4.11.55  Power of Attorney Rights and Responsibilities (Cont. 1)

4.11.55.1 
Power of Attorney and Tax Information Authorization

4.11.55.1.9  (04-20-2010)
Revocation

  1. A new POA or TIA regarding the same tax matter(s) and tax period(s) revokes a prior POA or TIA unless the box on line 8 of Form 2848, line 6 of Form 8821 is checked. If the box is checked, a copy of the POA or TIA not being revoked must be attached.

  2. A Form 8821 will never revoke a previously submitted Form 2848, and a Form 2848 will never revoke a previously submitted Form 8821.

  3. A taxpayer can revoke an existing POA or TIA without naming a new representative/authorized person. There are two ways a taxpayer can accomplish this:

    1. File a copy of the POA or TIA to be revoked with each office of the IRS where the POA or TIA was filed. This copy must have a current signature and date under the signature already on line 9 (Form 2848) or line 7 (Form 8821) and the word "REVOKE" written on the form.

    2. File a revocation statement with each office of the IRS where the POA or TIA was filed. The statement of revocation must indicate that the authority of the POA/designee is revoked and must be signed by the taxpayer(s). Also, the name and address of each recognized representative/designee whose authority is revoked must be listed.

  4. A recognized representative/designee may withdraw from representation by filing a statement with the IRS office where the POA or TIA to be revoked is filed. The statement must be signed and dated by the representative/ designee and must identify the name(s), TIN, address of the taxpayer(s), and the tax matter(s) from which the representative/designee is withdrawing.

  5. Upon receipt of a document (POA, TIA, revocation statement, or withdrawal statement) revoking an authorization, the examiner should:

    1. Make a copy of the document and send the copy to the CAF Unit where the original POA or TIA was filed within 5 days of receipt; and

    2. Attach the original document to the prior Form 2848 or Form 8821 attached to the tax return.

4.11.55.1.10  (04-20-2010)
Notices and Communications

  1. Original notices and other written communications will be sent to the taxpayer and a copy to the first listed representative unless the taxpayer checks one or more of the boxes on line 7 of Form 2848.

    If ... Then ...
    no box is checked on line 7 send the original of all written communications to the taxpayer(s) and send a copy to the first listed representative.
    if box (a) on line 7 is checked also send a copy to the second representative
    if box (b) on line 7 is checked send the original of all written communications to the taxpayer(s). Copies should not be sent to representatives.

  2. For TIAs (Form 8821), the taxpayer must check either box 5a or 5b unless the TIA is for a specific use not recorded on the CAF.

    If ... Then ...
    box 5a is checked, copies of written communications will be sent to the designee listed on Form 8821.
    box 5b is checked, the designee will not receive any copies of written communications.

    Note:

    For TIAs, the examiner will send the original of all written communications to the taxpayer.

  3. If copies of letters and notices are to be sent to the authorized designee, Form 3198, Special Handling Notice For Examination Case Processing, should be annotated as such.

4.11.55.2  (04-20-2010)
Interviewing and Control of the Examination

  1. References for Interviewing and Control Of The Examination:

    • IRC section 6001 - Requirement for taxpayers to keep records

    • IRC section 7521(c) - IRS cannot require the presence of a represented taxpayer without an administrative summons

    • IRC section 7525 - Confidentiality privileges relating to taxpayer communications with practitioners

    • IRC section 7601 - Authority to examine taxpayers

    • IRC section 7602 - Authority to Request Information

    • IRC section 7605 - Authority to Fix Time & Place of Appointment

    • IRM 4.10.1.5.7. Confidentiality - Privileges Relating to Taxpayer Communications

    • IRM 4.10.2.7.5 - Scheduling Appointment With the Taxpayer and/or Representative

    • IRM 4.10.2.8 - Scheduling Problems

    • IRM 4.10.2.9.3 - Authority to Request Books, Records, and Accountant's Workpapers

    • IRM 4.10.2.10.2 - Rescheduling the Initial Appointment

    • IRM 4.10.3.2.1 - Who To Interview

    • IRM 4.10.3.4.5.2 - Interview Techniques

    • IRM 25.5 -Summons Handbook

    • IRM 21.3.7 - Processing Third Party Authorizations onto the Centralized Authorization File (CAF)

    • SB/SE Delegation Order 145.7 - Authority to Request and Inspect Preparers Records

    • Circular 230 (31 CFR 10.0 through 10.93) - Regulations Governing the Practice of Attorneys, Certified Public Accountants, Enrolled Agents, Enrolled Actuaries, and Appraisers before the IRS

    • Publication 947 - Practice Before the IRS and Power of Attorney

4.11.55.2.1  (01-15-2005)
Interviewing Represented Taxpayers

  1. The purpose of an initial interview is to obtain an understanding of the taxpayer's financial history, the business operations, and the accounting records in order to evaluate the accuracy of the books and records and to determine the depth and scope of the examination.

  2. Proper depth and scope of the examination form the basis of a quality examination.

4.11.55.2.1.1  (04-20-2010)
Taxpayer's Presence Required?

  1. IRC section 7521(c) permits a representative authorized by a taxpayer to represent that taxpayer at any interview. A taxpayer may not be required to accompany a representative in the absence of an administrative summons.

  2. RRA 98, section 3502, requires taxpayers to be clearly informed of their rights to be represented at interviews and to have the interview suspended if the taxpayer wishes to consult with a person authorized to practice before the IRS. Publications 1, Your Rights as a Taxpayer, and Publication 3498, The Examination Process, have been revised to reflect this.

  3. Examiners must ensure that they do not violate or give the perception of violating the taxpayer's right to representation.

