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Institute for Justice Says IRS Is Breaking the Law

5:02 PM, Mar 12, 2012 • By KELLY JANE TORRANCE
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Tomorrow, the Institute for Justice (IJ) will file a lawsuit against perhaps the most hated of all federal agencies—the Internal Revenue Service (IRS).

The suit challenges licensing requirements that the IRS introduced last year. Tax return preparers must take a test and obtain IRS permission—and pay fees to the bureaucracy—before they can continue to offer their services. As IJ attorney Dan Alban says in the below video, “Congress never gave the IRS the authority to license tax preparers, and the IRS can’t give itself that power.”

Occupational licensing requirements almost invariably hurt small businesses, to the benefit of the big ones. That’s certainly been the case in previous economic liberty suits IJ has fought, including burdensome licensing requirements for florists, hair-braiders, and casket-builders.

H&R Block and Jackson Hewitt support the IRS’s new rules. That’s not surprising—attorneys and CPAs are exempt from these licensing requirements, as are those employees they supervise. That includes an exemption from a new continuing education obligation of 15 hours each year.

Nearly 60 percent of individual returns are completed by paid preparers. Tax preparation is a $9 billion industry. Around 350,000 tax preparers—those not exempt from the new rules—will see the cost of doing business go up. They’ll either pass on those extra fees to their clients, or they’ll simply go out of business. Which might be exactly what the big guns in the tax business are hoping for.

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