Court strikes PTIN fees; IRS suspends registration, renewal

A federal district court has found that the IRS may require the use of preparer tax identification numbers (PTINs). However, the court enjoined the IRS from charging a user fee to issue or renew PTINs. The IRS announced that, as a result of the court’s decision, PTIN registration and renewal is suspended. The D.C. Circuit, which would hear the likely appeal in this case, struck down the IRS’s Registered Tax Return Preparer (RTRP) regs in Loving, 2014-1 ustc ¶50,171. After Loving, the only part of the regs that remain are the PTIN requirements, the district court noted.


Individuals who are compensated for preparing, or assisting in the preparation of all or substantially all of any U.S. federal tax return, claim for refund, or other tax form submitted to the IRS, generally must obtain a PTIN. There are exceptions for preparers of certain forms and returns, including the Form W-2 series; Form W-7, Application for IRS Individual Taxpayer Identification Number; Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding; Form 1098 series; and Form 1099 series.

Court Analysis

The court first found that Congress has authorized Treasury and the IRS to require return preparers to identify themselves on tax returns and refund claims they prepare. Code Sec. 6109(a)(4) authorizes the IRS to assign identifying numbers, the court found.
Further, the court found that the PTIN requirement is not arbitrary or capricious. The court agreed with the IRS that the use of PTINs enables the agency to accurately identify return preparers, match preparers with the returns and refund claims, and better administer the tax laws with respect to preparers and their clients. Therefore, the court found that the IRS was authorized to issue regs requiring return preparers to obtain PTINs.
The court next found that the Independent Offices Appropriations Act (IOAA) permits agencies to charge user fees for a service or thing of value provided by the agency. Fees connote a benefit, the court found. Additionally, there must be a sufficient nexus between the agency service for which the fee is charged and the individuals who are assessed.
However, the court found that the IRS may not impose user fees for PTINs. Although the IRS may require the use of PTINs, the agency may not charge fees for PTINs because this would be equivalent to imposing a regulatory licensing scheme and the IRS does not have this regulatory authority, the court held.
The court noted the Circuit Court’s decision in Loving. There, the appellate court found that the IRS had improperly expanded the definition of practice before the Department of Treasury to include preparing and signing tax returns. “The ability to prepare tax returns is the ‘practice’ identified by the IRS in Loving, but the [appellate] court found that this activity does not qualify as practicing before the IRS. Therefore, it appears to this court that the IRS is attempting to grant a benefit that it is not allowed to grant, and charge fees for granting such a benefit,” the court held.
Wolters Kluwer asked the IRS if it intends to issue refunds but did not receive a response by press time. (Steele et al. v U.S., U.S. District Court, D. District of Columbia; 14-cv-1523-RCL, June 1, 2017, 2017-1 ustc ¶50,238.)

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