  4. Although a request for the taxpayer's voluntary presence should be made through his/her representative, the taxpayer's presence will not be mandated as long as the person being interviewed:

    1. Has first hand knowledge of the taxpayer's business, business practices, bookkeeping methods, accounting practices and the daily operation of the business;

    2. Provides factual, reliable information to questions asked by the examiner;

    3. Timely provides follow-up information for any questions that could not be answered at the time of the initial interview; and

    4. Has a properly executed Form 2848 or Form 8821. See IRM 4.11.55.1.7.

  5. If the taxpayer is not available for the initial interview, or if the representative is resolute in not having the taxpayer present at the initial interview, the examiner should attempt to conduct the initial interview with the taxpayer's representative.

  6. If the examiner determines that the representative does not have sufficient knowledge of the taxpayer and his/her business to provide factual information, the examiner should request an interview with the individual who possesses that information.

    Note:

    The examiner should not conduct the audit with someone who will merely serve as a courier, shuttling questions and answers between the examiner and the taxpayer. This type of arrangement obstructs the flow of the examination.

  7. In many cases, the taxpayer will be the only one who has the information necessary for the examiner to determine the accuracy of the books and records. This has a direct bearing on the ultimate scope and depth of the examination.

  8. If the taxpayer's representative does not comply with the request to interview someone more knowledgeable, including the taxpayer, the examiner should consider management involvement and/or an administrative summons.

4.11.55.2.1.2  (04-20-2010)
Request for Representation - Suspension of Interview

  1. Taxpayers have the right to representation at any time during the examination process.

  2. IRC 7521(b)(2) provides that if, during any interview, the taxpayer requests to consult with his/her representative (who is permitted to represent the taxpayer before the IRS), the examiner will immediately suspend the interview regardless of whether the taxpayer may have answered one or more questions.

    Exception:

    An interview will not be suspended if required by a court order or it was initiated via an administrative summons issued under subchapter A of Chapter 78.

  3. Allow the taxpayer a minimum of 10 business days to secure representation before taking any follow-up action to schedule the appointment (extensions can be granted on a case-by-case basis).

    Caution:

    A taxpayer can file a civil suit against the IRS under IRC section 7433 if an IRS employee intentionally or recklessly disregards the provision of the tax code by denying the taxpayer the right to consult with representation or bypassing the representative without proper approval.

4.11.55.2.2  (04-20-2010)
Controlling the Examination

  1. The Taxpayer Bill of Rights has not altered the right and obligation of the examiner to control the examination.

  2. Neither the taxpayer nor the taxpayer's representative will be allowed to control or unduly influence the scope or depth of an examination.

  3. The examiner must be firm yet courteous in their demeanor with the representative and taxpayer. Examiners should be aware that an uncooperative representative may employ one or more of the following tactics in an attempt to gain control of the examination:

    • Procrastinating

    • Failing to provide requested documents

    • Failing to attend conferences

    • Constantly questioning the need for certain information

    • Denying the examiner access to the taxpayer

    • Demonstrating abusive and/or aggressive behavior and attitude

  4. Examiners will document all contacts, cancellations of appointments, and unanswered telephone calls and letters.

  5. When a representative or taxpayer attempts to control the examination and/or procrastinate, the examiner should:

    1. Notify their manager and document this in their activity record,

    2. Consider issuing a summons to the taxpayer, see IRM 4.11.55.2.2.2.3 for additional guidance, and

    3. Consider by-passing the representative, see IRM 4.11.55.3 for additional guidance.

4.11.55.2.2.1  (04-20-2010)
Governing Documents for Representatives

  1. A thorough understanding of the information contained in the various documents which govern those who practice before the IRS is an excellent starting point in the management of an examination.

4.11.55.2.2.1.1  (04-20-2010)
Circular 230

  1. Circular 230 is an effective tool and should be referred to when working with procrastinating representatives.

  2. Circular 230 sets forth the regulations governing the practice of attorney's, CPAs, enrolled agents, and enrolled actuaries before the IRS.

  3. Some of the pertinent sections of the Circular 230 are provided below:

    1. 31 CFR 10.20 - Information to be furnished 31 CFR 10.23 - Prompt disposition of pending matters

    2. 31 CFR 10.51 - Incompetence and disreputable conduct

    3. 31 CFR 10.53 - Receipt of information concerning practitioner

  4. Reminding representatives of these provisions can help prevent procrastination.

4.11.55.2.2.1.2  (04-20-2010)
Revenue Procedure 81-38

  1. Rev. Proc. 81-38 prescribes the standards of conduct, the scope of authority, and the circumstances and conditions under which an individual preparer of tax returns may exercise, without enrollment, the privilege of limited practice as a taxpayer's representative before the IRS.

  2. The following is a sampling of provisions listed in Rev. Proc. 81-38:

    1. The unenrolled preparer will be expected to recognize questions, issues, and factual situations of such difficulty as to require additional expert assistance and to suggest to the taxpayer he/she seek such assistance.

    2. An unenrolled preparer shall act in such a manner as to not commit any act of disreputable conduct. Disreputable conduct includes, but is not limited to, the items contained in section 10.51 of Circular 230 (31 CFR 10.51).

    3. An unenrolled preparer shall not neglect or refuse to submit records or information in any matter before the IRS upon proper and lawful request and shall not interfere, or attempt to interfere, with any proper and lawful efforts to obtain information, unless the preparer believes in good faith and on reasonable grounds that the information is privileged.

    4. An unenrolled preparer shall exercise due diligence in preparing or assisting in preparing, approving, and filing of returns, documents, affidavits, or other papers relating to IRS matters. The preparer will also exercise due diligence in determining (1) the correctness of oral and written representations made by the preparer to the service, and (2) the correctness of representations made by the preparer to the client with reference to any matter administered by the IRS.

    5. Any examining officer, or other IRS officer or employee who has reason to believe that an unenrolled preparer's conduct has been or is such as would render the preparer ineligible to appear as the taxpayer's representative before the IRS, shall communicate this information to the Area Director of the taxpayer.

