- The Washington Times - Monday, March 12, 2012

Taxes, like death, may be inescapable. But, at the very least, taxpayers have always enjoyed the freedom to offload the headache of doing their taxes to the tax-return preparer of their choice.

Or rather, taxpayers used to enjoy that freedom.

Now, in an outrageous and unlawful power grab, the Internal Revenue Service seeks to control who you may hire to prepare your tax returns and even to nudge you toward a large tax preparation firm by eliminating many of their independent competitors. It has enacted a sweeping new licensing scheme that affects an estimated 350,000 tax professionals nationwide.

The licensing scheme requires tax preparers - who have always had the freedom to prepare tax returns for anyone who sought out their services - to secure permission from the IRS if they want to earn a living preparing taxes. Getting permission means satisfying expensive, unnecessary and time-consuming new requirements that threaten to drive many independent preparers out of business, leaving tens of millions of taxpayers searching for a new preparer.

Waiting in the wings for all these new customers are large tax preparation firms such as H&R Block, which supported the regulations, and the American Institute of CPAs, which successfully lobbied for an exemption from the licensing requirements for preparers supervised by CPAs. These powerful special interests stand to benefit tremendously from the reduced competition and increased prices that will result from these regulations. Meanwhile, the costs of the regulations will fall disproportionately on independent tax preparers and small tax-prep businesses.

Consider Sabina Loving, who worked for a decade as an accountant for banks and financial service companies before recently opening Loving Tax Services in an impoverished neighborhood on the South Side of Chicago. She has been offering an affordable, personable alternative to the large tax-prep companies for the members of her community, many of whom are low income. These new regulations will force her to raise her prices, making it more difficult for her to compete with large tax-prep companies. The regulations also prohibit her from hiring and supervising additional tax preparers, stifling job creation in a state with a 9.7 percent unemployment rate.

One hundred miles to the Northwest, Elmer Kilian is a retired Korean War veteran living in the small village of Eagle, Wisc., where he hangs a wooden shingle outside his house advertising his business, Eagle Tax Services. Mr. Kilian has prepared taxes seasonally for more than 30 years on his dining room table, but he will be forced out of business by the cost of the new regulations, depriving the 80-year-old of an important source of income.

These new licensing regulations represent true crony capitalism, expanding government power to protect politically powerful interests from honest competition. But the IRS‘ new regulations aren’t just an affront to economic liberty and consumer freedom - they’re unlawful. Congress never gave the IRS the authority to license tax preparers, and the IRS cannot give itself that power. That is why Mrs. Loving and Mr. Kilian have joined with the Institute for Justice, a national public-interest law firm that protects the rights of entrepreneurs, to file a federal lawsuit against the IRS, challenging its statutory authority to impose these regulations on them and other entrepreneurial tax preparers like them across the nation.

Tax preparers such as Mr. Kilian and Mrs. Loving have a right to earn a living independent from the big tax-prep firms without getting permission from the IRS. Taxpayers have the right to decide for themselves whom they want to prepare their taxes. A win for Mrs. Loving and Mr. Kilian will benefit not just the 350,000 tax-return preparers nationwide who are subject to these regulations, but the tens of millions of taxpayers they serve each year.

Dan Alban is an attorney at the Institute for Justice.