COURT RULES THE PTIN FEE IS UNLAWFUL!

The US District Court for the District of Columbia, in response to class action lawsuit “Adam Steele et al v United States of America”, has ruled that the Internal Revenue Service can require paid tax preparers to register with the Service and receive a “Preparer Tax Identification Number”, or PTIN, but it cannot charge a fee for applying for or renewing a PTIN.

 

The Court had determined -

 

“Although the IRS may require the use of PTINs, it may not charge fees for PTINs because this would be equivalent to imposing a regulatory licensing scheme and the IRS does not have such regulatory authority.”

 

The IRS relied on the Independent Offices Appropriations Act of 1952 in its justification of the fee, but according to the decision –

 

“The Court is unaware of similar cases in which an agency has been allowed to charge fees under the IOAA for issuing some sort of identifier when that agency is not allowed to regulate those to whom the identifier is issued, and the government has not pointed to any.”

 

For as long as I have been preparing 1040s, since February of 1972, paid preparers have been required to sign the tax returns they prepare.

 

On the 1971 return the preparer signature attested that: “Under penalties of perjury, I declare that I have examined this return, including accompanying schedules and statements, and to the best of my knowledge and belief it is true, correct, and complete.”

 

The sentence, “Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge,” was added to this statement sometime thereafter.

 

The 1977 return was the first that required, in addition to a signature, the preparer’s “identifying number”, later specifically referred to as the preparer’s Social Security number.  Beginning with the 1978 Form 1040, the preparer’s “Firm’s name (or yours if self-employed), address and ZIP code” and its corresponding Employer Identification Number had to also be entered on the return under a section called “Paid Preparer’s Information.”

 

In an attempt to avoid identity theft, the “Preparer Tax Identification Number”, was created as an alternative to listing one’s Social Security number on the return.  The 1999 Form 1040 was the first that asked for the preparer’s “SSN or PTIN”, and the first return on which I entered my PTIN, which is the same PTIN I use today.

 

Up through the 2009 return a PTIN was optional, and paid preparers could still use their Social Security number when signing a return.  And up through 2009 there was no fee for applying for a PTIN, and one never had to renew one’s PTIN.

 

Beginning with the 2010 return all paid preparers were required to register with the IRS and obtain a PTIN as part of the new IRS mandatory Registered Tax Return Preparer regulation regime.

 

And tax pros were required to pay an initial $64.25 to receive, or “refresh” an existing, PTIN.  PTINs were required to be renewed annually at a cost of $63.00.  The PTIN fee was established as a method of partially funding the mandatory RTRP program, and annual renewal was initiated so that the preparer could verify that they had taken the required hours of continuing professional education.  The IRS mandatory RTRP regulation regime was put to death by the court in Loving v. IRS, but the PTIN requirement, and fee, continued.

 

The PTIN fee for both new and renewing applicants was reduced to $50.00 in late 2015.  The $50.00 was composed of an actual $33.00 IRS fee and $17.00 for the outsourced agency that maintains the PTIN registry.     

 

I have never had any issue with the PTIN requirement.  The IRS does need to maintain a registry of tax return preparers, via the issuance of a PTIN, and the Court in both Loving v. IRS and Steele v. US allowed the IRS to continue to require that all paid preparers register with the service and receive a PTIN. 

 

My problem has been with the fee.  With the death of the mandatory RTRP program there was no more need to charge a fee for acquiring or maintaining a PTIN.  I am glad the Court correctly acknowledged this, and that the IRS did not have the authority to charge a fee.

 

The order pursuant to this decision, signed by Judge Royce C Lamberth, states (highlight is mine) –

 

“It is further ORDERED that all fees that the defendant {USA – rdf} has charged to class members to issue and renew a PTIN . . .  are hereby declared unlawful, and the defendant is enjoined from charging those fees in the future.

 

It is further ORDERED that the defendant shall provide each class member with a full refund of all PTIN fees paid.”

 

Assuming the IRS loses its expected appeal I am looking forward to getting my check! 

 

TTFN