4.11.55.2.2.2  (04-20-2010)
Managing Procrastination

  1. Examiners need to be forceful and resourceful in communicating with taxpayers and representatives when appropriate. There are a variety of tools available to the examiner to address examination delays.

  2. There is no magical or clear-cut solution to the problem. Typically, a variety of actions need to be taken when faced with procrastinating people, and much depends on the examiner's ability to recognize the problem and properly document the case file.

  3. In addition, receiving support from management is very important.

4.11.55.2.2.2.1  (04-20-2010)
A Firmer Approach

  1. The ability to exercise good judgment cannot be overemphasized. Still, there are times when a more aggressive approach to procrastination and untimely Information Document Request (IDR) responses needs to be taken by examiners and managers.

    Reminder:

    Some of the delays in an examination are attributable to the IRS. For example, the priorities and assignments of the examiner can change.

  2. Examiners need to take a firmer position with respect to allowing additional time for information. Examiners should not postpone appointments without valid reason(s) and should scrutinize any developing patterns in the postponement or cancellation of appointments.

  3. Examiners need to maintain their activity records and document all contacts, tactics, and misrepresentations made by representatives and taxpayers. As each procrastinating tactic occurs, it should be timely documented in the activity record. These contemporaneously documented repetitive actions will then form the basis for pursuing a representative bypass or summons if necessary.

  4. Problem cases need to be aggressively worked versus being " put on the back burner."

  5. Pending IDRs must be current and when responses are overdue or insufficient, action needs to be taken immediately.

  6. IDRs must be as specific as possible.

    Reminder:

    Examiners should ensure there is a specific due date or a follow-up appointment date reflected on the IDR.

  7. Uncooperative taxpayers and/or representatives will attempt to obstruct communication. A classic example is where they provide incomplete responses to requests for information with the hopes of examiners giving in.

    Note:

    This tactic can be very frustrating. The examiner can mitigate this problem by providing a very detailed IDR and discussing it with the taxpayer or representative at the time of submission and again at the time the response is provided.

  8. Examiner should get managerial involvement when unreasonable delays have occurred as a direct result of the taxpayers or the representatives' actions or lack of action.

4.11.55.2.2.2.2  (04-20-2010)
Correspondence

  1. Although the examiner is obligated to recognize the taxpayer's representative, taxpayers should be kept informed of all stages of the examination.

  2. Examiners should forward a copy of any correspondence, discussions, reports and/or other material to the taxpayer at the same time it is sent to the representative. (See 26 CFR 601.506.)

  3. To ensure "effective notice" , you should provide all written correspondence to the taxpayer even in cases where proper notice is given to their representative.

4.11.55.2.2.2.3  (04-20-2010)
Summons

  1. In instances of abuse of process, the examiner and group manager should consider issuing an administrative summons.

  2. If the representative and the taxpayer will not consent to an interview with the taxpayer for those cases in which we determine it is appropriate, the examiner and group manager should strongly consider issuing a summons.

  3. A taxpayer does not need to refuse a request to produce records or information before a summons can be issued. However, if there is a refusal, whether direct or indirect, it should be properly established and clearly documented by the examiner.

  4. To determine whether or not a summons should be issued, the examiner should take the following into consideration:

    1. Has there been a clear refusal to provide books, records, and/or testimony?

    2. Can vital information required for a material matter be obtained from any other source within a reasonable period of time and without extraordinary effort?

    3. Is there a statute problem?

  5. A decision to use the summons based on the information above will provide reasonable assurance that the summons can be successfully enforced should it become necessary.

4.11.55.2.2.3  (04-20-2010)
Refusal to Provide Books and Records Requested

  1. Under IRC section 7602(a), the examiner is authorized to " examine any books, papers, records, or other data which may be relevant or material to such inquiry" .

  2. If necessary, the examiner should remind the taxpayer and/or representative that the IRS has the right by law to examine the books and records. Also, if necessary, the examiner should remind the representative of his/her duties and obligations under Circular 230.

  3. An accountant's or other return preparer's workpapers used to prepare the return (including workpapers reconciling the books to the return and adjusting entries) are included under IRC section 7602(a).

4.11.55.2.3  (04-20-2010)
Privileged Communications

  1. IRC section 7525 creates a statutory confidentiality privilege for communications from a taxpayer to any "federally authorized tax practitioner " concerning "tax advice" .

  2. Although this communications privilege is partly defined by reference to, and is no broader than, the attorney-client privilege, it is clearly a different privilege, created solely by statute, and defined as much by the statutory language as by reference to the common law attorney-client privilege.

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

    1. Tax matters before the IRS, or

    2. Tax proceedings brought in federal court by or against the United States.

  4. FEDERALLY AUTHORIZED TAX PRACTITIONER - Any person described in Circular 230 who is an attorney, certified public accountant, enrolled agent, enrolled actuary, or appraiser.

  5. TAX ADVICE - Advice given by a federally authorized tax practitioner acting within the scope of authority to practice before the IRS.

4.11.55.2.3.1  (04-20-2010)
Confidentiality Privilege Does Not Apply

  1. The confidentiality privilege does NOT apply to the following:

    1. Communications made prior to the enactment date (7/22/1998);

    2. Information disclosed to a tax practitioner for the purpose of preparing a return;

    3. Written communications between the tax practitioner and a director, shareholder, officer, employee, agent, or representative of a corporation that promotes the direct or indirect participation of the corporation in any tax shelter as defined in IRC section 6662(d)(2)(C)(iii);

    4. Information that is also available from non-privileged sources;

    5. Communication between the taxpayer's tax practitioner and a third-party who provides information about the taxpayer to the practitioner (US vs. Ackert, 169 F. 3d 136 (2d Cir. 1999)).

    Note:

    This confidentiality privilege cannot be used in any administrative proceeding with an agency other than the IRS.

