CARL WATTS & ASSOCIATES

May 16, 2016

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Representation Before the IRS
We hope the tax season ran smoothly for all of you, but, as you know, each year a number of tax returns are selected for an audit by the IRS. If your return happens to be selected, it would be useful to know who can represent you before the IRS.

First of all, there is no need to panic if this happens to you.

Even though most of the returns audited are selected because of a high numerical score (which is a total for some triggering factors), other criteria for selection include informants, your relationship to another taxpayer who is being audited, being part of a special group that has been singled out for auditing, or being part of an IRS project, such as the auditing of all employers who use contract labor. This being said, it is also worth mentioning that there are several kinds of IRS audits.

Correspondence Audit is a letter from the IRS Service Center requesting that you send in copies of your canceled checks and/or receipts in order to verify certain deductions on the return.

There is also the notice of an Office Audit, again sent by mail. The letter identifies specific items on the return that are in question and requests that you or your representative bring certain documents to the local IRS office for the auditor's examination.


With a Field Audit, the IRS agent, personally, will call the owner/president/general partner and notify him/her that the return has been selected for audit. This type of audit is called "field" audit because the agent will want to conduct the audit at your place of business rather than the IRS office.


It’s not required to have someone represent you when you are undergoing an IRS audit. However, it is recommended that you have someone on your side during the process.


Many people use a tax professional to prepare their taxes. Tax professionals with an IRS Preparer Tax Identification Number (PTIN) can prepare a return for a fee. If you choose a tax pro, as we always recommend you do, you should which ones can represent you before the IRS and to what extent.


There are new rules this year, so please read the information below.

Representation rights, also known as practice rights, fall into two categories:


Unlimited Representation


Unlimited representation rights allow a credentialed tax practitioner to represent you before the IRS on any tax matter. This is true no matter who prepared your return. Credentialed tax professionals who have unlimited representation rights include:

  • Attorneys. People with this credential are licensed by state courts, the District of Columbia or their designees, such as the state bar. Generally, they have earned a degree in law and passed a bar exam. Attorneys generally have on-going continuing education requirements and professional character standards. Attorneys may offer a range of services; some attorneys specialize in tax preparation and planning.



  • Certified Public Accountants (CPA). Individuals with this credential are licensed by state boards of accountancy, the District of Columbia and U.S. territories, and have passed the Uniform CPA Examination. They have completed a study in accounting at a college or university and have also met experience and good character requirements established by their boards of accountancy. In addition, CPAs must comply with ethical requirements and complete specified levels of continuing education to maintain an active CPA license. CPAs may offer a range of services. Some CPAs specialize in tax preparation and planning.
  • Enrolled Agents. People with this credential are licensed by the IRS. They are subject to a suitability check and must pass a three-part Special Enrollment Examination, which is a comprehensive exam that requires them to demonstrate proficiency in federal tax planning, individual and business tax return preparation and representation. They complete 72 hours of continuing education every three years.

  • Enrolled Retirement Plan Agents (ERPA). People with this credential are licensed by the IRS and specifically trained in retirement plan matters. They can practice before the IRS on matters such as employee plan determination letters, the employee plans compliance resolution system, the employee plans master and prototype program and volume submitter program, and Form 5300 and Form 5500 tax returns.

  • Enrolled Actuary. People with this credential have satisfied the standards and qualifications as set forth by the Joint Board for the Enrollment of Actuaries and have been approved by the Joint Board to perform actuarial services required under the Employee Retirement Income Security Act of 1974 (ERISA).



Limited Representation


Limited representation rights authorize the tax professional to represent you if, and only if, they prepared and signed the return.


For returns filed after Dec. 31, 2015, the only tax return preparers with limited representation rights are Annual Filing Season Program Participants. The Annual Filing Season Program is a voluntary program. Non-credentialed tax return preparers who aim for a higher level of professionalism are encouraged to participate.

Annual filing season program participants do not have unlimited practice rights (unless they are also an attorney, certified public accountant or enrolled agent). Their representation rights are limited to clients whose returns they prepared and signed, but only before revenue agents, customer service representatives and similar IRS employees, including the Taxpayer Advocate Service. They cannot represent clients whose returns they did not prepare, nor can they represent clients regarding collection or appeals matters.

Other tax return preparers have limited representation rights, but only for returns filed before Jan. 1, 2016.

Keep these changes in mind and choose wisely when you select a tax return preparer.

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