Unit 3.2 Practice Before the IRS Exam
Questions and Answers
Fiduciary Representation - Answer-A fiduciary (trustee, executor, representative,
administrator, receiver, or guardian) is considered to be the taxpayer and not a
representative of the taxpayer
Authorization for Special Appearances - Answer-in rare circumstances, the
commissioner of the IRS will authorize a person who is not otherwise eligible to
practice before the IRS represent another person.
- Request is made to the OPR
Actions that are NOT Practiced Before the IRS - Answer-"Practice before the IRS"
does NOT include:
- Representation of taxpayers before the US Tax Court
- Appearing as a witness for the taxpayer
- Preparation of a tax return
Tax Return Preparers - Answer-individuals who participate in the preparation of tax
returns for tax payers for compensation
Tax Return Preparer Requirements - Answer-- Must register its IRS and obtain PTIN
- Must undergo a limited tax compliance check to ensure they have filed their own
personal and business tax returns
PTIN Requirements - Answer-- preparers must use when they prepare and sign a
tax return or refund claim
- Mandatory on all federal tax returns
- these requirements apply to EAs, CPAs and attorneys
- Fail to list PTIN on a return are subject to penalties
PTIN (Preparer Tax Identification Number) - Answer-- 9 digit number
- assigned to a single preparer (can't share, trade, transfer, etc.)
- Must be 18 y.o.
- No fee for issuance or renewal of PTIN
- All EAs are required to have PTIN
Supervised Preparers - Answer-Preparers who do not sign tax returns, but are
employed by a law firm, EA office, or CPA practice and are directly supervised by an
attorney, CPA, EA, ERPA, or enrolled actuary (who signs the return)
- required to have PTIN
Supervised Preparers CAN'T - Answer-- Sign any tax return they prepare or assist in
preparing
- Represent taxpayers before the IRS in any capacity
- Identify themselves as Circular 230 practitioners
, Compensation for Tax Preparing - Answer-if you do not receive compensation for tax
preparation you are NOT considered a tax preparer to the IRS
- gifts are not considered compensation
Exceptions to PTIN Requirements - Answer-The following are not considered tax
preparers and do not need a PTIN
- giving tax advice or opinions
- furnishing typing, copying or mechanical assistance
- preparing a return for employer (of which you are regularly and continuously
employed)
- fiduciary who prepares return for trust/estate
- unpaid volunteer who provides tax assistance under VITA
- employee of the IRS performing official duties
EFIN (Electronic Filing Identification Number) - Answer-number issued by the IRS to
individuals who have been approved as authorized IRS e-file providers
"Substantial Portion" Rule - Answer-only the person who prepares all or a substantial
portion of a return is considered the preparer
- only one person in a firm will be deemed the "signing preparer" (both person and
firm can be penalized if there is an error)
"Substantial Portion" Definition - Answer-A portion of a tax return is NOT considered
substantial if it involves ONLY amounts of gross income, deductions, or credits that
are
- Less than $10,000 or
- Less than $400,000 and less than 20% of the adjusted gross income of the return
A single schedule usually isn't a substantial portion unless it represents a major
portion of the income
Enrolled Agent Licensing - Answer-Two tracks to becoming an EA
1. Pass 3 part EA exam
2. by virtue of past employment with the IRS
Exam Track Licensing - Answer-- Must apply for PTIN
- Register to take SEE
- Achieve passing scores on all 3 portions of test
- File Form 23, Application for Enrollment to Practice before the IRS (submit online,
pay fee)
- Pass background check conducted by the IRS
Previous Experience Track Licensing - Answer-- must possess a minimum of 5 years
past service with the IRS and technical experience as outlined in Circular 230
- must apply w/in 3 years from the date employee left IRS
- must then file Form 23 and pass background check
Denial of Enrollment - Answer-any individual who is involved with disreputable
criminal conduct is subject to disciplinary action or denial of enrollment
- Ex: failure to file or pay one's taxes
Questions and Answers
Fiduciary Representation - Answer-A fiduciary (trustee, executor, representative,
administrator, receiver, or guardian) is considered to be the taxpayer and not a
representative of the taxpayer
Authorization for Special Appearances - Answer-in rare circumstances, the
commissioner of the IRS will authorize a person who is not otherwise eligible to
practice before the IRS represent another person.