4.11.55.2.3.2  (04-20-2010)
Assertion of the Confidentiality Privilege

  1. The taxpayer must assert the confidentiality privilege; it is not automatic.

  2. The taxpayer can assert the confidentiality privilege in any " non-criminal" tax matter before the IRS, and any "non-criminal " tax proceeding in federal court with respect to such matter.

  3. A case is a "non-criminal tax matter before the IRS" until the matter is referred to the Criminal Investigation Division for the assignment of a special agent to the matter. Once the matter ceases to be a non-criminal tax matter, the taxpayer may no longer assert the statutory privilege created under IRC section 7525. Thus, the IRS may obtain the information previously withheld.

  4. If the taxpayer asserts the confidentiality privilege, the examiner should do the following:

    1. Request a written statement from the Federally authorized tax practitioner providing the reasons why the privilege is being asserted, and

    2. Contact area counsel for guidance.

4.11.55.3  (04-20-2010)
By-Pass of a Representative

  1. References for By-Pass of a Representative:

    • IRC section 7521(c) - Authority to notify taxpayer directly that their representative is responsible for unreasonable delay or hindrance to an examination

    • IRM 4.10.3.2.1.1 - Procrastination by the Representative

    • Circular 230 Section 10.53 - Authority for making a report of selected misconduct

4.11.55.3.1  (04-20-2010)
Overview

  1. IRC section 7521(c) states that an examiner, with the manager's approval, "may notify the taxpayer directly that such officer or employee believes such representative is responsible for unreasonable delay or hindrance of an Internal Revenue Service examination or investigation of the taxpayer."

  2. The by-pass procedures permit the employee to contact the taxpayer directly and to request any information necessary to complete the examination.

  3. The representative continues to represent the taxpayer and copies of all correspondence issued to the taxpayer should be sent to the representative. The taxpayer may at his/her discretion forward the requested information/documentation through the representative to the employee.

  4. The by-pass procedures do not constitute a disbarment or a suspension of the practitioner. The taxpayer still has a statutory right to representation per IRC section 7521(c).

4.11.55.3.2  (04-20-2010)
Prior to Requesting a By-Pass

  1. If any of the following occur, the employee must document the case file.

    1. The representative impedes or delays an examination by failing to submit the taxpayer's records or information requested by the employee.

    2. The representative impedes or delays an examination by failing to keep scheduled appointments.

    3. The representative impedes or delays an examination by failure to return telephone calls and written correspondence.

  2. If a trend is noted and the examination is being hindered because of the representative, the examiner will notify the group manager of the representative's actions. The manager will ensure that all reasonable efforts have been taken to work directly with the representative and that the case file sufficiently details the facts that support how the representative has delayed or hindered the examination.

  3. Prior to initiating by-pass procedures, the following steps should be taken, depending on the circumstances:

    1. If the employee has not done so already, the taxpayer should be receiving copies of all written correspondence to the representative. This includes all IDRs).

    2. Either Letter 4020-A, Warning Letter for Bypass Procedures for Preparers covered under Circular 230, (attorneys, CPAs, enrolled agents and enrolled actuaries) or Letter 4020-B, Warning Letter for Bypass Procedures for Unenrolled Preparers, should be prepared and sent to the representative from the group manager advising the representative of his/her responsibilities under Circular 230 and conveying advance notice of a possible by-pass because the representative is violating Circular 230. Copies of prior document requests, a list of outstanding items and a brief chronology of events should be attached to the letter. A copy of the letter should not be sent to the taxpayer.

      Caution:

      The taxpayer should not be sent a copy of the warning letter! A copy of the letter should be sent to the territory manager and the area return preparer coordinator should be contacted and advised of the possible bypass.

4.11.55.3.3  (04-20-2010)
Procedures for By-Passing a Representative

  1. If the representative delays or refuses to provide the information requested after repeated attempts, a by-pass request should be prepared for the territory manager's signature.

  2. The decision to seek a by-pass rests with the employee and group manager. In taking such an action, the following items must be considered:

    1. It is imperative that the case file be properly documented with the efforts made by the employee to obtain the information and the actions (or lack thereof) of the representative. It is suggested that when the employee first suspects uncooperative behavior all appointments and document requests should be confirmed in writing.

    2. As previously mentioned, prior to initiating the by-pass procedures, the group manager should contact the representative in writing and advise him of his responsibilities under Circular 230 and explain the consequences of his continued conduct.

    3. The permission to by-pass must be obtained from the territory manager. A letter to the representative from the territory manager should be prepared. Letter Letter 4020-C, Final Bypass Letter, should be used for this purpose. The letter should outline the facts and circumstances which constitute the basis for the by-pass. The letter is prepared by the employee with the assistance of the area return preparer coordinator, as needed. This letter should be routed through the examiner's group manager and the area return preparer coordinator to the territory manager for signature.

    4. The employee may not circumvent the representative until the territory manager approves the by-pass by signing and issuing the letter in (c) above to the representative.

  3. The by-pass permits the employee to contact the taxpayer directly. The practitioner can continue to represent the taxpayer, if accompanied by the taxpayer. The representative will be afforded the courtesy of being advised of the time and place for future appointments with the taxpayer.

    Note:

    Employees will not use by-pass procedures routinely or simply to interview the taxpayer.

4.11.55.3.4  (01-15-2005)
Use of Summons in Lieu of a By-Pass

  1. A summons should be utilized as opposed to by-pass procedures in the following circumstances:

    1. The taxpayer and the representative are both intentionally uncooperative.

    2. The representative refuses to provide the requested documentation when he/she believes this documentation is privileged or that the request for such records is of doubtful legality. Issuance of a summons in this situation permits the representative to request the Court to consider the legal issue of privilege.

