The IRS limits those that are entitled to “practice” before it. Generally, “practice before the IRS” is defined as including all matters connected with a presentation to the IRS on behalf of the taxpayer. Examples include preparing and filing documents, communicating with the IRS, and representing a client at meetings. Any attorney, CPA, enrolled agent or enrolled actuary who is not under suspension or disbarment from practice before IRS may “practice” before the IRS. Also, there are some exceptions made for other persons, such as the following:
- An individual may appear on their own behalf;
- An individual may represent an immediate family member;
- A regular full-time employee of an employer may represent the employer;
- A general partner or a regular full-time employee of a partnership may represent the partnership;
- A bona fide officer or a regular full-time employee of a corporation, association, or organized group may represent the corporation, association, or organized group;
- A regular full-time employee of a trust, receivership, guardianship, or estate may represent the trust, receivership, guardianship, or estate;
- An officer or a regular employee of a governmental unit, agency, or authority may represent the government unit, agency, or authority in the course of his or her official duties;
- An individual may represent any individual or entity, which is outside the United States, before personnel of the IRS when such representation takes place outside the United States; and
- An individual who prepares and signs a taxpayer’s return as the preparer (or who prepares a tax return but is not required to sign the tax return) may represent the taxpayer only with respect to the return he or she prepared and signed. Such an individual may represent the taxpayer before revenue agents and customer service representatives, but not appeals officers, revenue officers, or Counsel.
But, what about an unenrolled preparer? That’s an individual who prepares and signs a tax return as the preparer, or who prepares a tax return but is not required to sign the tax return. Can they practice before the IRS? That was the issue presented in this case.
The plaintiff, a non-lawyer and non-CPA, had been an IRS revenue officer, but then became a self-employed tax consultant. He registered with the IRS as an unenrolled preparer. He provides various services to clients, but beginning in 1998, IRS officers and employees began refusing him permission to represent clients in matters before the IRS because he is not a “practitioner” as that term is defined by 31 C.F.R. §10.2(a). Eventually, the plaintiff sued, seeking a declaratory judgment challenging the pertinent IRS regulations as invalid and a violation of his constitutional due process rights. Specifically, 31 C.F.R. §10.7(c)(1)(viii) states:
[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, may represent the taxpayer before revenue agents, customer service representatives or similar officers and employees
of the Internal Revenue Service during an examination of the taxable year or period covered by the tax return, but, unless otherwise prescribed by regulation or notice, this right does not permit such individual to represent the taxpayer, regardless of the circumstances requiring representation, before appeals officers,
revenue officers, Counsel or similar officers or employees of the Internal Revenue Service or the Department of the Treasury.
So, an unenrolled preparer’s ability to practice before the Service is very limited. Generally, it is limited to the examination function of the Service, and only with respect to a return he or she prepared. Consequently, an unenrolled preparer cannot practice before appeals officers, revenue officers, and Counsel. Also, an unenrolled preparer cannot execute claims for refund, receive refund checks, execute consents to extend the statutory period for assessment or collection, execute closing agreements, or execute waivers of restriction on assessment or collection of a deficiency in tax.
In addition, federal law provides that only attorneys and CPAs may represent a person before the IRS. 5 U.S.C. §500(b)-(c). No one else has been granted a statutory right to do so. See 5 U.S.C. §500(d)(1). But, the Congress has never said whocannot represent a taxpayer before the IRS. So, the precise issue before the court was whether 31 C.F.R. §10.7(c)(1)(viii) was a reasonable interpretation of federal law. On that point, the deck is stacked in the government’s favor – to win, the plaintiff had to show that the regulation was arbitrary, capricious, or manifestly contrary to statute. The court said the plaintiff failed to clear that hurdle. IRS had provided valid reasons for placing limits on who may practice before it, and the court noted that the regulation balanced the need for affordable yet competent representation. In addition, the court noted that the plaintiff, to be able to fully represent clients before the IRS, only needed to demonstrate his knowledge to the IRS and become an enrolled agent. Wright v. Everson, No. 07-13167, 2008 U.S. App. LEXIS 17418 (11th Cir. Aug. 15, 2008).
Note: (1) To become an enrolled agent, the plaintiff (or any other person) would have to file an application with the IRS Office of Professional Responsibility and pass the Special Enrollment Examination or present evidence of qualifying experience as a former IRS employee. IRS will then perform a background check including a review of the applicant’s tax compliance record. That process typically takes about 120 days and the applicant would then be issued an enrollment card.
(2) On September 24, 2008, the court vacated its prior opinion and filed a revised opinion again upholding the regulation and denying the plaintiff's petition for rehearing. Wright v. Everson, No. 07-13167 (11th Cir. Sept. 24, 2008), vac'g 2008 U.S. App. LEXIS 17418)(11th Cir. Aug. 15, 2008), pet. for rehearing denied.