REPRESENTATION - PRACTICING BEFORE THE IRS Flashcards
To Practice Before The IRS defined:
Practicing Before The IRS concerns all matters connected with a presentation to the IRS relating to a taxpayer’s rights, privileges, or liabilities under laws or regulations administered by the IRS.
A limited list of what is INCLUDED in Practicing Before The IRS
- Preparing documents (not including preparing a Tax Return)
- Filing documents
- Corresponding and communicating with the IRS
- Representing a taxpayer at conferences, hearings, or meetings with the IRS
- Rendering written advice with respect to any entity, transaction, plan, or arrangement
Who may Practice Before The IRS?
- Attorneys
- Certified Public Accountants (CPAs)
- Enrolled Agents
- Enrolled Retirement Plan Agents
- Enrolled Actuaries
- IRS Annual Filing Season Program (AFSP). Note: This is a non-credentialed preparer that has a record of completion for the IRS AFSP.
Director of the Office of Professional Responsibility duties include:
Acts on applications for enrollment to practice before the IRS
Inquiries on matters under the Director’s jurisdiction
Institutes’ disciplinary proceedings related to practitioners
NOTE: The OPR is responsible for the enforcement of any conduct issues under Circular 230.
IRS Return Preparer Office (RPO) is responsible for:
The IRS RPO is responsible for implementing the new requirements and oversight of the IRS return preparer program.
Circular 230
Circular 230 is the common name of the Code of Federal Regulations,
Title 31, Subtitle A, Part 10.
This is NOT a law, but a codification of BEST PRACTICES. The goals of behavior that practitioners should have. There are 8 elements.
Circular 230 applies to:
Circular 230 applies to Attorneys, CPAs, Agents and other persons representing taxpayers.
Knowledge of Omission (Element 1 of Circular 230):
If a tax practitioner knows that a client has not complied with rules and regulations or has made an error or omission, they MUST advise the client of the consequences of non-compliance.
Diligence as to Accuracy (Element 2 of Circular 230):
A tax practitioner must exercise due diligence in respect to:
- His or her own work
- Information prepared by the client
- Work of other people
A tax preparer must pay a penalty if they do not perform their work accurately.
This applies to ANY portion of an understatement due to negligence, or to substantial Tax Understatements for things such as:
- Income Tax Valuation Misstatement
- Estate or Gift Tax Understatement
- Pension Liability Overstatement
Diligent for our work, the TPs work, or even 3rd Party work.
Contingent Fees (Element 3 of Circular 230):
This is a fee based on whether or not the IRS accepts a submission or the client subsequently wins in litigation.
A tax practitioner cannot charge a contingent fee for the preparation of the original tax return or advice given on preparing an original return.
NOTE: Contingent Fees CAN be charged for Judicial Proceedings.
Return of Records (Element 4 of Circular 230):
A practitioner must promptly return all records the client may need to fulfill Federal tax obligations.
The practitioner may keep copies of these documents, but the originals must be returned.
Advertisements (Element 5 of Circular 230):
Practitioner may NOT participate in any advertisement or other material that makes a false, fraudulent or coercive statement or claim.
Solicitation of Employment (Element 6 of Circular 230):
A practitioner may not solicit anyone for employment in matters related to the IRS if, by doing so, they violate Federal or State Law.
Standards for Advice on Tax Return Positions (Element 7 of Circular 230):
A practitioner may not endorse a return if he or she believes that a position taken on the return does not have a realistic possibility of being sustained, unless it is non-frivolous and is adequately disclosed.
The practitioner must advise the client of the possibility of being fined and the level of such penalties plus the opportunity of avoiding such penalties, if any.
Sanctions (Element 8 of Circular 230):
The Secretary of the Treasury may censure, suspend, or disbar any practitioner who is proved to be incompetent, disreputable, fails to comply with regulations, acts with intent to defraud or mislead, or threatens a client.