4.11.55.4  (04-20-2010)
Referrals

  1. Referral Reference Sources:

    • Title 31 USCS section 330, Practice before the Department of the Treasury

    • IRM 1.2.10.1.33, Policy Statement 11-86 (P-11-86), Names of Disbarred Taxpayer Representatives Published

    • IRM 4.19.10.1.11.2, Office of Professional Responsibility, paragraph 2, Make a referral to the Office of Professional Responsibility if the non-filer is a tax practitioner

    • IRM 20.1.6.2.1, - Referrals to Director of the Office of Professional Responsibility

    • Rev. Proc. 81-38, Section 10, Rules Governing Recognition of Unenrolled Preparers, provides guidance regarding referrals to Compliance Area Directors per SB/SE Delegation Order 4-59

    • SB/SE Delegation Order 4-59, Review of Unenrolled Preparers Authority to Act Before the IRS, - advises that authority to revoke eligibility of unenrolled preparers to act on behalf of taxpayers before the IRS is delegated to Compliance Area Directors

    • Form Form 8484, Report of Suspected Practitioner Misconduct, is used to report practitioner misconduct. to the Office of Professional Responsibility - http://nhq.no.irs.gov/opr/

4.11.55.4.1  (04-20-2010)
Overview

  1. To monitor potential problems, the IRS has a process of referring practitioners to OPR for consideration of further disciplinary action.

  2. When an employee has reason to believe, or receives information, that a tax practitioner has violated any of the rules in Circular 230, a written report should be promptly forwarded to the area return preparer coordinator for possible referral to the Office of Professional Responsibility or the Area Director in cases involving an unenrolled preparer.

    Reminder:

    OPR has jurisdiction over attorneys, CPAs, enrolled agents, enrolled actuaries, enrolled retirement plan agents, and appraisers. Area Directors have jurisdiction over unenrolled return preparers.

4.11.55.4.2  (04-20-2010)
Referral to the Office of Professional Responsibility (OPR)

  1. A referral to OPR is a consideration to institute disciplinary action against a practitioner. If OPR has reason to believe that a provision of the law or regulations governing practice before the IRS have been violated based on the referral, OPR may reprimand or institute proceedings for disbarment or suspension. Each referral should describe and document the practitioner's actions in order to support disciplinary action.

  2. Announcements of censures, disbarments, and suspensions normally are published in the Internal Revenue Bulletin. Also, employees can access this listing via OPR's intranet website at http://nhq.no.irs.gov/opr/Practice/SCDefault.asp .

  3. As long as the preparer's name appears on the list, he/she is not permitted to appear before the examiner as an advocate with or without the taxpayer, but only as a witness for the taxpayer under Rev. Proc. 68-29. Additional information is provided in IRM 4.11.55.1.2.2.

4.11.55.4.2.1  (04-20-2010)
Practitioners under the Office of Professional Responsibility's (OPR) - Authority

  1. OPR exercises jurisdiction over attorneys, CPAs, enrolled Agents, enrolled actuaries, Enrolled Retirement Plan Agents and Appraisers.

  2. Unenrolled preparers are under the jurisdiction of the Area Director.

4.11.55.4.2.2  (04-20-2010)
When Should a Referral Be Made to the Office of Professional Responsibility (OPR)?

  1. Examiners are to exercise discretion in making referrals of specific cases to the Director, Office of Professional Responsibility.

  2. In matters involving non-willful conduct, a referral should only be made when it can be established that the preparer has a pattern of failing to meet the required standards of Circular 230.

  3. An isolated instance in which a penalty may apply should not, in and of itself, require a referral unless willful conduct is involved. Accordingly, the imposition of penalties under IRC section 6694(a), and IRC section 6695(a) through (e) should not automatically generate a referral to the Director, Office of Professional Responsibility.

4.11.55.4.2.2.1  (04-20-2010)
Situations Requiring a Mandatory Referral

  1. When the following penalties are asserted against a practitioner a mandatory referral should be prepared:

    1. Willful or reckless conduct (IRC section 6694(b)) - when closed agreed, sustained in Appeals, or closed unagreed without Appeals contact.

    2. Aiding and abetting penalties (IRC section 6701) - The assessment of an aiding and abetting penalty against a tax practitioner or appraiser mandates an automatic referral. In addition, referrals should be considered in those situations in which the aiding and abetting penalty was considered but not imposed.

    3. Promoting abusive tax shelters (IRC section 6700) - The assessment of an IRC section 6700 penalty against an attorney, CPA or enrolled agent.

    4. Action to enjoin promoters of abusive tax shelters (IRC section 7407 and IRC section 7408)

    5. Injunctive action under IRC section 7408 taken against an attorney, CPA or enrolled agent.

      Note:

      The Deficit Reduction Act of 1984 expanded IRC section 7408 to include conduct subject to the penalty under IRC section 6701.

4.11.55.4.2.2.2  (04-20-2010)
Situations Which May Warrant a Referral

  1. The following situations may warrant a referral to the Office of Professional Responsibility:

    1. Examiners should exercise discretion in making referrals to OPR when penalties are asserted against attorneys, CPAs, enrolled agents, enrolled actuaries, enrolled retirement plan agents, and appraisers under IRC section 6694(a) and IRC section 6695(a) through (g).

      Note:

      The referral(s) should be based on a pattern of failing to meet the required penalty standards.

    2. Return preparer referrals made to Criminal Investigation under IRC section 7206.

    3. An appraiser who aids or assists in the preparation or presentation of an appraisal in connection with the tax laws may be subject to disciplinary action if the appraiser knows that the appraisal will be used in connection with the tax laws and will result in an understatement of the tax liability of another person.

    4. A by-pass of representative letter was issued to a tax practitioner.

    5. Disreputable conduct or incompetence described in Circular 230, Section 10.51.

    6. The implication of a tax practitioner in a frivolous tax return matter (IRC section 6702) should result in a referral.

