Representation, Practices and Procedures
Representation
Practicing before the IRS
Representation focuses on authority, ethics, and procedure. An enrolled agent may represent taxpayers before all IRS offices, but authority must be documented. Form 2848, Power of Attorney and Declaration of Representative, authorizes representation for specified tax matters and permits the representative to receive confidential information and act. Form 8821, Tax Information Authorization, only authorizes disclosure of tax information; it does not authorize representation. Know the difference, the scope of authorization, and when a client must sign.
Circular 230 governs practice: competence, due diligence, confidentiality, conflicts of interest, written advice standards, prompt return of records, and restrictions on contingent fees. A practitioner generally may not charge a contingent fee for preparing an original return; fee arrangements tied to a refund percentage are restricted. Preparer penalties can arise from unreasonable positions, willful misconduct, failure to furnish a PTIN, or failure to keep required records. Taxpayer rights include representation, appeals, and collection due process.
Examination and collection tools include interviews, summonses, appeals conferences, installment agreements, offers in compromise, liens, levies, and innocent spouse relief. Reasonable cause may abate penalties, but it must be documented.
Traps: confusing 2848 with 8821; assuming a power of attorney covers every tax year or entity; conflicts of interest; promising a specific result; and signing a return without a valid PTIN or required due diligence.
Worked example: A client wants help with an audit but also wants the IRS to send notices to a bookkeeper. File Form 2848 for the representative; use Form 8821 only if the bookkeeper needs information but will not represent the taxpayer. Rule of thumb: authority follows the form-match the form to the task.
Practices and Procedures
Procedure, deadlines, and enforcement
Procedure questions test dates, assessments, collection, and penalties. Filing deadlines depend on the return type; individuals generally file by April 15, with an extension to October 15. An extension extends the time to file, not the time to pay. Estimated tax payments are required when withholding is insufficient; underpayment penalties can be avoided through safe harbors based on prior-year tax or current-year tax.
The assessment statute is generally three years from the later of the return due date or filing date. It extends to six years if gross income is omitted by more than 25%, and there is no limit for fraud or failure to file. A claim for refund generally must be filed within three years from the return filing date or two years from payment, whichever is later. Amended returns start a new assessment period in some cases, so know the rules.
Collection tools include liens, levies, installment agreements, offers in compromise, and collection due process appeals. Penalties include failure to file, failure to pay, failure to deposit payroll taxes, accuracy-related penalties, and trust fund recovery penalties. Interest runs from the due date and is not a penalty. E-filing, record retention, identity theft procedures, and information return matching are recurring topics.
Traps: treating an extension as an extension to pay; miscomputing the refund statute; overlooking the 25% omission threshold; and missing payroll deposit deadlines.
Worked example: A taxpayer files a 2020 return on April 15, 2021. The three-year assessment period generally ends April 15, 2024. A refund claim filed April 16, 2024 is late unless the two-year-from-payment rule applies. Rule of thumb: separate filing, payment, assessment, and refund clocks-each has its own trigger.