Enrolled agent part 3 2024-2025

Form 2848

Power of Attorney and Declaration of Representative

TP authorizes specific individual to receive confidential tax information and perform the actions details on the form

Stolen Identity Refund Fraud

Tax refund fraud

Title 26

Internal Revenue Code - main body of tax law of the United States

Title 31

Bank Secrecy Act - for FBAR and international financial reporting laws

Regulation of practice of representatives before the Dept of Treasury (including IRS) and determinators of practitioner "fitness" to practice

Legislative branch

Makes laws (Congress)

Executive branch

Carries out laws (President)

Judicial branch

Evaluates laws, determines whether tax law is constitutional

US Treasury Department

Collects taxes through the IRS

IRS

Federal agency that enforces tax law, administers Internal Revenue Code, translates law into detailed regulations, rules, and procedures

Collection arm of US Treasury Dept

IRS Documentation in order of importance

Treasury Regulations

Revenue Rulings

Revenue Procedures

Private letter rulings

Technical advice memoranda (TAMs)

IRS notices

Primary authority

Internal Revenue Code, decisions by US Supreme Court, and international tax treaties

Substantial Authority

TO serve as the basis for interpretation of current tax law and to establish precedents for the future

- Temporary and final Treasury Regulations

- Court Cases

- Administrative pronouncements

- Congressional intent as reflected in committee reports

- Press releases, notices, similar documents published by IRS in Internal Revenue Bulletin (Excludes IRS publications)

Treasury Regulation

US Treasury Dept's official interpretation of the IRC

Steps to publish a Treasury Regulation

1) Published in Federal Register

2) Regulations are organized by subject matter and codified in the Code of Federal Regulations (CFR)

- Legislative regulations

- Interpretive regulations

- Procedural regulations

Legislative regulation

Highest degree of authority - generally carries same authority as the law

Interpretive regulation

Issued under IRS' general authority to interpret the IRC, explains meaning of portion of code

Revenue ruling

Intended to promote uniform application of IRC, can be used as guidance to avoid certain accuracy-related penalties, not binding in court

Revenue procedures

Official IS statements of procedure that affect the rights or duties of TPs under IRC

- Explains Revenue Ruling in detail

Large Business & International Division

Corporations with assets > $10M

Small Business/Self-Employed Division

- Small corps and parternships with assets < $10M

- Filers of gift, estate, excise, employment, and fiduciary returns

- Individuals filing income tax return with Sch C, E, F, or employee business expenses (Form 2106)

Wage and Investment Division

Individuals with wage and investment income only filing individual return without Schedule C, E, F

Tax-Exempt and Government Entities Division

- Employee plans (including IRAs) with filing requirement

- Exempt organizations

- Government entities

Taxpayer Advocate Service

Separate, independent org within the IRS whose goal is to help TPs resolve problems with the IRS

Right to Privacy and Confidentiality

IRS will not disclose to anyone the info a TP provides, except as authorized by law

Who can represent TPs before the IRS?

- Attorneys

- EAs

- CPAs

- Enrolled actuaries (limited to area of expertise)

- Enrolled Retirement Plan Agents (limited to area of expertise)

AFSP Record of Completion requirements

- Minimum 18 hours of continuing education, including 6 hour annual Federal Tax Refresher course

- Passed knowledge-based comprehension test administered by CE provider at end of course

- Current PTIN

- Consented to duties and restrictions relating to practice before IRS Circular 230

Individuals exempt from AFSP record of completion course

- State-based return preparer program participants

- Passed SEE Part 1 in past 2 years

- RTRP test passers

- VITA/TCE volunteers

- Other accredited tax-focused credential holders

Still must have taken 15 hours of qualifying CE courses during the year

Office of Professional Responsibility

Responsible for matters related to practitioner conduct, discipline, disciplinary proceedings, and sanctions

Return Preparer Office

Responsible for issuance of PTINs, acting on applications for enrollment, and administering AFSP testing and continuing education for designated groups

Who has limited practice due to "Special Relationship"?

