IRS loses lawsuit in fight against tax preparers

[waltky]

A win for the 'little guy'...

IRS loses lawsuit in fight against tax preparers
Fri, Jan 18, 2013 — A federal judge on Friday barred the IRS from imposing a series of new regulations, including a competency exam, on hundreds of thousands of tax preparers.

U.S. District Judge James Boasberg in Washington ruled against the IRS in favor of three tax preparers who filed suit last year with the help of a libertarian legal group, the Arlington, Va.-based Institute for Justice. Since 2011, in response to what it says has been a growing problem of poorly done returns, the IRS has sought to impose a series of new regulations on tax preparers. That included a requirement to pass a qualifying exam, paying an annual application fee, and taking 15 hours annually of continuing-education courses. Attorneys and certified public accountants would have been exempt from the regulations.

The Institute for Justice argued that the IRS lacked the statutory authority to impose the regulations and said they would put tens of thousands of mom-and-pop tax preparers out of business, because the regulations were onerous and create a competitive disadvantage to the attorneys and CPAs who were exempt. The judge's order includes an injunction that bars implementation of the regulations, which have been put in place on a piecemeal basis. The competency exam was to have taken effect in 2014.

Dan Alban, an Institute for Justice attorney, said the timing of the ruling is good because tax preparers who could have been put out of business will be able to work during the coming tax season. "It is also good for the public at large because the cost of preparing a tax return was about to go up" as a result of the increased regulations, Alban said. Alban called the IRS plan "an unlawful power grab by one of the most powerful federal agencies and thankfully the court stopped the IRS dead in its tracks."

The IRS argued in court that it not only had the statutory authority to impose the regulations, but also had the inherent authority to do so. An IRS spokesman declined comment Friday on the judge's ruling. The government can seek to appeal.

Paid tax preparers fill out 60 percent of all U.S. tax returns, according to a study from the Government Accountability Office, a congressional watchdog agency. The GAO has found significant problems over the years in the quality of work done by them. In one 2006 study, the GAO took tax returns to 19 different commercial tax preparers, and 17 of 19 incorrectly calculated the taxes due.

IRS loses lawsuit in fight against tax preparers - Yahoo! News

 

[waltky]

Granny says it just goes to show what a buncha sore losers the IRS is...

IRS: We can read emails without warrant
4/10/13 - The Internal Revenue Service (IRS) has claimed that agents do not need warrants to read people's emails, text messages and other private electronic communications, according to internal agency documents.

The American Civil Liberties Union (ACLU), which obtained the documents through a Freedom of Information Act request, released the information on Wednesday. In a 2009 handbook, the IRS said the Fourth Amendment does not protect emails because Internet users "do not have a reasonable expectation of privacy in such communications." A 2010 presentation by the IRS Office of General Counsel reiterated the policy. Under the Electronic Communications Privacy Act (ECPA) of 1986, government officials only need a subpoena, issued without a judge's approval, to read emails that have been opened or that are more than 180 days old.

Privacy groups such as the ACLU argue that the Fourth Amendment provides greater privacy protections than the ECPA, and that officials should need a warrant to access all emails and other private messages. Traditionally, the courts have ruled that people have limited privacy rights over information they share with third parties. Some law enforcement groups have argued that this means they only need a subpoena to compel email providers, Internet service companies and others to turn over their customers' sensitive content. But in 2010, a federal appeals court ruled that police violated a man's constitutional rights when they read his emails without a warrant.

Despite the court decision, U.S. v. Warshak, the IRS kept its email search policy unchanged in a March 2011 update to its employee manual, according to the ACLU. In an October 2011 memo obtained by the ACLU, an IRS attorney explained that the Warshak decision only applies in the Sixth Circuit, which covers Kentucky, Michigan, Ohio and Tennessee. But the attorney noted that if a service provider fought the search request, it would likely result in "protracted litigation," meaning that any leads from the emails would be "stale" if the IRS ever obtained them. The IRS did not respond to a request to comment.

The ACLU also submitted requests for documents from the FBI and the Justice Department on their policies for emails searches, but has not received responses yet. Lawmakers in both chambers are working on legislation that would update the ECPA to require a warrant for emails and other private online messages. At a hearing last month, Elana Tyrangiel, the acting assistant attorney general for the Justice Department's Office of Legal Policy, agreed that there is "no principled basis" for treating emails differently depending on how old they are.

Read more: IRS: We can read emails without warrant - The Hill's Hillicon Valley

See also:

IRS tracks your digital footprint
4/10/2013 - The IRS has quietly upgraded its technology so tax collectors can track virtually everything people do online.

The Internal Revenue Service is collecting a lot more than taxes this year -- it's also acquiring a huge volume of personal information on taxpayers' digital activities, from eBay auctions to Facebook posts and, for the first time ever, credit card and e-payment transaction records, as it expands its search for tax cheats to places it's never gone before.

The IRS, under heavy pressure to help Washington out of its budget quagmire by chasing down an estimated $300 billion in revenue lost to evasions and errors each year, will start using "robo-audits" of tax forms and third-party data the IRS hopes will help close this so-called "tax gap." But the agency reveals little about how it will employ its vast, new network scanning powers.

Tax lawyers and watchdogs are concerned about the sweeping changes being implemented with little public discussion or clear guidelines, and Congressional staff sources say the IRS use of "big data" will be a key issue when the next IRS chief comes to the Senate for approval. Acting commissioner Steven T. Miller replaced Douglas Shulman last November.

"It's well-known in the tax community, but not many people outside of it are aware of this big expansion of data and computer use," says Edward Zelinsky, a tax law expert and professor at Benjamin N. Cardozo School of Law and Yale Law School. "I am sure people will be concerned about the use of personal information on databases in government, and those concerns are well-taken. It's appropriate to watch it carefully. There should be safeguards." He adds that taxpayers should know that whatever people do and say electronically can and will be used against them in IRS enforcement.