    7. The accuracy-related penalty under IRC section 6662(d) for a substantial understatement is asserted and the facts of the case suggest the practitioner did not exercise due diligence in the preparation of the return.

      Note:

      IRM 20.1.5.8 provides that whenever IRC section 6662(d) is not asserted because the taxpayer has met the "advice" standard under the reasonable cause exception, contact with the preparer is mandatory to obtain information from the preparer concerning the "advice" provided before the case is closed from the group. A comment should be made in the client examination workpapers' penalty section as to consideration of a referral to the Office of Professional Responsibility.

    8. The erroneous claim for refund or credit penalty under IRC section 6676 is asserted when there is no reasonable basis for the refund claim, and the facts suggest the practitioner did not exercise due diligence in the preparation of the claim.

    9. Referral should be made to OPR in instances where a practitioner fails to comply with the tax shelter registration requirement or characterizes the registration as an IRS endorsement of the shelter under IRC section 6111 and IRC section 6112 and takes a position on a tax return which reflects the endorsement.

    10. Opinions rendered by tax practitioners and used or referred to in the marketing of tax shelters (abusive or otherwise) issued after May 23, 1984. Tax shelter opinions which violate Circular 230 will be referred to OPR

    11. Examination report of any tax return of an attorney, CPA, or enrolled agent, or of a return prepared by an attorney, CPA or enrolled agent where a Pre-filing Notification Letter was issued in connection with the tax shelter and the loss and/or credit from the promotion was nevertheless claimed on the tax return.

4.11.55.4.2.3  (04-20-2010)
Referral to the Office of Professional Responsibility (OPR) - Procedures

  1. Once it has been determined that a referral is necessary, a referral package to OPR must be prepared and closed separately from the related case. Include in the referral package:

    1. Completed Form 8484, Report of Suspected Practitioner Misconduct to OPR, including disposition of the case (agreed, unagreed).

    2. A complete copy of the tax return.

    3. A complete copy of the RAR (including explanation of items and workpapers).

    4. Letters, Memoranda, copies of Form 2311, Affidavit or similar attested document, and Form 2797, Referral Report for Potential Fraud Cases, if applicable.

    5. Penalty summary from RGS.

    6. Other penalty assessment documents that are not on RGS (i.e. Form 8278, Assessment and Abatement of Miscellaneous Civil Penalties.)

    7. Form 2848, Power of Attorney and Declaration of Representative, if available.

    8. Explanatory memorandum, which details the actions of the return preparer. The actions of the return preparer must be described and documented in sufficient detail to develop a substantial position for disciplinary action. Include documentation and exhibits from the income tax file. Include a statement regarding the preparer's appearance before the IRS (a record of contacts and activity of the preparer).

    9. Document the preparer's position, whether an appeal will be made, and the extent the preparer practices before the IRS.

    10. The name, tax period, and TIN of the related case(s) should be noted in the referral package.

  2. Form 9984, Examiner Officer's Activity Record, for the related tax case should note the referral was prepared and forwarded to the area return preparer coordinator.

  3. A comment should be made in the client examination workpapers' penalty section as to consideration of a referral to the Office of Professional Responsibility.

4.11.55.4.2.4  (04-20-2010)
Routing of Referral to the Office of Professional Responsibility (OPR)

  1. Examiners will send referrals to OPR utilizing Form 8484. The referral package should be routed through the area return preparer coordinator.

4.11.55.4.3  (04-20-2010)
Referrals of Unenrolled Preparers

  1. Disciplinary matters concerning unenrolled return preparers are under the jurisdiction of the Area Director. The privilege of limited practice without enrollment is extended to practitioners at the Area Director's discretion as outlined in Rev. Proc. 81-38. Examiners will continue to recognize the representative until a final determination of ineligibility has been issued by the Area Director and all appeals have been exhausted.

  2. The same standards that apply to attorneys, CPAs, and enrolled agents, also apply to Unenrolled Return Preparers. Rev Proc 81-38 provides guidance in referring practitioners to the Area Director for purposes of determining their eligibility to exercise the privilege of limited practice before the IRS without enrollment.

4.11.55.4.3.1  (04-20-2010)
When Should a Referral Be Made to the Area Director?

  1. A referral to the Area Director is required when an unenrolled return preparer violates the provisions of Rev. Proc. 81-38.

  2. In accordance with this revenue procedure, an unenrolled return preparer shall act in a manner not to commit any act of disreputable conduct.

  3. Disreputable conduct includes, but is not limited to items contained in Section 10.51 of Circular 230.

4.11.55.4.3.2  (04-20-2010)
Procedures for Making a Referral to the Area Director

  1. Any IRS employee who has identified disreputable conduct by an unenrolled return preparer should communicate such information through proper channels beginning with his or her manager.

  2. If it is determined that a referral to the Area Director is warranted, a memorandum, signed by the group manager, outlining the facts as to why the unenrolled return preparer should be referred and supporting documentation will be routed to the area RPC or the coordinator handling referrals of unenrolled return preparers.

  3. After the area RPC or coordinator has reviewed the memorandum and concurs, he/she will draft a memorandum to the Area Director outlining the specific references to Rev. Proc. 81-38 that have been violated.

  4. When the Area Director receives this information and concurs that the unenrolled return preparer's actions are such that they may render the unenrolled return preparer ineligible to represent taxpayers without enrollment. A written notice prepared by the area RPC will be sent from the Area Director to the unenrolled return preparer stating the basis for the proposed determination of ineligibility.

  5. The notice will give the unenrolled return preparer 30 days to request a conference with the Area Director.

  6. If the conference is not requested, or if a conference is held and the Area Director determines that the privilege of limited practice should be revoked, the Area Director will issue a notice to the unenrolled return preparer that he or she is no longer eligible for the privilege of limited practice before the IRS.

