What Type of Tax Preparer Are You Using?
Tax professionals generally interact with the IRS in two ways. There are those who prepare tax returns, and those who represent the taxpayer before the IRS. It is important that a taxpayer understand the differences when choosing a tax preparer.
As a representative of the taxpayer, the tax pro has direct contact with the IRS and can negotiate on behalf of the taxpayer with the IRS. These representatives often prepare tax returns. However, not all tax preparers are qualified to represent a taxpayer before the IRS. These tax preparers are considered to be “unenrolled” tax return preparers. Unenrolled tax preparers are generally limited to represent taxpayers for returns prepared by the unenrolled preparer which are under IRS audit examination, and before certain IRS employees, such as revenue agents and customer service representatives.
On the other hand, enrolled representatives (attorneys, CPAs, and Enrolled Agents), in addition to the aforementioned services, can also represent taxpayers in the Appeals Office, before Revenue Officers, and similar employees of the IRS and U.S. Treasury. In addition, these representatives can execute waivers, claims for refunds, and sign any document on behalf of an employee. More importantly, these individuals are licensed professionals who are subject to oversight by the IRS’s Office of Professional Responsibility (OPR). Attorneys and CPAs are required to pass their state and/or national regulatory exams and must abide by their state licensing board. Enrolled agents must pass a rigorous IRS exam to prove their tax proficiency and are regulated by the IRS. All these tax professionals are required to take annual continuing education credits to maintain their enrolled status with the IRS.
The Loving v. Commissioner case makes for interesting reading. The IRS, as one of its objectives, wanting to limit the filing of fraudulent tax returns prepared by unscrupulous tax preparers, passed rules to regulate tax preparers. Loving, a tax preparer, sued the IRS claiming that the IRS did not have the authority to license tax preparers. A District Court ruled that Congress never gave the IRS the power to license tax preparers and the IRS cannot give itself that authority. Thus, taxpayers be aware. You should ascertain whether your tax preparer is subject to IRS Circular 230 and OPR jurisdiction. Remember that you are the person signing your tax return under penalties of perjury that the return is true and correct to the best of your knowledge. If the tax return preparer is not signing the return, does not have an IRS required PTIN number, or is using estimates rather than actual numbers, run, don’t walk out of that office.
Tax Planning Tip: When choosing your tax preparer, be sure that you understand the differences between an unenrolled tax preparer and those who are authorized to represent taxpayers before the IRS who are bound to abide by very strict rules.
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.