IRS issuing some refunds for tax preparer tests

Good news for some tax preparers.

If you paid for testing under the Internal Revenue Service's nascent system of regulating tax preparers, a refund of your exam fee could be in the works.

The IRS this week answered the big question that's been hanging out there since a federal court decision in January put the agency's Registered Tax Return Preparer (RTRP) system, notably the testing component, on hold:

What's the deal with money I paid
for a test that now is not allowed?

Here's the official IRS word, per its special Web page devoted to the ongoing court challenge:

Fee amounts collected for scheduled registered tax return preparer test appointments canceled due to the court-ordered injunction are being refunded.  Additionally, fees collected from return preparers who tested on or after January 18, 2013, the date the test was enjoined, are also being refunded. 

Not all payments covered: Note the specific limitations based on the timing of the tests.

The refunds, which will be issued by the vendors responsible for the testing, are for scheduled tests that have been paid for but, due to the court order, not administered.

The payback also applies to fees preparers paid for tests they paid for and took on or after the Jan. 18 court order that put the testing on hold.

If, however, you paid for a test prior to the court order, you are out of luck.

"No additional refund or reimbursement requests related to registered tax return preparer regulation are being provided or considered at this time," according to the IRS announcement.

The thinking by the IRS is that it will prevail when the legal challenge runs its full course.

So instead of refunding the fees for tests conducted before Loving vs. IRS was on the docket and temporarily threw a wrench into the works, the IRS is waiting.

The IRS limited refund decision also is no doubt affected by the administrative costs, both of physical processing and money, during this time of sequester (the IRS is losing $185 million this fiscal year) and furloughs set to begin May 24.

No action necessary: If you are eligible for the refund, you don't have to do anything to get your test money back.

The IRS says you'll be credited the test fee via the payment method you used when you signed up for the exam.

So check your credit card or bank debit card statements.

If you paid via an electronic check, the refund should show up on your bank account statement.

Where such refunds can't be completed, the IRS says tax preparers will get a paper check via snail mail at the address provided when the test was scheduled.

All refunds, according to the IRS, are expected to be processed by July 19.

The agency also is sending explanatory emails to affected preparers.

Since I'm not a preparer, I won't get the communication. If you do get an email, would you let me know what it says? I'm particularly interested to know if it answers all your questions. Thanks!

And be sure to share the good news when you get your testing money refund.

You also might find these items of interest:

• House bill would give IRS authority to regulate tax pros
• IRS vs. tax pros: Uncle Sam wins a bit, loses some in Round 2
• Ways and Means member wants answers from IRS regarding tax preparer registration