refund claims, requesting reimbursement of the PTIN user fees paid for 2011-2013. Adam Steele did not receive a refund claim rejection notice or approval notice from the U.S. Department of the Treasury with respect to his initial PTIN fee payment of $64.25 or his two PTIN renewal fee payments of $63."
In January 2010, the IRS issued IRS Publication 4832, "Report Preparer Review (Rev. 12-2009)." This document, which is not law, proposed certain actions be taken to regulate the tax return preparation industry, the suit says.
"Currently, any person may prepare a federal tax return for another for a fee," the publication states.
"With the exception of persons prohibited from preparing tax returns by court order, the quoted sentence of the immediately preceding paragraph was correct upon the date of issuance of Publication 4832, and it has remained correct through the present date," the complaint states.
No recently enacted legislation led to preparation and issuance of Publication 4832, according to the suit. Instead, this publication is purely an IRS-generated product, it says.
The plaintiffs claim no law has been enacted since issuance of Publication 4832 that would permit the Treasury or any federal agency to prohibit anyone from preparing tax returns for compensation.
"No law existed prior to the issuance of Publication 4832 that would have permitted any Treasury or any federal agency to issue a regulation or regulations that would have prohibited anyone from preparing tax returns for compensation," the complaint states.
Publication 4832 recommended that the tax return preparation industry be regulated in a particular manner, including IRS testing of certain preparers to determine eligibility to be able to prepare returns for others for compensation and annual continuing professional education requirements for those persons who passed the IRS's test, according to the suit.
The plaintiffs claim previously, the IRS required tax return preparers to include an identifying number of prepared returns. Return preparers could use their Social Security Number or obtain, for free, a PTIN from the IRS.
"Publication 4832 recommended that, in order to aid the IRS, individuals who prepare tax returns be required to acquire a Treasury provided PTIN, and be charged upon issuance and every three years thereafter for the PTIN," the complaint states.
Once issued, a PTIN does not change.
The challenged regulations were issued several years ago as part of a broad IRS initiative to radically expand its oversight of attorneys, accountants and other tax return preparers who prepare tax returns for compensation.
Earlier this year, the D.C. Circuit Court ruled that large portions of the regulations issued by the IRS were invalid because the IRS lacked statutory authority to issue the regulations in Loving v. United States.
Congress allowed the IRS to require practitioners who prepare returns for compensation to place a PTIN on the returns to help IRS identify the preparer. The plaintiff CPAs contend that the IRS lacks statutory authority, however, to charge fees to obtain or renew a PTIN and the IRS cannot use fees it has collected for unrelated activities.
"The courts have rejected the IRS's effort to regulate return preparers and it is time for the IRS to return the PTIN registration fees it has collected to support that effort," plaintiffs' attorney Stuart Bassin said.
The class is composed of individuals who prepare tax returns for others for compensation and firms and companies the employees or some or all of the owners of which prepare tax returns for others for compensation. It involves more than 700,000 individual practitioners.
The plaintiffs are seeking class certification and compensatory damages. They are being represented by Bassin of The Bassin Law Firm.
The case is assigned to District Judge Tanya S. Chutkan.
U.S. District Court for the District of Columbia case number: 1:14-cv-01523
From Legal Newsline: Kyla Asbury can be reached at email@example.com.