Disbarred Attorney Allowed by Law to Prepare Income Tax Returns
If a tax preparer fails to file his/her federal income tax returns, fails to remit the taxes due, willfully fails to sign a tax return prepared by that person, or prepares a return without a valid preparer tax identification number (ITIN), the preparer can be disciplined by the IRS Office of Professional Responsibility (OPR). Disciplinary actions, depending upon the offense and number of infractions, can include a censure (public reprimand), suspension to practice before the IRS for a period of time, and disbarment (revoking the person’s eligibility to practice before the IRS.
However, the IRS has NO authority or jurisdiction over a disbarred attorney/tax preparer or his tax preparation practice and cannot regulate his providing tax advice given to a taxpayer per a federal district court (Sexton v. Hawkins).
James Sexton Jr. was an attorney licensed in S. Carolina. He pleaded guilty to four counts of mail fraud and one count of money laundering. He was disbarred in S. Carolina and suspended from practice before the IRS by OPR. He did not challenge his IRS suspension from practice.
A former client of Sexton, learning that he had been disbarred, fired him and filed a complaint with the OPR. What happened when the IRS attempted to bar him from preparing tax returns? Sexton prevailed in court arguing that the ruling in Loving, 742 F.3d 1013, means that the IRS has no jurisdiction over him or his company as a tax preparer. Under Loving, preparing and signing tax returns is not practice before the IRS. Therefore, the IRS cannot regulate Sexton who prepared tax returns.
“Practice Before the IRS”
Practice before the IRS generally includes preparing or filing documents or communicating with the IRS. The prohibition applies to all means of communication, including person-to-person conversations, faxes, e-mails, other written materials, and telephone calls. Thus, Sexton could not represent his clients before the IRS at conferences, hearings, and meetings. He could not file a Power-of-Attorney on behalf of his clients. He could not advocate, dispute, argue or otherwise negotiate for his client’s rights, privileges or liabilities under the law or regulations administered by the IRS.
However, the restriction generally does not apply to merely preparing tax returns. Sexton could prepare tax returns for his clients and sign the returns as the preparer because the preparation of tax returns does not constitute practice before the IRS.
Tax Planning Tip #1:
If you use a professional tax preparer, the burden is upon you to verify the preparer’s credentials.
The state bar association is a good place to start to check a lawyer’s license. The Disciplinary Board of the Supreme court of Pennsylvania allows one to search by attorney name.
Most states have a Board of Accountancy that governs CPAs. In PA, go to Verify a Professional.
If you wish to verify the status of an Enrolled Agent, go directly to email@example.com.
If you would like to discuss your business or personal tax planning, tax preparation and other financial concerns with an experienced tax professional, we invite you to call 610-594-2601 today to make an appointment at our Exton PA CPA office to discuss your situation. You can also schedule a consultation at Click Here.
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About F. Bryan Haarlander, EA, CTRS:
Bryan Haarlander is an IRS licensed Enrolled Agent and who owns and operates a specialized tax services firm serving clients in the western suburbs of Philadelphia, PA, which includes the cities of Chester Springs, Coatesville, Collegeville, Devon, Downingtown, Exton, Frazer, King of Prussia, Paoli, Philadelphia, Phoenixville, Pottstown, Radnor, Reading, Wayne, West Chester in Berks, Chester, Delaware, Montgomery and Philadelphia Counties, as well as clients in Delaware, New Jersey, New York and throughout the continental USA.
A Certified Tax Resolution Specialist, Bryan is well-known for his IRS tax resolution expertise and his book How to Resolve Your IRS Tax Debt Problems.