Unit 2: Practice Before the IRS

Question 1

Representation, or “practice before the IRS” is defined in:

Answer 1

Publication 947

Question 2

“Practice before the IRS” Includes:

Answer 2

1. Corresponding and communicating with the IRS
2. Representing a taxpayer at conferences, hearings, or meetings with the IRS
3. Preparing and filing documents with the IRS
4. Rendering written advice with respect to any entity, transaction, plan or arrangement, or other plan or arrangement having a potential for tax avoidance or evasion

Question 3

The following individuals may represent taxpayers and practice before the IRS by virtue of their licensing unless they are currently under suspension or disbarment:

Answer 3

• Attorney
• CPA
• EA
• Enrolled Actuaries
• Enrolled Retirement Plan Agents

Question 4

The AFSP program is designed to encourage competence and education among unenrolled tax prepares, To receive an annual “record of completion,” a taxpayer must normally have:

Answer 4

• A minimum of 18 hours of continuing education from an IRS-approved provider, including 6 hours of “annual federal tax refresher” course
• Passed a knowledge-based comprehension test administered by the CE provider at the end of the course
• A current preparer tax identification number (PTIN)
• Consented to the “duties and restrictions relating to practice before the IRS” in Circular 230/ This consent gives the IRS the authority to regulate those individuals who receive the record of completion

Question 5

The following unenrolled preparers are exempt from the AFSP “ annual refresher” course:

Answer 5

• State-based return preparer program participants
• SEE part 1 test-passers
• VITA/TCE volunteers
• Other accredited tax-focused credential-holders

Question 6

AFSP participants may only represent:

Answer 6

clients whose tax returns they prepared and signed

Question 7

Unenrolled tax return preparers cannot do any of the following:

Answer 7

• Represent taxpayers before appeals officers, revenue officers, counsel, or similar officers or employees of the IRS or Department of Treasury
• Execute closing agreements
• Extend the statutory period for tax assessments or collection of tax
• Execute waivers
• Execute claims for refund
• Sign any document on behalf of a taxpayer

Question 8

Other individuals who are not enrolled practitioners may represent taxpayers before the IRS because of a special relationship with the taxpayer, without having prepared the tax return in question:

Answer 8

• An individual (self-representation)
• A family member
• An office
• A partner
• An employee
• A fiduciary
• Qualifying student or Law Graduate working in a LITC or STCP
• Authorization for Special Appearances

Question 9

“Practice before the IRS” does not include:

Answer 9

1. Representation of taxpayers before the U.S. tax court: The tax Court has its own rules of practice and its own rules regarding admission to practice
2. Merely appearing as a witness for the taxpayer: In general, individuals who are not practitioners may appear before the IRS as witnesses but they may not advocate for the taxpayer
3. The preparation of a tax return (preparers do not practice before the IRS why they simply assist the the preparation of tax returns)

Question 10

Attorneys and CPAs do not need to obtain PTINs if:

Answer 10

They do not prepare federal tax returns, even if they represent clients in a federal tax matter

Question 11

Supervised preparers are individuals who do not sin tax returns as paid return preparers but are:

Answer 11

• Employed by a law firm, EA office, or CPA practice
• Are directly supervised by an attorney, CPA, EA, ERPA< or enrolled actuary who signs returns prepared by the supervised preparer as the paid tax return preparer

Question 12

Supervised preparers may not:

Answer 12

• Sign any tax return they prepare or assist in preparing
• Represent taxpayers before the IRS in any capacity
• Identify themselves as Circular 230 practitioners
• When applying for or renewing a PTIN, supervised preparers must provide the PTIN of their supervisor.

Question 13

The “Substantial Portion” Rule

Answer 13

Only the person who prepares all or a “substantial portions” of a tax return is considered the preparer of the return.

Question 14

A portion of a tax return is not considered to be substantial if it involves only amounts of gross income, amounts of deductions, or amounts based on which credits are determined that ate:

Answer 14

• Less than $10,000
• Less than $40,000 and less than 20% of the adjusted gross income on the return

Question 15

If the IRS rejects an applicant for enrolled agent status, how long do they have to appeal?

Answer 15

30 days

Question 16

8554

Answer 16

“Application for Renewal of Enrollment to Practice before the Internal Revenue Service”

Used by enrolled agents every 3 years to renew their enrollment status

Question 17

EA CE Requirements:

Answer 17

• 2 hours of CE for every month enrolled
• 2 hours of ethics annually (no exceptions)

Question 18

An EA may request a full or partial waiver of CE requirements from the RPO> Qualifying circumstances may include:

Answer 18

• Health issues
• Extended active duty military
• Absence from the United States for employment or other reasons
• Other reasons on a case-by-case basis

Question 19

If an RPO notifies an EA that their status has been terminated, how long does the EA have to respond?

Answer 19

60 days

Question 20

Practitioners may lose their eligibility to practice before the IRS for the following reasons, among others:

Answer 20

• Failure to meet the annual continuing education requirements for EAs
• Failure to renew a PTIN
• Requesting to be placed on inactive/retirement status