  7. An unenrolled return preparer who wishes to appeal the Area Director’s final determination of ineligibility may, within 30 days of receipt of the final determination, submit a signed, written appeal to the Director of the Office of Professional Responsibility together with the unenrolled return preparer’s reasons in support of it. Upon request, the unenrolled return preparer will be afforded the opportunity of a conference with the Director of the Office of Professional Responsibility or the Director’s designee. A decision will then be rendered by the Director of the Office of Professional Responsibility or the Director’s designee affirming, reversing, or modifying the decision of the Area Director on such terms and conditions as deemed warranted under the facts and circumstances of the particular appeal. The decision of the Director of Director of the Office of Professional Responsibility or the Director’s designee on this appeal will be final.

    Reminder:

    IRS employees will continue to recognize the representative until a final determination of ineligibility has been issued by the Area Director, and either the time for appeal has expired, or all appeals have been exhausted. Recognition will not be continued; however, where IRS employees determine, or receive instructions from the Area Director or the Area Director's designee, that the representative should not be recognized because significant rights or interests of the taxpayer or IRS could be substantially harmed by continued recognition.

4.11.55.4.3.3  (04-20-2010)
Routing Referral Package to Area Director

  1. An employee who has identified disreputable conduct by an unenrolled return preparer should communicate such information through proper channels beginning with his/her manager to the Area Director.

  2. If it is determined that a referral is warranted, a memorandum, signed by the group manager, outlining the facts of why the unenrolled return preparer should be referred with any supporting documentation, will be routed to the area return preparer coordinator (RPC) in PSP.

  3. After review and concurrence, the coordinator will draft a memorandum to the Area Director outlining the specific references to Rev. Proc. 81-38 that have been violated.

  4. The area RPC will draft a written notice for the Area Director's signature to be issued to the unenrolled return preparer which sets forth the proposed determination of ineligibility to appear as a taxpayer's representative.

4.11.55.5  (04-20-2010)
Centralized Authorization File (CAF)

  1. The Centralized Authorization File (CAF) contains information routinely recorded from Form 2848 or Form 8821 that is input when a POA or TIA is received. CAF numbers are assigned to representatives to help in the processing of POAs and TIAs.

    Caution:

    CAF numbers do not indicate that a representative is qualified to practice before the IRS.

4.11.55.5.1  (04-20-2010)
Before Requesting a POA - Check IDRS

  1. The CAF is an automated file containing information on the authority of representatives that will allow the IRS to handle matters regarding authorizations and representatives quickly and efficiently. The CAF allows employees to identify representatives and the scope of their authority.

  2. Employees should check IDRS before the start of an examination to see if there is a POA or TIA on file for the specific tax period for the taxpayer. The following codes on a transcript will reflect if a POA is on file:

    1. ENMOD - will display a "C" in the " CAF" indicator next to the SSN if a POA is present on at least one tax period.

    2. TXMODA - will display a "1" in the " CAF" indicator next to the ASED and CSED if a POA is on file for the tax period requested.

    3. Transaction Code 960 - will be present on a transcript of account if a POA is on file for the tax period required.

      Caution:

      A Transaction Code 960 only indicates a Form 2848 was processed by the CAF unit. It does not mean the alpha designation is correct. For additional information on verification of the alpha designation, see IRM 4.11.55.1.2.2.

    4. A CFINK must be requested for additional information.

4.11.55.5.2  (04-20-2010)
CFINK

  1. The CAF contains taxpayer records regarding POAs on file with the IRS. It contains the years for which POAs are on file for a given taxpayer.

  2. The IDRS command code (CC) that is input to access the tax periods for which a POA is present is "CFINK" . The CFINK command with the taxpayer's TIN will yield a listing of all years for which a POA is on file. IRM Exhibit 2.3.31–1 provides a description of all the information available via IDRS CC CFINK and RPINK, such as:

    1. Name and CAF number of the representative,

    2. Date the POA was signed,

    3. Last action to CAF for this representative for this taxpayer,

    4. Type of Representative (attorney, CPA, enrolled agent, etc.)

    5. Whether the representative is authorized to receive correspondence,

    6. Whether the duties the POA is authorized to perform have been changed or modified,

    7. Form number,

    8. If it is a blind trust. Only one representative is authorized to receive confidential information,

    9. If the POA was submitted with the original filed return, and

    10. If the tax year on the Form 2848 or Form 8821 has been revised.

    Note:

    The output field labeled "SUPPRESSED" is for internal use in case there is a discrepancy with the information on IDRS. The representative will still receive all correspondence if the response is "Yes " or "No" .

  3. Command Code CFINK input with the CAF Number of the representative will provide the following information:

    1. The first and second representatives' names,

    2. The representatives' addresses and telephone numbers,

    3. The date the POA was signed.

4.11.55.5.3  (04-20-2010)
RPINK

  1. CAF contains representative records. It contains the name and address information for the representative. RPINK is the IDRS command code used to access this information if the representative's CAF number is available. For a complete discussion of the use of this command code and the information available via this command code, see IRM 2.3.31.3, Command Code RPINK — Description and Use.

Exhibit 4.11.55-1 
Glossary

Advocate - one who acts on behalf of the taxpayer in urging particular determinations with respect to issues or controversies.

Appointee - individual or entity named on a Tax Information Authorization (TIA); same as designee.

Attorney - any individual who is a member in good standing of the bar of the highest court of any state, possession, territory, commonwealth, or the District of Columbia.

Attorney-in-fact - an agent authorized by a principal under a Power of Attorney (POA) to perform a certain specified act(s) or kind of act(s) on behalf of the principal.

Blind Trust - a device used to give management of one's investments to an outside person over whom the beneficiary has no control.

Centralized Authorization File (CAF) - a computerized system of records which houses authorization information from both POAs and TIAs. The CAF system contains two types of records: taxpayer records (CAFT) and representative records (CAFR).

