Many Canadian tax preparers have historically offered US tax preparation as part of their overall service to their clients. Some have developed an expertise in the area, taking courses and keeping up with changes in the law. Others are less competent, filling out the forms using guides or computer software without really developing a professional working relationship with the IRC Code.
The situation in the US is no different. Tax preparation is a service that was never historically regulated in the US (or in Canada for that matter)…until, in 2011 the IRS instituted their Return Preparer Regulations , requiring all tax return preparers to register, pay a fee and apply for a Preparer Identification Number (PTIN).
This move effectively put many Canadian tax preparers into a quandary. Should they comply with the regulations, which include submitting to competency tests and continuing education, or simply leave US tax preparation to the US CPA’s and registered tax preparers.
Well, that question may be put on hold for now. In a recent court decision, the IRS was held to be overstepping its bounds with its regulations. Three independent tax preparers went to federal court to challenge the IRS and its policy of regulating tax preparers and won.
As the law stands today, the IRS does not have the right to require tax preparers to comply with their regulations. This week the IRS released a statement with regard to the court decision which it must respect for now. However, they are seeking an injunction and will be appealing the decision within the next 30 days, so it remains to be seen how long-lived this victory will be.