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Waukesha Co. man prevails, again, in challenge of IRS rules for tax preparers

Proof and Hearsay

Crime, courts and legal issues in Milwaukee and throughout Wisconsin

Feb. 11, 2014

By Bruce Vielmetti of the Journal Sentinel

Feb. 11, 2014 0

 An octogenarin tax preparer from Eagle has prevailed in a challenge of new IRS licensing rules that he said would have forced him into retirement and put hundreds of thousands of other small income tax services out of business.

Elmer Kilian (Photo courtesy of Institute for Justice)Elmer Kilian, 81, (left, in a photo from the Institute for Justice) was one of three people who sued over the new IRS requirements in 2012 with the help a Libertarian public interest law firm, the Institute for Justice. The new rules would have imposed expensive and time consuming competency testing and continuing education requirements on small time tax preparers, as well as require them to have internet connections.

Kilian, who works with a calculator and a typewriter, said Tuesday he was glad to get news of the court victory, but didn't have too long to crow about it. It's tax season.

"I've been busy this week," he said. "I've got three people coming in this afternoon."

ar the appeals court ould not immediately be reached for comment Tuesday.

The new regulations, effective in 2012, excluded lawyers, CPAs, enrolled agents or those working for large commercial tax return companies like H & R Block and Jackson Hewitt from the annual training and testing.

The U.S. Court of Appeals for the District of Columbia ruled that Congress never gave IRS power to license tax preparers, and that it was unlawful for the IRS to assume that power for itself.

"This is a big victory,  for independent tax preparers like Mr. Kilian, nationwide,. and a big victory for tax payers themselves -- they get to choose who prepares their taxes, not the IRS," said Scott Bullock, senior attorney with the Institute for Justice.

He called the defeated regulations “classic economic protectionism,” that would have "benefitted powerful industry insiders at the expense of entrepreneurs and consumers.”

Tuesday's ruling was a unanimous decision by a three-judge panel of the influential appeals court. The IRS could request a rehearing before the full court, or petition the Supreme Court to review the case.

The IRS argued that its authority to regulate small tax perparers came from a 1884 statute aimed at those seeking compensation for Civil War soldiers' dead horses. It said the regulations would help assure tax payers of getting quality service from small tax preparation businesses. 

In 2012, Kilian told the Journal Sentinel  he has done tax work at his dining room table with a calculator and a typewriter for about 30 years. He said it started when a few people asked for his help because he worked for the state's consumer protection agency, was on the local school board and had studied bookkeeping.

Retired about 24 years, Kilian said tax preparation is now a year-round job. He said he mostly does returns for individuals and some small businesses. In 2012, he charged about $45 for a 1040 form with itemized deductions, and $5 a sheet for additional forms for things like tuition tax credits. He said he'd have to double or triple those fees if forced to pay all the new licensing costs.

Last year, a federal district court permanently enjoined enforcement of the new regulations and denied the IRS motion to stay its judgment pending the agency's appeal.

In affirming the district court, the appellate court panel listed six reasons that defeat the IRS's interpretation of the 1884 statute as a basis for its tax preparer regulation authority.

Bruce Vielmetti thumbnail
About Bruce Vielmetti

Bruce Vielmetti writes about legal affairs.

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