Suit challenges federal licensing of tax preparers

McLEAN, Va. - An expected federal lawsuit targets new IRS regulations that require tax preparers to get a federal license and pass a competency exam.

The Virginia-based Institute for Justice plans to file a federal lawsuit in Washington seeking to halt the regulations, which affect hundreds of thousands of tax preparers. 

It claims the IRS lacks the legal authority to regulate preparers so aggressively without congressional approval.

The IRS says the regulations are needed to ensure that the millions of Americans who rely on tax preparers get good service.

Studies have shown that returns prepared by commercial preparers are rampant with errors.

The Institute for Justice says the regulations on tax preparers are part of an explosion of licensing regimes imposed on a variety of professions.