In 2013, the U.S. District Court for the D.C. Circuit put a stop to IRS efforts to regulate tax preparers. These proposed rules would require all unenrolled tax preparers to become “registered tax return preparers”—paying an annual fee, passing a competency exam, and completing a certain number of continuing education (CE) hours each year—in order to continue their tax preparation activities. While these efforts may have been well-intentioned, the District Court ruled, an administrative agency like the IRS lacked the statutory authority to regulate income tax preparers and could not legally enforce these rules.
In response, the IRS created a voluntary training and oversight program known as the Annual Filing Season Program (AFSP). This program allows unenrolled tax preparers who complete certain annual testing and CE requirements to represent taxpayers on a limited basis. By receiving an AFSP Record of Completion, an unenrolled tax preparer can be listed in the IRS’s online directory of tax preparers and represent taxpayers in the initial stages of an IRS audit.
While this compromise seemed to fulfill both the IRS’s goal of regulating those who assist taxpayers in tax preparation and unenrolled preparers’ goals of continuing to assist their clients, enrolled tax preparers and certified public accountants did not appreciate the increased competition for tax prep services. The American Institute of Certified Public Accountants (AICPA) recently challenged the AFSP in the federal district court, arguing that the Administrative Procedure Act required the IRS to go through the administrative process set forth for other programs instead of unilaterally enacting the AFSP without notice or comment.
The Court of Appeals for the District Circuit disagreed. In an opinion issued in August 2018, it held that the AFSP did not violate the Administrative Procedure Act in the ways the AICPA alleged and remanded the matter back to the D.C. Circuit to enter judgment in the IRS’s favor.
Although the AFSP is still in its early stages and will likely face additional legal challenges in the future, for the time being, this program is the “law of the land.” Unenrolled preparers will still need to meet the program’s requirements, including the completion of 18 hours of annual CE, to receive their Records of Completion and continue to represent clients before the IRS.