IRS's big data tracking

 

[Mad Scientist]

The Institute for Justice argued that the IRS lacked the statutory authority to impose the regulations and said they would put tens of thousands of mom-and-pop tax preparers out of business, because the regulations were onerous and create a competitive disadvantage to the attorneys and CPAs who were exempt.

Which was the whole point of those Regulations. IRS wants a monopoly on Tax Preparation.

 

[oldfart]

DISCLAIMER: I have been an enrolled agent ("Federally Authorized Tax Practitioner") since 1979 so I have an innate bias, but it's probably not what you think it is.

First some background. The tax industry has two general classes of practitioners. There are the FATP's which include attorneys, CPA's, enrolled agents (EA's) and a few other miscellaneous special categories such as enrolled retirement plan agents, certified acceptance agents, and enrolled actuaries. All of these may practice before the IRS (handle audits, appeals, collections cases, etc) on behalf of taxpayers. They are governed by a set of regulations commonly known as Circular 230. This means they can be sanctioned or disbarred for unprofessional conduct. Attorneys and CPA's are licensed and regulated by each state and Treasury regulation under 230 is secondary. EA's however, are primarily regulated by the US Treasury and therefore must also demonstrate proficiency in taxation to gain the credential and meet continuing education requirements.

Up until 1976, tax preparers were entirely unregulated. In the 1976 Tax Reform Act, a set of preparer penalties was enacted which has since been substantially expanded, requiring tax preparers to sign returns, provide taxpayers with copies of their returns, and exercise due diligence in preparing returns. With the advent of electronic filing in the mid-80's another set of regulations governing electronic filing gave the IRS additional regulatory powers over Electronic Return Originators (ERO's) which eventually included just about all tax preparers one way or another. A couple of decades ago, the IRS decided to exercise its power under the 76 Act to provide preparers with a substitute for their Social Security numbers in complying with the requirement that they provide their name, address, and tax identifying number on each return (a bonanza for identity thieves!). This was called a Preparer Tax Identifying Number (PTIN) which the IRS issued and maintained lists of. So I actually have four IRS/Treasury issued numbers; my PTIN, my EFIN, my enrollment number, and my CAF number (Central Authorization File number which uniquely identifies me in the IRS system as an authorized Power of Attorney when I represent a client).

All of this pre-dates the most recent controversy and is unaffected by it. The judge in the present case makes a big deal of the fact that his ruling leaves all of this in place. Tax preparers must still apply for a PTIN, obey all of the regulations regarding preparer penalties under the 76 Act, comply with the electronic filing regulations, and conform to Circular 230 in their “limited practice without enrollment” (i.e. they can provide explanations to an IRS examiner as long as they do not argue in your behalf, but nothing else).

What they got out of was demonstrating any competence in taxation whatsoever (avoiding a $145 exam fee), and meeting a continuing education requirement. That’s it.

The IRS has already taken steps to justify the fee for “renewing” a PTIN and has shifted to a “vigorous” enforcement of preparer penalties, which the Congress has thoughtfully increased. For example, failure to retain records documenting due diligence in determining eligibility for earned income credit has increased from $100 to $500 PER RETURN and site visits are already happening. So instead of regulation with the procedural safeguards of Circular 230, preparers now face the prospect of being put out of business by fines often running into the tens of thousands of dollars for recordkeeping lapses (note that it is irrelevant whether the return is correct, the penalty applies for simply not documenting due diligence whether you did it or not.

Way to go guys. With victories like this you stuck your heads in the noose and can jump off the platform now.

 

[waltky]

House looking into IRS email search policy...

House lawmaker questions IRS over email search policy
4/11/13 - The chairman of a House subcommittee is demanding more information from the Internal Revenue Service (IRS) about its practice of searching the emails of suspected tax fraudsters.

In a letter to the IRS on Thursday, Rep. Charles Boustany (R-La.), chairman of the Ways and Means subcommittee on Oversight, asked for the IRS to explain when it believes it can search emails without a warrant and how many searches it has conducted since 2010. He asked the agency to provide all internal memos and guidelines on its email search policy. Boustany also asked the IRS to provide information about whether it mines Facebook, Twitter or other social media sites for information on taxpayers.

In a statement on Thursday, the IRS said that "respecting taxpayer rights and taxpayer privacy are cornerstone principles for the IRS." "Our job is to administer the nation's tax laws, and we do so in a way that follows the law and treats taxpayers with respect," the agency said. "Contrary to some suggestions, the IRS does not use emails to target taxpayers. Any suggestion to the contrary is wrong."

The American Civil Liberties Union (ACLU) released internal IRS documents on Wednesday in which the agency claimed that, in many cases, it does not need a warrant to access emails, text messages and other electronic communications. The ACLU obtained the documents through a Freedom of Information Act request. In a 2009 handbook, for example, the IRS said the Fourth Amendment does not protect emails because Internet users "do not have a reasonable expectation of privacy in such communications." Under the Electronic Communications Privacy Act (ECPA) of 1986, government officials only need a subpoena, issued without a judge's approval, to demand that an Internet company turn over emails that have been opened or that are more than 180 days old.

Privacy groups, however, argue that the Fourth Amendment provides greater privacy protections than ECPA and that police and other officials should need a warrant to access electronic messages. A 2010 appeals court decision backed a warrant requirement for email searches, but the Supreme Court has yet to settle the issue. Lawmakers in both chambers are currently working on legislation to update ECPA to require warrants to search all emails, regardless of how old they are.

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