The Internal Revenue Service’s Office of Professional Responsibility has released
The guidance comes in response to questions regarding the effect on Circular 230 and the Office of Professional Responsibility’s jurisdiction over the corporate officers or employees identified in Section 1(b) of Form 4764, Communications Agreement, LB&I Examination Plan, for purposes of referrals for alleged Circular 230 misconduct.
Circular 230 regulates representation activity by practitioners and others who represent or advocate on behalf of taxpayers or otherwise “practice” before the IRS
The IRS Large Business & International Division’s Communications Agreement allows a corporate taxpayer to designate one or more employees to 1) discuss tax matters, 2) provide and receive information, or 3) receive and discuss adjustments (or some combination of these three). The LB&I Communications Agreement operates as an authorization to receive tax information, similar to Form 8821, Tax Information Authorization, the IRS noted.
However, the LB&I Communications Agreement does NOT replace the Form 2848. “When a corporate employee is merely providing or accepting information to, or from, the IRS, there is no representation activity or “practice” occurring and the Form 4764 will suffice,” said the IRS.
“However, when the employee advocates, negotiates, disputes or does anything which goes beyond mere delivery of facts, general explanation, or acceptance of materials, the employee is engaged in representation activities (“practicing”) before the agency and the Form 4764 is not sufficient. In the LB&I context, this typically involves advocating or defending certain positions related to the corporation’s tax liability or adjustments proposed thereto.”
The IRS noted that if a corporation wants a specific employee (irrespective of the employee’s title) to advocate, negotiate or dispute issues with the IRS on behalf of the corporation, then a Form 2848, Power of Attorney, must be obtained from the corporation authorizing that representation.
The Form 2848 must be signed by a duly elected officer or director of the corporation as identified in the corporate articles or by-laws (typically, the same officer who signs the corporation’s tax returns and consents to extend the time for assessment of tax).
The IRS said that “vanity-titled” officers of a corporation are not legally authorized to execute the Form 2848 on behalf of the corporation. The IRS point of contact should request the Form 2848 from the appropriate corporate official when representation activities are about to, or have, begun.
IRS employees make referrals to the Office of Professional Responsibility for alleged Circular 230 misconduct using Form 8484, Suspected Practitioner Misconduct Report for the Office of Professional Responsibility (rev. 12-2013). Form 8484 asks for evidence of the subject’s practice before the IRS for Circular 230 jurisdiction to be established.
A Form 2848 submitted to the IRS is one source of evidence of practice for purposes of establishing Circular 230’s jurisdiction over the individual designated on the Form 2848, the IRS noted. Other forms of evidence of practice can include a tax opinion written for the corporation to support taking a position in its tax return, or conduct that involves the preparation for compensation of all or a substantial portion of a document for submission to the IRS with respect to a corporate taxpayer’s tax liabilities.
In any referral situation, the IRS pointed out that a thorough and complete narrative must be provided that describes the individual’s conduct and the alleged Circular 230 violation. The information assists the Office of Professional Responsibility in beginning an investigation. Upon receipt of the Form 8484, the IRS noted that OPR conducts an independent investigation of the facts and circumstances and determines whether, and to what extent, discipline may be necessary.
