IRS can't regulate tax preparers

Andrew Harrer | Bloomberg | Getty Images

A U.S. appeals court on Tuesday struck down the U.S. Internal Revenue Service's authority to regulate tax-return preparers, dealing a blow to the Obama administration, which has been trying to crack down on tax preparation fraud.

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The unanimous decision from the U.S. Court of Appeals for the District of Columbia upheld a lower court ruling that invalidated test-taking and continuing education requirements that the IRS wanted to impose on hundreds of thousands of unregulated tax-return preparers.

"We agree with the District Court that the IRS's statutory authority ... cannot be stretched so broadly as to encompass authority to regulate tax-return preparers,'' the court's 19-page ruling said.

—By Reuters