Court Rules Against IRS PTIN Fees

Chris Gaetano
Published Date:
Jun 5, 2017

A federal court has ruled that while the IRS can require the use of Preparer Tax Identification Numbers (PTIN), it cannot charge fees to get them, ending the $175 million class action lawsuit that has been fighting the service on this issue since 2014, according to Forbes. The case, Adam Steele et al. v United States of America, concerned a move from the IRS that not only mandated the use of a PTIN in order to file, but also imposed a $64.25 initial fee to set one up, along with an annual $63 fee to maintain it. 

The court said that the IRS was not arbitrary or capricious, which would have negated the PTIN requirement entirely, as it allows the service to identify tax return preparers in order to maintain oversight. Further, it said that this was not an unexplained change in policy, and pointed out that Congress specifically authorizes the Treasury Secretary to create regulations requiring return preparers to identify themselves. For these reasons, the court ruled that the IRS does indeed have the authority to require the use of a PTIN. 

In contrast,the court found that the IRS does not have the authority to charge for one. If it did, the PTIN would need to confer a special benefit of some sort. The IRS argued that the special benefit was being able to prepare tax returns for compensation, something that only those who obtain a PTIN would be able to do. It also argued that the PTIN protects the confidentiality of tax return preparers, as it is used in place of a Social Security number, and that protection itself is a service or thing of value. The court, however, said that being able to practice before the IRS is not a special benefit. If it were, then that would mean that the PTIN amounts to a regulatory licensing scheme, and another case, Loving vs. IRS, explicitly said the IRS did not have the authority to run such a thing. 

"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," said the opinion. 

The court said that if tax return preparers were regulated entities required to obtain licenses, then the case would be very different, but they're not. 

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