- Individual (self-representation)

- Family member (spouse, child, parent, sibling)

- Officer of a corp/association/agency

- Partner - general partner may represent partnernship (not limited partner)

- Employee - regular, full time employee can represent employer

- Fiduciary (trustee, executor, personal rep, guardian)

- Qualifying student or law graduate working in an LITC or STCP

Authorization for special appearances (request make with OPR)

How can someone lose eligibility to practice before the IRS?

- Suspension/disbarment by OPR

- Being placed in inactive retirement status

Not meeting requirements for renewal of enrollment (CPE)

Who is not considered a preparer and not required to obtain a PTIN?

- Person who gives opinion about events that haven't happened

- Person who furnishes typing, copying, or mechanical assistance

- Person who prepares returns of employer

- Fiduciary who prepares return for a trust or estate

- Unpaid volunteer who provides tax assistance under VITA,LITC,TCPE

- Employee of IRS who performs official duties by preparing a tax return for a TP who requests it

Enrolled Agent Licensing tracks

1) Exam track

2) Previous experience track (min 5 years of past service with the IRS, apply within 3 years of leaving IRS)

How often do you need to renew your EA?

Every 3 years depending on last digit of SSN

EA continuing education

- 72 hours of CE during each 3 year enrollment

- Minimum 16 hours each year (2 hours of ethics or professional conduct required each year)

EA continuing education - first enrollment cycle

- 2 hours of CE for every month enrolled

- Includes 2 hours of Circular 230 ethics each year

Minutes in a contact/credit hour

50

With regards to the Annual Filing Season Program, how often are non-exempt participants required to take the Annual Federal Tax Refresher test?

Annually

All CE for credit must satisfy what requirements?

- Be given by IRS approved provider (in person, online, or self-study)

- Course material must focus on federal law

- If course deals with individual state law, at least 80% of program material must consist of a comparison between federal and state tax laws

RPO typically grants waivers based on what reasons?

- Active military duty

- Absence from US for extended period

- Health issues

Form 2848

Power of Attorney and

Durable POA vs Regular POA

Durable POA - Terminated upon death of the individual

Regular POA - Terminated if TP becomes incapacitated or incompetent

Form 8821

Tax Information Authorization

- Authorizes any individual, corp, firm, org, or partnership to inspect or receive confidential info for the type of tax and periods listed

Centralized Authorization File

- IRS' computer database that contains info regarding the authorization that TPs have given representatives for their accounts

- CAF number confirms a centralized file has been established for the rep under that number and enables IRS to send copies of notices & communications

- Can only provide authorization for 3 years in the future

IRC Section 7216

Prohibits tax return preparers from using tax return info for unauthorized purposes (criminal penalty)

IRC Section 6713

Imposes civil penalty for each unauthorized disclosure or use of tax return info by a tax return preparer

The confidentiality protection applies to communications that would be considered privileged if they were between the taxpayer and an attorney and that relate to:

- noncriminal tax matters before the IRS or

- noncriminal tax proceedings brough in federal court by or against the US

Cannot be used with any agency other than the IRS

When can rep sign a return?

TP unable to due to:

- Disease or injury

- Continuous absence from the US/PR for at least 60 days prior to return due date

- Other good cause with specific permission granted by IRS

When does Form 8821 expire?

Upon taxpayer's revocation or appointee's withdrawal

How long does checkbox authority last?

1 year from the due date of the return, not including extensions

When is preparer not required to obtain disclosure consent from a client?

If dislcosure is made for any of following reasons:

- Court order or subpoena

- Administrative order, demand, summons

- To report crime to proper authorities

- For purposes of a peer review

Direct mail advertising requirement

Must retain copy of communication and list of who it was sent to for at least 36 months

Fee information advertising requirement

Must adhere to published schedule for at least 30 calendar days after it's published

Radio/TV advertising requirement

Must record and save for at least 36 months from date of last transmission

Record keeping responsibilities under IRC 6060 related to employment recordrs

Must keep a record of all tax preparers he employs for a period of three years following the close of the return period. The records must be available for IRS inspection upon request.

