The court also noted that there was a separate statutory regime for imposing penalties on tax return preparers apart that would be obliterated if IRS had the authority to “disbar” tax return preparers under the new regulations.  In addition, the regulations would allow the IRS to sidestep a tax preparer’s protection of procedural due process and judicial review.  That would not be a proper result, the court concluded.   Only the Congress, by enacting a statute, can authorize the regulatory procedures that the IRS was seeking. 

The court granted the plaintiffs’ motion for summary judgment, denied the summary judgment motion of the IRS, held that the IRS lacked the statutory authority to promulgate or enforce the new regulations, and permanently enjoined the IRS from enforcing the regulations.

We’ll have to see if the administration chooses to appeal the court’s decision or whether the D.C. Circuit Court of Appeals enters a stay of the District Court’s opinion.  But, for now, the preparer regulations are blocked.  

An interesting factual side-note in the case is that the lead plaintiff was a tax preparer from the South Side of Chicago that served low-income clients.   Loving, et al. v. Internal Revenue Service, et al., No. 12-385 (JEB) (D. D.C. Jan. 18, 2013).

The other major development on Jan. 18 was that the IRS announced that the March 1 filing deadline for farmers that don’t pay estimated taxes has been moved back to April 15.  That’s welcome relief.  The lateness of tax legislation delayed the IRS from preparing forms necessary for processing returns (particularly Form 4562 which is used to report depreciation).  To be able to use the April 15 deadline instead of March 1 for a farm return, the taxpayer must complete Form 2210-F and check the waiver box.  The form must be attached to the return.  IRS Announcement, IR 2013-7.