Just back from a visit to daughters and granddaughter in the Magnolia City, celebrating first birthday of granddaughter Kathryn, I find that Tax Court has provided me with an opinion worth a rant.

To begin, I agree with Judge Boasberg that Doug Shulman and Dave Williams went from first to third without touching second (it’s baseball season and I already have my first set of tickets) by roping in the unregistered preparers to Circular 230. See my blogposts “Chevron, Mayo – I’m Loving It”, 1/21/13, and “Modified Loving”, 2/4/13.

IRS took an 1884 statute to do with phony Civil War claims for requisitioned cavalry mounts, and tried to make it fit for-pay preparers of income tax returns. Congress already has passed preparer penalties, and evinced no intent at any time to require registration (although they should have). Moreover, by 1884 the idea of a Federal income tax was just that – an idea. You’ll remember that Abe Lincoln got a Revenue Act through Congress in August, 1861, imposing a flat 3% tax on income, which lasted for ten years until Congress repealed it. But by 1884 all that was history.

Though Judge Boasberg got it right on the law, in the field the situation is still out of control. And as Congress is the only body that can try to get things straightened out, then it’s time.

Case in Point: Thornell Johnson and Nicole Smith, 2013 T. C. Memo. 90, filed 4/2/13. The facts are not particularly novel. Both Thornell and Nicole (married during the year at issue but divorced afterwards) failed to report salary and wage income in small amounts. Nicole gets innocent spouse except as to what her couple of grand in wages adds to the tax bill at the Rule 155.

But Thornell is a for-pay preparer.

Thornell’s case involves the Schedule C panoply of unsubstantiated home office deduction, unsubstantiated Section 274 expenses, and the usual trial of dubious testimony and no reliable records. We’ve seen this before; see my blogpost “The Preparer – Unprepared”, 11/8/11.

It’s Thornell’s Section 6662 penalty argument that gets me into rant mode.

Judge Morrison: “Johnson did not specifically discuss the penalty in his arguments at trial. We ordered posttrial briefs, but Johnson failed to file one. We can, however, interpret some of his arguments at trial as assertions that he should not be penalized because he meets the requirements of reasonable cause and good faith under the terms of the section 6664(c)(1) exception.” 2013 T. C. Memo. 90, at p. 20.

OK, Thornell, lay it on us. “Johnson asserted that he did not file his returns accurately because he did not fully understand the ‘complex’ tax code. But Johnson worked as a tax preparer. He claimed that he prepared the third-highest number of tax returns of any tax preparer on the East Coast of the United States. He testified that he prepared returns for taxpayers who ran businesses and filed Schedule C with their returns. He claimed to be familiar with reporting and substantiation requirements. Thus, his purported ignorance of the rules, even if it were enough to qualify for a reasonable cause exception, is not credible. We hold that Johnson does not qualify for the reasonable cause and good faith exception under section 6664(c)(1).” 2013 T. C. Memo. 90, at pp. 20-21.

However onerous a $60 registration fee, $100 to take a test on Form 1040, and a 15-hour annual CPE requirement might be, if the self-styled preparer of “the third-highest number of tax returns of any tax preparer on the East Coast of the United States” is, as he swears, totally clueless, then how can Congress, in the face of a series of budget deficits and a national debt beyond imagining, continue to permit Thornell and his unregistered colleagues to hold themselves out to unsuspecting taxpayers as competent?

Now granted, competency does not come only from registering, passing tests and taking CPE classes. But it is a start, and registration provides a simpler means of imposing discipline on preparers than hit-or-miss audits (and I’m sure many of Thornell’s customers are in for a surprise).

But until Congress acts, Thornell is free to remain blissfully ignorant–and keep charging for preparing all those returns.