Records must include name, TIN, place of work for each tax return preparer employed

Form 8275

Disclosure statement - allows preparer to disclose positions that don't have substantial authority but do have a reasonable basis

Form 8275 is used by taxpayers and tax return preparers to disclose items or positions, except those taken contrary to a regulation, that are not otherwise adequately disclosed on a tax return to avoid certain penalties. The form is filed to avoid the portions of the accuracy-related penalty due to disregard of rules or to a substantial understatement of income tax for non-tax shelter items if the return position has a reasonable basis

Disclosure statement + Avoidance of penalties

Used to avoid accuracy related penalties (understatement of tax), but cannot be used to avoid penalties related to misconduct (negligence, tax shelter) or if position has no reasonable basis

Under Circular 230, a practitioner may not willfully sign a tax return or claim for refund that the practitioner knows (or reasonably should know) contains a position that:

- Lacks a reasonable basis

- Is an unreasonable position

A practitioner can sign a return with a tax position that meets at least one of two standards:

- The position is "more likely than not" to be sustained on its merits, or

- The position has a "reasonable basis".

Synonym for reportable transaction

listed transaction - one that the IRS has determined has the potential for tax avoidance and evasion

Form 8867

Paid Preparer's Due Diligence Checklist

- Completed for each EITC, CTC/ACTC/ODC, AOTC, and/or HOH filing status claim prepared, every year without exception

- Includes questions preparer must ask TPs to comply

- Used to identify documents the TP provided and that the preparer used to determine credit eligibility

Claims required to complete Form 8867

- EITC

- CTC/ACTC/ODC

- AOTC

- HOH filing status

What records must be retained for each Form 8867 claim?

- Form 8867

- Applicable worksheets for EITC, CTC/ACTC, AOTC claimed on return

- Any documents or written proof relief on to complete Form 8867

- A record of how, when, and from whom the info the preparer obtained to prepare return

- Record of any questions preparer asked to determine eligibility

How long should refundable credit records be kept?

3 years from the latest of:

- Due date of tax return

- Date return was electronically filed

- For paper return, date return presented for signature

- Date you gave the part of the return for which you're responsible to the signing tax return preparer

Penalties for failure to exercise due diligence related to EITC, CTC/ACTC/ODC, AOTC, HOH claims

- Pay amount back with interest

- File Form 8862 in year after disallowance

- Cannot claim credit for 2 years if due to reckless/intentional disregard of rules or 10 years due to fraud

- (preparer penalty) $600 penalty for each failure to comply (no max)

What is IRC §6695 and what is its relevance to tax preparers?

Internal Revenue Code §6695 outlines certain penalties that may be assessed against preparers when they prepare returns. Specifically, the section stipulates a penalty for each instance of failing to comply with the following requirements:

- Failure to furnish a copy of a return to a taxpayer

- Failure to sign a return

- Failure to furnish an identifying number

- Failure to retain a copy or list of a return or claim

- Failure to file correct information returns

Statute of limitations - normal tax rreturn

3 years after return is due or filed (whichever is late)

Statute of limitations - Omitted income exceeding 25% of gross income on return

6 years from filing date

Statute of limitations - Fraudulent return

No limit

Statute of limitations - no return filed

No limit

Statute of limitations - claim for credit or amended return

The later of:

- 3 years from filing date of original return

- 2 years after tax was paid

If filed beforre April 15, SOL begins April 15

If filed on extension, 3 years begins when IRS receives return

Statute of limitations - claim for loss from worthless securities

7 years

Statute of limitations - employment and payroll tax recods

4 years after tax becomes due or is paid (whichever is later)

Statute of limitations - Fixed assets, real estate

Until SOL expires for tax year in which the asset is disposed

Retention SOL for property records

Records relating to the basis of property should be retained as long as they may be material to any tax return involving the property

