Is the IRS Annual Filing Season Program Lawful?

On July 15^th, the AICPA (American Institute of CPAs) filed a federal lawsuit against the IRS in-order to halt the IRS’s recently introduced Annual Filing Season Program.  The complaint has three counts and aims to declare the rule implementing the program unlawful and stop its operation.

 

Their main complaints are a follows:

1. The IRS violated the APA’s notice and comment requirements when it implemented the rule through a revenue procedure. The Administrative Procedure Act (APA) requires federal agencies to issue a notice of proposed rulemaking and solicit comments.

2. The rule is “an illegitimate exercise of government power” because it violates the APA and is “an impermissible end run” around the decision in Loving.

3.  The IRS cites no statutory authority that allows it to implement the new rule, and, under 5 U.S.C. §706(2)(C), without statutory authority, the program is invalid.

 

The AICPA argues in its complaint that while the program is said to be voluntary, it will actually be “de facto”.  According to the complaint, “[f]aced with the prospect of not participating and losing business, tax return preparers will “choose” to comply.” That makes it clear that the “rule is mandatory as a practical matter” and thus, the program “achieves substantially the same outcome as the rule invalidated in Loving.”

Other arguments include that creating new categories of tax preparers is confusing to the consumer and that this doesn’t address the problem of unethical or fraudulent preparers.

According to Accounting Today, when IRS Commissioner John Koskinen announced the program last month, he told reporters that “the agency’s Office of Chief Counsel and the Treasury Department’s General Counsel had reviewed the matter carefully and assured the IRS that it had the legal authority to proceed.” The AICPA disagrees.

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