- Request is made to the OPR
Actions that are NOT Practiced Before the IRS - Answer-"Practice before the IRS"
does NOT include:
- Representation of taxpayers before the US Tax Court
- Appearing as a witness for the taxpayer
- Preparation of a tax return
Tax Return Preparers - Answer-individuals who participate in the preparation of tax
returns for tax payers for compensation
Tax Return Preparer Requirements - Answer-- Must register its IRS and obtain PTIN
- Must undergo a limited tax compliance check to ensure they have filed their own
personal and business tax returns
PTIN Requirements - Answer-- preparers must use when they prepare and sign a
tax return or refund claim
- Mandatory on all federal tax returns
- these requirements apply to EAs, CPAs and attorneys
- Fail to list PTIN on a return are subject to penalties
PTIN (Preparer Tax Identification Number) - Answer-- 9 digit number
- assigned to a single preparer (can't share, trade, transfer, etc.)
- Must be 18 y.o.
- No fee for issuance or renewal of PTIN
- All EAs are required to have PTIN
Supervised Preparers - Answer-Preparers who do not sign tax returns, but are
employed by a law firm, EA office, or CPA practice and are directly supervised by an
attorney, CPA, EA, ERPA, or enrolled actuary (who signs the return)
- required to have PTIN
Supervised Preparers CAN'T - Answer-- Sign any tax return they prepare or assist in
preparing
- Represent taxpayers before the IRS in any capacity
- Identify themselves as Circular 230 practitioners
, Compensation for Tax Preparing - Answer-if you do not receive compensation for tax
preparation you are NOT considered a tax preparer to the IRS
- gifts are not considered compensation
Exceptions to PTIN Requirements - Answer-The following are not considered tax
preparers and do not need a PTIN
- giving tax advice or opinions
- furnishing typing, copying or mechanical assistance
- preparing a return for employer (of which you are regularly and continuously
employed)
- fiduciary who prepares return for trust/estate
- unpaid volunteer who provides tax assistance under VITA
- employee of the IRS performing official duties
EFIN (Electronic Filing Identification Number) - Answer-number issued by the IRS to
individuals who have been approved as authorized IRS e-file providers
"Substantial Portion" Rule - Answer-only the person who prepares all or a substantial
portion of a return is considered the preparer
- only one person in a firm will be deemed the "signing preparer" (both person and
firm can be penalized if there is an error)
"Substantial Portion" Definition - Answer-A portion of a tax return is NOT considered
substantial if it involves ONLY amounts of gross income, deductions, or credits that
are
- Less than $10,000 or
- Less than $400,000 and less than 20% of the adjusted gross income of the return
A single schedule usually isn't a substantial portion unless it represents a major
portion of the income
Enrolled Agent Licensing - Answer-Two tracks to becoming an EA
1. Pass 3 part EA exam
2. by virtue of past employment with the IRS
Exam Track Licensing - Answer-- Must apply for PTIN
- Register to take SEE
- Achieve passing scores on all 3 portions of test
- File Form 23, Application for Enrollment to Practice before the IRS (submit online,
pay fee)
- Pass background check conducted by the IRS
Previous Experience Track Licensing - Answer-- must possess a minimum of 5 years
past service with the IRS and technical experience as outlined in Circular 230
- must apply w/in 3 years from the date employee left IRS
- must then file Form 23 and pass background check
Denial of Enrollment - Answer-any individual who is involved with disreputable
criminal conduct is subject to disciplinary action or denial of enrollment
- Ex: failure to file or pay one's taxes