- Basis in property is material until SOL expires for the tax year or the asset is sold or disposed of

- TP must keep these records to figure asset's basis, depreciation, amortization, or depletion deductions 3 years from date of return sale reported on

Record statute of limitations for employment returns

4 years (including payroll tax returns, applicable employment records related to wages paid)

Substantial valuation misstatement penalty

20%

- Applies when TP claims value for property on return is overstated by at least 150% of correct value and results in underpayment of tax of at least $5K ($10K for corps)

Gross valuation misstatement penalty

40%

- Applies when TP claims value for property on return that is 200%+ of the correct amount

Valuation understatement due to fraud

75%

- Filing false return

- Hiding or transferring assets or income

- Claiming false deductions

- Intentional

Penalty for filing frivolous return or other submissions

$5K in addition to other penalties

Penalty for making frivolous arguments in US Tax Court

$25K

Trust Fund Recovery Payment

100% of amount of unpaid trust fund taxes can be assessed to anyone who is considered a "reasonable person" in the business

- Includes officer, director, stockholder, accountant, bookkeeper, staff who writes checks

- Person must be responsible and willful to be liability for employer's failure to collect or pay trust fund taxes (person knew or should have known taxes not being remitted and has power to correct)

Penalty for alteration of jurat

$5K penalty

Additional penalties for failure to file, failure to pay, fraudulent failure to file

Interest may be abated or waived in the following instances:

- When it is excessive, barred by statute, or erroneously or illegally assessed.

- When it is assessed on an erroneous refund.

- When it was incurred on an account while the taxpayer was in a combat zone or in a declared disaster area.

- When it was the result of certain errors or delays caused by an IRS employee.

How many days does the preparer have to request an appeal before a preparer penalty is assessed?

During a field audit, if an IRS examiner determines a preparer penalty applies, a detailed report is prepared and the preparer is provided with a copy of the report. The preparer then has 30 days to request an appeal before the preparer penalty is assessed

Tax refund fraud using stolen identities

Stolen Identity Refund Fraud (SIRF)

How long is IP PIN valid?

1 year

For how many years after reporting identity theft incident to IRS will IRS send TP an IP PIN?

3 years

CP01 Notice

Used to provide IP PIN

How many refunds can be deposited into a single financial account or prepaid debit card?

3 refunds

- Any additional converted to paper refund and mailed to TP

Preparers who experience a security incident or similar data breach must contact the IRS to report the incident within

1 business day

Gramm-Leach-Bliley Act safeguards rule

Requires tax preparers and others who are significantly engaged in providing financial products or services that include preparation and filing of tax returns, to ensure the security and confidentiality of their customer's records and information

Section 6713 Penalty

Disclosure or use of information by return preparers: for disclosure in connection with a crime related to identity theft, the penalty for each disclosure is $1,000 with an aggregate maximum per year of $50,000

Section 7216 Penalty

Criminal code that details penalties for preparers who knowingly or recklessly disclose or use tax return information

Preparer may be fined up to $1,000 and/or imprisoned up to 1 year for each violation

If TP receives an IRS notice saying he may be a victim of identity theft, the next steps include:

1) Contact the name and number printed on the notice

2) Fill out Form 14039, IRS identity Theft Affidavit, which allows IRS no put an indicator on her tax records for questionable activity

3) Contact local police and file a report, report identity theft

IRS Identity Protection Specialized Unit

for TPs who have previously been in contact with IRS and have not achieved a resolution

Form 14039

When a taxpayer is the victim of ID theft, they should submit a Form 14039, Identity Theft Affidavit. The primary purpose of the form is to provide a means for reporting the theft of your identity to the IRS.

What form is used to report ID theft to the IRS?

Form 14039

The Federal Trade Commission's "Safeguards Rule" requires that all paid tax preparers

Create and enact data security plans

Direct debit

Tax payment electronically withdrawn from bank account. Used by TPs who are filing and paying at the same time

(C-corps can pay small amounts this way)