Circular 230 - Treasury Department Circular No. 230 (Subtitle A, 31 CFR Part 10), which sets forth the rules governing practice before the IRS.

Certified Public Accountant (CPA) - any person who is duly qualified to practice as a CPA in any state, possession, territory, commonwealth, or the District of Columbia.

Declaration of Representative - a recognized representative must attach to the POA a signed declaration (which may be made by completing Part II of Form 2848) stating the following:

  1. The representative is not currently under suspension or disbarment from practice before the IRS;

  2. The representative is aware of the regulations contained in Circular 230, concerning the practice of attorneys, CPAs, enrolled agents, enrolled actuaries, and others;

  3. The representative is authorized to represent the taxpayer(s) identified in the POA; and

  4. The representative is an individual recognized to practice before the IRS.

Delegation of Authority - an act performed by a recognized representative where authority given under a POA is delegated to another representative. After a delegation is made, both the original representative and the newly recognized representative to whom a delegation is made will be allowed to represent the taxpayer. The authority to delegate must be specifically stated on Form 2848.

Disbarment - a form of disciplinary action taken to preclude a representative from practice before the IRS. Representatives who are disbarred can no longer represent their clients before the IRS.

Designee - a person authorized by the taxpayer to receive the taxpayer's confidential tax return information.

Enrolled Actuary - any individual who is enrolled as an actuary by the Joint Board for the Enrollment of Actuaries under 29 USC 1242 and is in active status as such.

Enrolled Agent - any individual who is enrolled as an agent to practice before the IRS and is in active status pursuant to the requirements of Circular 230.

Fiduciary - a person acting on behalf of a taxpayer in one of the following capacities: guardian, executor, receiver, administrator, or trustee.

Form 2848 - Power of Attorney and Declaration of Representative. The IRS form that may be used by any taxpayer who wishes to appoint an individual to represent that taxpayer before the IRS.

Form 8821 - Tax Information Authorization. The IRS form on which taxpayers may authorize a designee to inspect and/or receive confidential tax information. The disclosure may be made to any individual, corporation, firm, organization, or partnership designated by the taxpayer.

Matter - the application of each tax for each taxable period imposed by the Internal Revenue Code and the governing regulations constitutes a separate matter.

Power of Attorney (POA) - a document signed by the taxpayer, as principal, by which an individual is appointed as attorney-in-fact to perform certain specified act(s) or kinds of act(s) on behalf of the principal. Specific types of POAs, other than the IRS Form 2848, Power of Attorney and Declaration of Representative, include the following:

  1. General POA - the attorney-in-fact is authorized to perform any or all acts the taxpayer can perform. This type of authorization is executed in accordance with State requirements. The language "any and all acts" includes conducting real estate transactions, making financial arrangements, taking legal actions, in addition to filing federal tax returns and/or documents, and handling federal tax matters.

  2. Durable POA - a document which specifies that the appointment of the attorney-in-fact will not end due to either the passage of time (i.e., the death of the taxpayer) or the incompetency of the taxpayer (e.g., the taxpayer becomes unable or is adjudged incompetent to conduct his/her business affairs).

  3. Limited POA - a document that is limited in any facet. The POA authorizes the attorney-in-fact to perform only certain specified acts.

Practice before the IRS - this encompasses all matters connected with a presentation of information to the IRS relating to a taxpayer's rights, privileges, or liabilities. These include preparation and filing of necessary documents, correspondence/communications with the IRS, and representation at conferences, hearings, and meetings. The preparation of tax returns or the furnishing of information at the request of the IRS does not constitute "practice before the IRS" .

Practitioner - any individual authorized under section 10.3 of Circular 230 to practice before the IRS. Those authorized are attorneys, CPAs, enrolled agents, and enrolled actuaries.

Principal - a person (i.e., taxpayer) who appoints an attorney-in-fact under a POA.

Recognized Representative - an individual who is appointed as an attorney-in-fact under a POA and who is a member of one of the categories described in section 10.3 or 10.7 of Circular 230 and who files a declaration of representative.

Representation - acts performed on behalf of a taxpayer by a representative in practice before the IRS.

Specific Use POA or TIA - this refers to an authorization that is executed for a specific item and will not be recorded on the CAF. Examples of specific items include: civil penalty cases, 100% penalty cases, requests for private letter rulings, application for an employer identification number, and disclosure requests to release information to schools, universities, and mortgage companies.

Substitution of Representative - an act performed by an attorney-in-fact whereby authority given under a POA is transferred to another representative. After a substitution is made, only the newly recognized representative will be considered the taxpayer's representative.

Suspension - a form of disciplinary action prohibiting a representative from practice before the IRS. Representatives who have been suspended can not represent their clients before the IRS during the suspension period.

Tax Matter(s) - types of tax, tax form, and year or period.

Tax Information Authorization (TIA) - document, such as Form 8821, signed by the taxpayer authorizing the IRS to release confidential tax information to a designee. The designee may be an individual or entity (e.g., corporation, partnership, trust or organization).

Exhibit 4.11.55-2 
Other Documents

Publication 216 - Conference and Practice Requirements, 26 CFR, Part 601, Subpart E - These regulations supplement the provisions of Circular 230 regarding practice requirements and provide the rules for recognition of taxpayer representatives.

Rev. Proc. 68-29 - 1968-2 C.B. 913 - This revenue procedure concerns the extent to which IRS employees may accord " witness" recognition to persons acting on behalf of taxpayers. It also distinguishes between a person's activities as a witness and as a properly authorized taxpayer representative.

Rev. Proc. 81-38 - 1981-2 C.B. 592 - This revenue procedure implements the provisions of section 10.7(c) of Circular 230, regarding the circumstances and conditions under which an individual preparer of tax returns may exercise the privilege of limited practice without enrollment. Also see Publication 470.

Form 2848 - Power of Attorney and Declaration of Representative.

Form 8821 - Tax Information Authorization.


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