IRS - Internal Revenue Service Certified Representation Before the IRS Questions and Answers 1 — Questions and Answers
Question 1: A taxpayer wants to authorize their Certified Public Accountant (CPA) to receive and inspect their confidential tax information from the IRS. However, the taxpayer does not want the CPA to have the authority to represent them in meetings, sign agreements, or otherwise act on their behalf. Which form should the taxpayer file?
- Form 4506-T, Request for Transcript of Tax Return
- Form 8821, Tax Information Authorization (Correct answer)
- Form 2848, Power of Attorney and Declaration of Representative
- Form 9465, Installment Agreement Request
Correct answer: Form 8821, Tax Information Authorization
Form 8821, Tax Information Authorization, allows a designee to inspect and/or receive a taxpayer's confidential information. It does not grant the designee the authority to represent the taxpayer before the IRS. Form 2848 grants full representative authority, which is more than the taxpayer in this scenario wants to provide.
Question 2: According to Treasury Department Circular No. 230, which of the following is a primary component of a practitioner's due diligence responsibility when preparing a tax return?
- Personally auditing all of the client's financial records for the year.
- Guaranteeing that the IRS will not select the return for an audit.
- Making reasonable inquiries if information provided by the client appears to be incorrect, inconsistent, or incomplete. (Correct answer)
- Requiring the client to sign a statement accepting all liability for potential penalties.
Correct answer: Making reasonable inquiries if information provided by the client appears to be incorrect, inconsistent, or incomplete.
Circular 230, Section 10.22, requires practitioners to exercise due diligence. This standard includes the responsibility to make reasonable inquiries when client-furnished information seems questionable. It does not require a full audit, guarantee an outcome, or shift all liability in the manner described.
Question 3: An unenrolled return preparer, who holds a valid Annual Filing Season Program Record of Completion, has limited practice rights. This preparer may represent a taxpayer for a return they prepared and signed before which of the following?
- An Appeals Officer regarding a disputed liability.
- A Revenue Officer concerning collection activities.
- An attorney in the Office of Chief Counsel.
- A Revenue Agent during an examination of the return. (Correct answer)
Correct answer: A Revenue Agent during an examination of the return.
An unenrolled return preparer with limited practice rights can only represent taxpayers before revenue agents, customer service representatives, and similar IRS employees during an examination of the return they prepared. They are not permitted to represent clients before Appeals, Collections (Revenue Officers), or Counsel.
Question 4: Under which of the following circumstances is a practitioner, governed by Circular 230, generally prohibited from charging a contingent fee?
- For services in connection with preparing an original tax return. (Correct answer)
- For services related to an IRS examination of an original return.
- For services connected to a claim for a credit or refund filed in response to a formal notice of examination.
- For services rendered in connection with a judicial proceeding under the Internal Revenue Code.
Correct answer: For services in connection with preparing an original tax return.
Circular 230, Section 10.27, generally prohibits practitioners from charging a contingent fee for preparing an original tax return. The exceptions to this rule typically involve situations where the IRS is already challenging a return or the matter is in court.
Question 5: An enrolled agent is asked to provide tax representation for a married couple who filed a joint return. During the initial consultation, the agent learns that the IRS is asserting a penalty against one spouse for an action the other spouse was unaware of, creating a potential conflict of interest. According to Circular 230, what must the agent do to proceed with the joint representation?
- Inform the clients that joint representation is impossible and they must seek separate counsel.
- Proceed with the representation but only discuss the penalty with the spouse to whom it applies.
- Reasonably believe they can provide competent representation to both, fully disclose the conflict, and obtain informed consent confirmed in writing from each spouse. (Correct answer)
- File two separate Forms 2848 and let the IRS determine if the conflict is too significant.
Correct answer: Reasonably believe they can provide competent representation to both, fully disclose the conflict, and obtain informed consent confirmed in writing from each spouse.
Circular 230, Section 10.29, allows for representation despite a conflict of interest if three conditions are met: (1) the practitioner reasonably believes they can provide competent and diligent representation to each client, (2) the representation is not prohibited by law, and (3) each affected client waives the conflict and gives informed consent, confirmed in writing.
Question 6: Which of the following is a mandatory requirement for a valid Form 2848, Power of Attorney and Declaration of Representative?
- The taxpayer's signature must be notarized.
- The representative must list their primary college degree.
- The form must specify the tax matters, form numbers, and years or periods for which representation is granted. (Correct answer)
- The form automatically revokes any existing Form 8821, Tax Information Authorization.
Correct answer: The form must specify the tax matters, form numbers, and years or periods for which representation is granted.
A valid Form 2848 must specifically list the types of tax matters (e.g., Income), the tax form numbers (e.g., 1040), and the specific years or periods the authority covers. A taxpayer's signature is required but does not need to be notarized. Representative qualifications are listed by designation (CPA, Attorney, EA), not by academic degrees. A Form 2848 automatically revokes prior Forms 2848 for the same matters, not Forms 8821.
IRS - Internal Revenue Service Certified Representation Before the IRS Questions and Answers 1
A taxpayer wants to authorize their Certified Public Accountant (CPA) to receive and inspect their confidential tax information from the IRS.
However, the taxpayer does not want the CPA to have the authority to represent them in meetings, sign agreements, or otherwise act on their behalf.
Which form should the taxpayer file?