Tax filing season is upon us, but this spring, one Washington-based group is sending the Internal Revenue Service more than just completed W-2 forms. The Institute for Justice (IJ), a public interest law firm, is suing the IRS on behalf of three professional tax preparers over a rule mandating that they obtain a license to file tax forms for compensation.
The rule, first implemented in 2011, imposes $64 in new fees and mandates a $100 examination charge on top of an obligation to take a 15-hour course. Certified public accountants, attorneys and certain IRS-approved "enrolled agents," however, are exempt from the requirements.
The rule has the support of large tax-filing firms like H&R Block, and critics argue that the fees could raise the price of tax services or dissuade independent tax filers from offering them, thereby sending more business to the larger companies.
"These licensing requirements impose a substantial burden on small tax preparation businesses and independent tax return preparers, many of whom prepare taxes on a part-time or seasonal basis," IJ's attorneys argued in a statement. "Many of these independent preparers and small businesses will have to either stop preparing taxes or raise their prices, making it more difficult for them to compete on price with the larger tax preparation firms, which can more easily absorb these costs, and CPA firms and law firms, which are generally exempt from these licensing regulations and thus won't have to pay the licensing costs."
The firm argues that the IRS does not have the authority to implement such a rule without the consent of Congress. A spokeswoman from the IRS declined to comment on the pending lawsuit, but the IRS has defended the requirement as a means to protect consumers.
IJ has a history of fighting—and sometimes winning—battles over regulatory licensing. Most recently, the organization represented Benedictine monks in Louisiana who were barred from building hand-crafted funeral caskets because of a state Board of Embalmers and Funeral Directors rule that made it illegal to build caskets without a license. IJ has filed similar complaints over licensing rules on behalf of beauty parlor eyebrow threaders in Arizona, taxi drivers in Colorado, interior designers in Connecticut and yoga instructors in Virginia.
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