A libertarian-leaning public interest law firm is suing the Internal Revenue Service for what it describes as “an unlawful power grab” by the agency.
At issue are regulations put in place last year by the IRS requiring those who prepare taxes for compensation to be licensed through the agency. The IRS now requires tax preparers to take an exam and pay a fee to be licensed as a “registered tax return preparer.”
The Institute for Justice said the IRS doesn’t have the power to do this.
“Congress never gave the IRS the authority to license tax preparers, and the IRS can’t give itself that power,” the Institute for Justice said in a brief provided to The Daily Caller.
A spokesman for the IRS declined to comment. “The IRS does not comment on pending litigation,” spokesman Grant Williams told TheDC.
The Institute for Justice argues that the licensing unfairly targets independent tax return preparers and small businesses because large tax preparer companies like H&R Block and Jackson Hewitt — which support the regulations — can easily absorb the licensing costs, while smaller outfits cannot. The Institute argues that many independent tax preparers work “on a part-time or seasonal basis” and “will have to either stop preparing taxes or raise their prices” to comply.
The regulations also make exceptions for attorneys and certified public accountants. Three independent tax preparers joined the firm in filing a lawsuit against the IRS in federal court on Tuesday.
“These regulations are typical government protectionism,” the Institute said in the brief. “They benefit powerful industry insiders and at the expense of entrepreneurs and consumers, who will likely have fewer options and face higher prices. But tax preparers have a right to earn an honest living without getting permission from the IRS. And taxpayers—not the IRS—should be the ones who decide who prepares their taxes.”
The Institute for Justice points out that tax return preparers are already regulated by a number of federal and civil criminal laws meant to protect customers from fraud or disclosure of private information.
The Institute for Justice in the lawsuit seeks to stop the IRS from continuing to implement these regulations on about 350,000 tax return preparers.
Here’s a video from the group explaining the lawsuit: