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© www.taxdebtanonymous.com 2011 Circular 230 Overview

Circular 230 Considerations

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Table of Contents

Meet Your Instructor

Overview of Circular 230 Interacting with OPR Brief Glossary Practitioners re: POA

Limitations Special Rules No Longer Eligible

Conflicts of interest Advertising and Fees Evaluations and Thanks!

08/15/11



Who is Eva Rosenberg MBA, EA

Eva Rosenberg, EA, Your TaxMama® has been teaching Enrolled Agents Exam review courses off and on since developing the program for UCLA Extension over 15 years ago. These days, she’s teaching her own course online at www.irsexams.com

Eva has a BA in Accounting and an MBA in International business. Your TaxMama® is a TaxWatch columnist for Dow Jones' www.MartketWatch.com and a WSJ blog (2011), and author of the ever-popular book, Small Business Taxes Made Easy, published by McGraw-Hill – new edition – just released!

As a speaker, TaxMama® is popular with both tax professionals and taxpayers. You can find her at www.TaxMama.com and subscribe to her free daily podcast at www.TaxQuips.com

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Circ 230

Main outline of Circ 230:Subpart A – Rules Governing Authority to PracticeSubpart B – Duties and Restrictions Relating to

Practice Before the Internal Revenue Service.Subpart C – Sanctions for Violations of RegulationsSubpart D – Rules Applicable to Disciplinary

HearingsSubpart E – General Provisions Addendum



Our Main Goal?

When it comes to OPR oversight, your main goals 1. Behave ethically2. Guide your clients towards ethical behavior3. Stay informed about changes to the tax law

and procedures4. Learn shortcuts to the tax maze5. Above all - CYA with respect to clients’

demands



CYA

What’s the best way for you to CYA?



Best CYA

DOCUMENT EVERYTHING!

If I teach you nothing else – learn this.



Document

Always make notes about conversations with IRS or with clients. You never know what will be significant later.

Make note of:Name of person (if IRS or state, get employee number)Date Time All contact information (phone, fax, e-mail, etc.) – keep a master list on the cover of the folder, or in the electronic client file.Summary of key points of discussion – especially agreements, or “to-do”s with deadlines.If possible, request a fax or e-mail from client or government agent to confirm details – or send them one. Also, when getting missing tax information, especially numbers from client – get it in writing – ALWAYS. No exceptions.

What is a good way to document things?



Glossary of Key Terms

Commissioner: The Commissioner of the Internal Revenue Service. Durable power of attorney: A power of attorney that is not subject to a time limit and

that will continue in force after the incapacitation or incompetence of the grantor (the taxpayer).

General power of attorney: A power of attorney that authorizes the attorney-in-fact to perform any and all acts the taxpayer can perform.

Limited power of attorney: A power of attorney that limits the attorney-in-fact to certain specified act(s).

Practitioner: Generally an attorney, CPA, enrolled agent, or enrolled actuary authorized to practice before the IRS. Other individuals may qualify to practice temporarily or engage in limited practice before the IRS, however, they are not referred to as practitioners.

Recognized representative: An individual who is recognized to practice before the IRS.



Who Can Practice Before the IRS?

Any of the following individuals can practice before the IRS – provided they are not under suspension or disbarment. However, any individual who is recognized to practice (a recognized representative) must be designated as the taxpayer's power of attorney and file a written declaration with the IRS stating that he or she is authorized and qualified to represent a particular taxpayer. Form 2848 can be used for this purpose.

Attorneys. Certified public accountants (CPAs). Enrolled agents. Enrolled actuaries. Enrolled retirement plan agents – New!Unenrolled return preparers (limited)



May NOT Practice

Government officers and employees, and others.An individual, who is an officer or employee of the executive, legislative,

or judicial branch of the United States Government; an officer or employee of the District of Columbia; a Member of Congress; or a Resident Commissioner may not practice before the Internal Revenue Service if such practice violates 18 U.S.C. §§ 203 or 205.

(§§ 203 or 205 = Bribery or graft or conflict of interest http://www.law.cornell.edu/uscode/html/uscode18/usc_sup_01_18_10_I_20_11.html )

State officers and employees. No officer or employee of any State, or subdivision of any State, whose duties require him or her to pass upon, investigate, or deal with tax matters for such State or subdivision, may practice before the Internal Revenue Service, if such employment may disclose facts or information applicable to Federal tax matters.

http://www.law.cornell.edu/uscode/html/uscode18/usc_sup_01_18_10_I_20_11.html



Unenrolled Return Preparers

Unenrolled return preparers. An unenrolled return preparer is an individual other than an attorney, CPA, enrolled agent, or enrolled actuary who prepares and signs a taxpayer's return as the preparer, or who prepares a return but is not required (by the instructions to the return or regulations) to sign the return.

They get limited authority to speak with IRS about tax returns they have prepared – when the box is checked.



Limited practice

An individual who is not a practitioner may represent a taxpayer before the Internal Revenue Service in the circumstances described in this paragraph (c)(1), even if the taxpayer is not present, provided the individual presents satisfactory identification and proof of his or her authority to represent the taxpayer. The circumstances described in this paragraph (c)(1) are as follows:

(i) An individual may represent a member of his or her immediate family.(ii) A regular full-time employee of an individual employer may represent the employer.(iii) A general partner or a regular full-time employee of a partnership may represent the

partnership.(iv) A bona fide officer or a regular full-time employee of a corporation (including a parent,

subsidiary, or other affiliated corporation), association, or organized group may represent the corporation, association, or organized group.

(v) A regular full-time employee of a trust, receivership, guardianship, or estate may represent the trust, receivership, guardianship, or estate.

(vi) An officer or a regular employee of a governmental unit, agency, or authority may represent the governmental unit, agency, or authority in the course of his or her official duties.

(vii) An individual may represent any individual or entity, who is outside the United States, before personnel of the Internal Revenue Service when such representation takes place outside the United States.

(viii) An individual who prepares and signs a taxpayer’s tax return as the preparer, or who prepares a tax return but is not required (by the instructions to the tax return or regulations) to sign the tax return



Not Enrolled Limitations

What an Unenrolled Return Preparer May NOT Do An unenrolled return preparer is permitted to appear as your representative only before

customer service representatives, revenue agents, and examination officers, with respect to an examination regarding the return he or she prepared.

An unenrolled return preparer cannot: • Represent a taxpayer before other offices of the IRS, such as Collection or

Appeals. This includes the Automated Collection System (ACS) unit. • Execute closing agreements.• Extend the statutory period for tax assessments or collection of tax.• Execute waivers.• Execute claims for refund.• Receive refund checks.

For more information, see Publication 470. If the unenrolled return preparer does not meet the requirements for limited

representation, you must file Form 8821. The unenrolled return preparer's involvement in the case will be limited to receiving or inspecting the taxpayer information. See Form 8821. (We’ll discuss this further when we talk about POAs.)



Representation Outside the United States

Any individual may represent an individual or entity before personnel of the IRS when such representation occurs outside the United States. See section 10.7(c)(1)(vii) of Circular 230.

Shocking, isn’t it?

The only reason this is the case, is becase there are so few EAs outside the country.

In fact, this new exam system with Prometric may precipitate the change - since they will have more testing locations outside the country.



Special Appearances

Authorization for Special Appearances The Office of Professional Responsibility can authorize an individual who

is not otherwise eligible to practice before the IRS to represent another person for a particular matter. The prospective representative must request this authorization in writing from the Office of Professional Responsibility. However, it is granted only when extremely compelling circumstances exist. If granted, the Office of Professional Responsibility will issue a letter that details the conditions related to the appearance and the particular tax matter for which the authorization is granted.

The authorization letter from the Office of Professional Responsibility should not be confused with a letter from an IRS center advising an individual that he or she has been assigned a Centralized Authorization File (CAF) number (an identifying number that the IRS assigns representatives). The issuance of a CAF number does not indicate that a person is either recognized or authorized to practice before the IRS. It merely confirms that a centralized file for authorizations has been established for the representative under that number.



Students

Students in QLITCs and the STCP.

http://www.irs.gov/publications/p947/ar02.html#en_US_publink1000148704 You may authorize a student who works in a (an acronym) Qualified Low

Income Taxpayer Clinic (QLITC) or Student Tax Clinic Program (STCP) to represent you under a special order issued by the Office of Professional Responsibility.

These are usually some version of the VITA program.

Volunteer Income Tax Assistance , and Tax Counseling for the Elderly (TCE)

http://www.irs.gov/individuals/article/0,,id=107626,00.htmlNote: this is a great way to get experience –

without the commitment of a job.

http://www.irs.gov/publications/p947/ar02.html

http://www.irs.gov/individuals/article/0,,id=107626,00.html



Cannot Practice

Who Cannot Practice Before the IRS?(note: This should be re-printed as who MAY not practice before IRS.)

In general, individuals who are not eligible or who have lost the privilege as a result of certain actions cannot practice before the IRS. If an individual loses eligibility to practice, his or her power of attorney will not be recognized by the IRS.

Corporations, associations, partnerships, and other persons that are not individuals. These organizations (or persons) are not eligible to practice before the IRS.



Mother May I? Or…– NOT!

Loss of Eligibility

Generally, individuals lose their eligibility to practice before the IRS in the following ways:

• Not meeting the requirements for renewal of enrollment (such as continuing professional education).

• Requesting to be placed in an inactive retirement status.

• Being suspended or disbarred by state authorities to practice as an attorney or certified public accountant.



Failure to meet requirements.

Enrolled agents who fail to comply with the requirements for eligibility for renewal of enrollment will be notified by the Office of Professional Responsibility through first class mail. The notice will explain the reason for noncompliance and provide the enrolled agent with an opportunity to furnish information for reconsideration. The enrolled agent has 60 days from the date of the notice to respond.

Practice denied. Any individual engaged in limited practice before the IRS who is

involved in disreputable conduct is subject to disciplinary action. Disreputable conduct includes, but is not limited to, the list of items under Disreputable Conduct shown later under What Are the Rules of Practice.



Inactive Roster

An enrolled agent will be placed on the roster of inactive enrolled individuals for a period of three years, if he or she:

• Fails to respond timely to the notice of noncompliance with the renewal requirements,

• Fails to file timely the application for renewal of enrollment, or• Does not satisfy the requirements of eligibility for renewal of

enrollment.The enrolled agent must file an application for renewal and satisfy all

requirements for renewal within 3 years of being placed on the roster. After 3 years, he or she will be removed from the roster and the enrollment terminated.

Note: There will be a master roster for all PTIN holders where this information will be visible to the public.



Inactive Retirement Status

Inactive retirement status. Enrolled agents who request to be placed in an inactive

retirement status will be ineligible to practice before the IRS. They must continue to adhere to all renewal requirements. They can be reinstated to an active enrollment status by filing an application for renewal of enrollment and providing evidence that they have completed the required continuing professional education hours.



Conflicts of interest

Conflicts of interest – Conflicts can arise between couples, partners, shareholders, members of LLCs, employees of a client business, etc. Circ 230 demands that you do something common-sensical. If you want to work with both or all of them, or they insist that you do, you must get a written release from BOTH (or all) parties the instant you realize that a conflict exists.

Once you learn that a conflict exists, you must stop work and prepare the written release for everyone to sign. This will relate to preparing tax returns, giving advice or representing them in audit or collections matters. Aside from the fact that this is now law, this really is great advice, designed to protect you from litigation.

This has been a big issue for discussion, especially in the IRS Tax Forums.



Conflicts - Cont

For instance, when you are dealing with a married couple about to embark on a divorce, working with both of them is a conflict of interest. IRS feels that you cannot fairly look after the interests of both parties. Perhaps you can – but beware of nasty divorces. You will become the scapegoat in all financial situations if you remain in the middle, working with both. You’ll become of the victim of the “Mother loves you best” syndrome, where one spouse is apt to claim that you gave preferential treatment to the other.

Sometimes you know that you’re just better off, gently referring each of them to other tax professionals and staying out of the middle. Sometimes you know that you can do a better job for both of them, if you can coordinate their respective tax issues with each other. There’s a lot you can do to maximize the tax benefits of dependents, credits and deductions if the couple can work together.



Conflict - Preparer

Incidentally, another conflict that may arise is between you and your client. When IRS is looking at major errors or discrepancies in a tax return, audit information or financial report in collections situations – they will also be looking at preparer penalties. You may be facing a situation where it’s your neck or theirs. Time to get a conflict of interest letter signed – or remove yourself from the engagement, to represent just yourself.

If you stay on the engagement, be sure that conflict of interest letter spells out the issues that affect you – in writing.



