Have you thought about who should represent you if you have an issue with the IRS?

Representation Before the IRS

Article written by EricBank

The rules concerning who can represent you before the Internal Revenue Service are currently in flux. In February 2014, The D.C. Circuit Court of Appeals ruled that the Internal Revenue Service couldn't limit the ranks of paid tax return preparers to four categories: CPAs, enrolled agents (EAs), attorneys and registered tax return preparers (RTRPs). Until the court struck down the IRS rules, the first three categories were allowed to represent taxpayers before the IRS in any examination or proceeding, whereas RTRPs representation rights were limited. Before the court decision, individuals who did not belong to any of the four categories were barred from representing taxpayers before the IRS.

A "Voluntary" Program

The IRS wanted, and rightly so, to ensure that paid yet uncertified tax preparers were properly trained, and therefore created mandatory testing and continuing education requirements for RTRPs. Here is the irony: the court never said that holding paid tax preparers to a high standard of training was a bad idea, it simply said that the IRS overstepped its authority in creating the new rules. In response, the IRS has established the voluntary Annual Filing Season Program as a sort of stopgap until, and if, Congress passes laws enabling the IRS to re-establish its rules regarding representation.

The program requires non-certified tax preparers to take "voluntary" courses and pass tests in order to receive a Record of Completion, which the IRS mandates if the non-certified person wants to provide certain limited representation before the IRS. While attorneys, EAs and CPAs can represent taxpayers in any IRS procedure, the holders of a Record of Completion are not allowed "to represent the taxpayer before appeals officers, revenue officers, Counsel, or similar officers or employees of the IRS" according to IRS Revenue Procedure 2014-42.

Invitation to Chaos

This is where the Law of Unintended Consequences comes into play. The average taxpayer is not going to be familiar with the representation distinctions set up by the IRS. In other words, if you have someone other than an attorney, EA or CPA prepare your taxes for you, do not assume that person will be able to represent you in all IRS matters. The unintended consequences: confusion and added expense. Imagine, for instance, you have a Record-of-Completion-holder prepare your taxes and then the IRS audits the return. The IRS rules against you and you appeal the ruling. You might then suddenly discover that the preparer can no longer represent you, so you will have to find a new representative, an expensive time-consuming, and daresay upsetting, proposition.

Suing the IRS

The American Institute of CPA's is suing the IRS on the grounds that the new rules, once again, overstep the IRS' authority and is an end-run around the court ruling. The bottom line: not all tax preparers are equal. Enrolled agents have the necessary education and certification necessary to expertly prepare returns AND represent you in all IRS matters. Remember, CPAs and attorneys do not have to specialize in taxes, but EA's must. Until the pending lawsuit is resolved, using an uncertified tax preparer is a crapshoot.