By Kevin Drawbaugh
WASHINGTON (Reuters) - The U.S. Internal Revenue Service said on Thursday it will launch a voluntary education program for tax return preparers, a step back from an earlier mandatory program of testing and regulation that was halted by the courts.
The U.S. Court of Appeals for the District of Columbia ruled in February that the IRS did not have the authority on its own to impose rules on up to 700,000 preparers who are not already licensed as attorneys, accountants or "enrolled agents."
The IRS had to mothball its mandatory program and ask Congress for authority to reinstate it. Unless and until that happens, a voluntary program will be run, IRS Commissioner John Koskinen said on a conference call with reporters.
"About 60 percent of paid tax return preparers in the U.S. operate without regulation or oversight," he said. "Although many of them do a good job, we have found that others are poorly equipped to assist taxpayers in preparing returns."
He said the IRS intends to have the voluntary program in place by the beginning of the 2015 tax filing season.
Under the program, participating preparers would register with the IRS and get a Preparer Tax Identification Number, take 18 hours of continuing education each year and a test.
Passing the test would earn preparers a record of completion good for the filing season.
About a third of the $9.4 billion tax return business is controlled by H&R Block Inc and three other large companies. The remaining two-thirds is divided among licensed and unlicensed preparers, many of them mom-and-pop operations.
The IRS took steps starting in 2011 to regulate unlicensed return preparers for the first time, with a program requiring thousands of them to meet testing and education requirements.
But independent preparers complained. Then in 2012, a libertarian activist group called the Institute for Justice sued the IRS, arguing that Congress never gave the agency authority to regulate preparers.
(Editing by Jonathan Oatis)