Advertising

Sec. 10.30 (a) Advertising and solicitation restrictions.(1) A practitioner may not, with respect to any Internal

Revenue Service matter, in any way use or participate in the use of any form of public communication or private solicitation containing a false, fraudulent, or coercive statement or claim; or a misleading or deceptive statement or claim.



False and Misleading?

On April 22nd, the California Superior Court froze the assets of Roni Deutch for shredding documents in defiance of a court order, and not giving refunds to clients, as ordered. Trial is set for July

Minnesota Attorney General Lori Swanson filed suit

accusing Houston-based TaxMasters of fraud and deception. Texas filed suit alleging the company unlawfully "engaged in false, misleading, and deceptive acts and practices." Florida is investing them, too.

Florida is also investigating JK Harris for allegedly violating a 2008

settlement with Florida and 17 other states over misleading sales tactics.

http://www.sacbee.com/2011/04/21/3568671/court-freezes-assets-of-tax-lady.html

http://www.sacbee.com/2011/04/21/3568671/court-freezes-assets-of-tax-lady.html

http://abcnews.go.com/Blotter/taxmasters-accused-fraud-deception/story?id=13364502

http://abcnews.go.com/Blotter/taxmasters-accused-fraud-deception/story?id=13364502

http://www2.highlandstoday.com/content/2011/mar/25/251016/tax-masters-and-jk-harris-face-ag-inquiry/c_1/



Advertising Fees

Sec 10.30 (b) Fee Information(1)(i) A practitioner may publish the availabilityof a written schedule of fees and disseminate the followingfee information —(A) Fixed fees for specific routine services.(B) Hourly rates.(C) Range of fees for particular services.(D) Fee charged for an initial consultation.(ii) Any statement of fee information concerning matters in which costs

may be incurred must include a statement disclosing whether clients will be responsible for such costs.



Contingent Fees

Contingent Fees – A contingent fee is where the fee is based on a percentage of the refund or taxes saved. Or when we offer to reduce or waive our fee if we cannot get the intended result.

Circ 230 spells out the very few places where we may charge them. Never for preparing the initial tax return for any years. And never for giving written advice, or in connection with any qualified plans.



Contingent - Effective

These rules are effective for all fee agreements dated after March 26, 2008. We may charge them only in the following instances (read Sec 10.27):

1) Representing taxpayers at audit

a) of an original return

b) or of an amended return or claim for refund, where the amended return or claim for refund or credit was filed within 120 days of the taxpayer receiving a written notice of the examination of, or a written challenge to the original tax return.

2) In connection with a claim for credit or refund filed solely in connection with the determination of statutory interest or penalties assessed by the IRS .

3) In connection with any judicial proceeding arising under the Internal Revenue Code.



Client Records

Secure information in officeTake sensible precautions about staff screeningDon’t send SSNs in the mail or emailShred documents – do not simply throw them out.Return records to clients



Closing

IRS Doesn’t ask that much of us, do they?

What do they expect?

EthicsThorough ResearchThe Latest TechnologyThe Skills of a DiplomatMind-Reading!

08/15/11



Resources

Circular 230 - Regulations Governing the Practice of Attorneys, Certified Public Accountants, Enrolled Agents, Enrolled Actuaries, and Appraisers before the Internal Revenue Service (04/2008)http://www.irs.gov/pub/irs-pdf/pcir230.pdf

Publication 947 (4/2009), Practice Before the IRS and Power of Attorneyhttp://www.irs.gov/publications/p947/index.html

Publication 216 - Conference and Practice Requirements (updated 03/92)http://www.irs.gov/pub/irs-pdf/p216.pdf

08/15/11

http://www.irs.gov/publications/p947/index.html







CPE Link

Thanks for coming.

Remember to give CPE Link your evaluations.

Drop by to sign up for other TaxMama classes – http://www.cpelink.com/teamtaxmama

The next 5 classes in the series:IRS Practice Series: After SUCCESSFUL Collections or Audits – What Next? May 19

IRS Practice Series: Computing Or Recalculating IRS Assessments For Interest And Penalties Jun 7

IRS Practice Series: Representing Your Client at a 1040 Audit – Office or Field Jun 23

IRS Practice Series: Curing the Addicted Tax Delinquent - A 12-step program Jul 7

Our Tax series are available as Self-Study or Resources:

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