The Internal Revenue Service continues to prepare the rollout for the registration of return preparers, with the first step being Preparer Tax Identification Numbers, followed by testing and continuing education requirements. Although the rules with respect to practice before the IRS as set forth in IRS Publication 947 are not changing, there continues to be a great deal of confusion, which will only be increased by the new registration requirements.
Treasury Department Circular 230 continues to provide the guidance as to who is authorized to practice before the IRS. Under Section 10.3 of Circular 230, a return preparer who is not a practitioner (attorney, CPA, enrolled agent, enrolled retirement plan agent, enrolled actuary) is considered an unenrolled return preparer and may exercise the privilege of limited practice before the IRS. This limited practice before the IRS would include working with customer service representatives, revenue agents and examination officers with respect to an examination regarding the return they prepared.
A preparer who is not a practitioner may represent a taxpayer in an examination of a return that they prepared, provided the taxpayer has submitted a valid power of attorney (Form 2848) appointing the individual as the taxpayer's representative. The authority is limited to the examination level and does not extend to collection activity, executing closing agreements, extending statutes of limitations, executing waivers, executing claims for refunds, or receiving refund checks.
PRACTICE BEFORE THE TAS
Program Manager Technical Assistance 2010-022, issued on June 24, 2010, addresses the ability of employees of the Taxpayer Advocate Service to deal with unenrolled return preparers. The guidance states that TAS employees should accept a Form 2848 from an unenrolled return preparer only if:
The unenrolled return preparer prepared the return;
The return is under examination; and,
TAS assistance is being requested for an issue related to the examination of the tax return.
On a more limited basis, the unenrolled tax return preparer could be designated as a third-party designee by filing Form 8821, entitling the tax return preparer to receive copies of the notices that the IRS provides to the taxpayer.
The guidance also pointed out that Taxpayer Advocate Service assistance is most often sought after a matter has gone to collection, and the unenrolled return preparer would not be permitted to work with TAS on a collection matter.
Circular 230 identifies CPAs as practitioners authorized to practice before the IRS. What about practicing public accountants who are not CPAs? The answer depends on the laws of the particular state involved. Over the last several years, the IRS has issued program manager technical assistance with respect to uncertified accountants in a number of states. In most of those states, the IRS has determined that, based on state law, an uncertified public accountant has the same rights to practice with respect to tax matters as a CPA, and therefore has the same rights to practice before the IRS as a CPA.
Although the details of the practice requirements vary from state to state, if the IRS finds that the state law allows uncertified public accountants to practice accounting and engage in services that involve accounting skill, including the preparation of tax returns and the furnishing of advice on tax matters, the IRS has determined that the uncertified accountant has the same rights with respect to the IRS as a certified accountant, and therefore both are authorized to practice before the IRS.
The states with respect to which the IRS has taken this position include Alabama, Alaska, Arkansas, California, Colorado, Connecticut, Hawaii, Idaho, Maine, Montana, New Hampshire, New Jersey, New York, North Dakota, Ohio, Oklahoma, Rhode Island, South Dakota, Tennessee, Vermont and West Virginia.
In a few states, the IRS has made a different determination. In Illinois and Michigan, there are both registered and licensed CPAs. Since only a licensed CPA may practice public accountancy in those states, a registered CPA who is not licensed may not practice before the IRS.
In Iowa, there are CPAs and licensed public accountants. The IRS has determined that, under Iowa law, a licensed public accountant does not have the same rights and privileges as a CPA and is therefore not authorized to practice before the IRS.
In Kansas, the IRS concluded that, under Kansas law, only persons who hold a permit to practice may practice as a CPA, and therefore individuals who are not permitted to practice as a CPA are not authorized to practice before the IRS.
In Delaware, while both CPAs and public accountants may practice public accountancy, the IRS determined that under the law only persons who hold a certificate may practice certified public accountancy. The IRS concluded therefore that Delaware public accountants are not authorized to practice before the IRS.
In Oregon and South Carolina, the IRS issued a split verdict based on state law. In Oregon, a person licensed as a public accountant is not qualified to practice as a CPA unless such person qualified for, and applied to take, the Uniform CPA examination before Jan. 1, 2002. The IRS determined that any person who meets these requirements is authorized to practice before the IRS. However, any person who holds a public accountant's license, but who has not qualified for, or applied to take, the Uniform CPA Exam before Jan. 1, 2002, and is not otherwise qualified to practice before the IRS, is not eligible to practice before the IRS.
In South Carolina, licensed public accountants have the same rights and privileges as CPAs in that state. However, there is also an accounting practitioners' license, which does not grant the same rights and privileges as CPAs. The IRS determined that licensed South Carolina public accountants are authorized to practice before the IRS. However, licensed accounting practitioners are not authorized to practice before the IRS.
As the registration of return preparers brings more tax return preparers within the scope of Circular 230 and the IRS Office of Professional Responsibility, more confusion is likely to be created as to who is authorized to practice before the IRS. The rules as to who is authorized to practice before the IRS have not changed. However, a tax return preparer may have to look to IRS guidance and their particular state law to determine whether their particular authority to prepare tax returns authorizes them to fully practice before the IRS, or to only engage in a limited practice related to an examination of the returns that they have prepared.
George G. Jones, JD, LL.M, is managing editor, and Mark A. Luscombe, JD, LL.M, CPA, is principal analyst, at CCH Tax and Accounting, a Wolters Kluwer business.
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