Randolph Law Firm, P.C.

Class action suit against the IRS seeks refund for tax preparers

Pursuant to regulations issued by the IRS in 2010, tax preparers in Nevada and all of the states must pay a fee and obtain what is called a preparer tax identification number (PTIN). The IRS takes in a handsome sum of money with its PTIN program. The anticipated income is from 51 million to $77 million per year. To date, it's estimated that tax preparers have paid over $150 million to the agency.

A controversy over the fees has developed due to the fact that many of the costs of administering the program did not develop as anticipated. Early litigation resulted in a federal court decision narrowing the power of the IRS to regulate the tax preparers. The original intent of the agency to conduct tax compliance and suitability checks, for example, was not ultimately carried out.

A group of tax preparers have filed a class action against the IRS in the U.S. District Court for the District of Columbia, in which they claim essentially that the fee is not legal because it does not provide any value to the user and there is no valid public policy being served. They want their money back. Alternatively, they claim that at least the $50 portion of the fee that exceeds its actual cost is illegal.

The suit comes on the heels of a legal action filed against the agency in July. The American Institute of CPA's sued the IRS claiming that its voluntary program to regulate tax preparers was improper. That suit is pending.                                                                              

The lawsuit just filed in the District of Columbia seeks both a refund and a declaration that the fees are improper and not allowed. The plaintiffs also claim that the IRS asks for far too much information from the tax preparers.  A decision will thus impact hundreds of thousands of tax preparers throughout the country, including in Nevada.


Source: Forbes, "IRS Hit With Class Action Suit Over Tax Preparer User Fees", Kelly Phillips Erb, Sept. 8, 2014

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