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Federal Tax Ethics Course |
| This topic contains concepts governing the recognition of attorney, certified public accountant, enrolled agents, and other persons representing taxpayers before the IRS. Regulations such as rules relating to the authority to practice before the Internal Revenue Service, the duties and restrictions relating to such practice, prescription of sanctions for violating the regulations, the rules applicable to disciplinary proceedings and the availability of official records. Usually, attorneys, CPAs, enrolled agents, and enrolled actuaries can represent taxpayers before the IRS. Under special circumstances, other individuals, including un-enrolled tax return preparers can assist taxpayers on tax matters. Special forms need to be filed to authorize an individual or certain entities to receive and inspect a taxpayer's confidential tax information. In addition, the following information is great for understanding what ethics is. We need to strive to be as ethical as the following reading material is trying to teach. This material goes into detail on what it is to live a good life. These are good concepts to think about. |
| "Do unto others as you would have them do unto you". Seriously? The golden rule? This rule seems to be more like the "It is ok to do anything to others". Then you need to determine who "others" is. Is it others like me? Would others include animals and other creatures? So according to this rules, it would be alright to be slowly roasted over an open frame. |
| Oh, so this only means "Do unto others (humans like me) as you would have them do unto you"? |
| We can continue to interpret this rule as we wish. We have been doing this for years. We can include in our religious literature and use it for centuries to hurt others. Others has only included "Others like me". What other explanation could there be for these foreigners to come to our land, call it their own, enslave us and force us to convert to their ways? At one time "Others" only included certain people who possessed the power better known as gun powder to force their will upon others. Now we celebrate their triumphs on special legal holidays such as Thanksgiving, Christmas, Independence day etc. Many disguise these so called holidays as "time to spend with family". |
| Does "Do unto others as you would have them do unto you" mean that you can force feed geese and ducks until their liver explodes to eat foie gras? Or does "Do unto others as you would have them do unto you" mean tying up a new born calf and freeze its movements so that the meat remains tender and then killing it to get the best veal? These acts are all legal. You can do anything to an animal because animals are considered property. The question is: Is it ethical? |
| Please don't use "Do unto others as you would have them do unto you" or "The Golden Rule" as your measurement of how good you are. |
| Ethics is one thing and legal is another. Sometimes they come hand in hand. For instance, the person that constantly breaks the law is not considered an ethical person. Laws are derived from ethics. Something must first be considered unethical or wrong before it becomes illegal. |
| However, there is also the person who never breaks the law but does all sort of unethical things. For this reason, ethics becomes a very complicated concept to understand. Sometimes we cannot tell is something is unethical since there are no laws that prohibit such an act. |
| Many times, as is the case with foie gras and veal, ethics is a matter of personal conviction. I don't eat foie gras or veal because I know the torture these animals are put through in their the manufacture of such. I also only eat eggs from cage free hens. I don't eat at fast food places because I know about the little regard for animal life at the farms that produce the meats for these fast food places. I honestly think that fast food places such as McDonalds should disappear from the face of the earth. They are killing and torturing innocent creatures for profit. |
| However, none of these places are breaking the law. They offer jobs and boast about their food production and how they are able to manufacture cheap and unhealthy food for the masses. |
| In this course we are more concerned with the tax laws. Practitioners who don't follow the rules are considered unethical. Also, if the practitioner were to find gray areas in the tax law, he or she would be considered unethical. If a practitioner uses gray areas in the tax law to help his clients, he or she would be performing classical unethical acts. If the practitioner is breaking the law, this would not be too much an issue of ethics but more of an issue of crime. The individual breaking the law is not really "unethical" but rather "a criminal". |
| There are many criminals in the world, but many more unethical people. Likewise, there are many practitioners who break the law and who pay the price by getting arrested and losing their license to practice or both. However, there are many more unethical preparers who never get in trouble for anything they do because they are within the legal constraints. |
| If everything that is unethical was written down as being wrong, then the science of ethics would disappear. There would not be such as thing as ethics. In a sense, anything that is wrong and there is no law that prohibits it, is a matter of ethics. If you break ethics rules, you are unethical. If you break legal rules, you are a criminal. |
| The practitioner must use reasonable efforts to identify and ascertain the facts, which may relate to future events if a transaction is prospective, and to determine which facts are relevant. The practitioner can never base an opinion on any unreasonable factual assumptions, even assumptions as to future events. Furthermore, the practitioner cannot base an opinion on any unreasonable factual representations, statements or findings or of the taxpayers or any other person. It would also not be reasonable for a practitioner to rely on a projection, financial forecast or appraisal if the practitioner knows or should know that it is incorrect or incomplete or was prepared by a person lacking skills or qualifications. |
| Any practitioner who has principal authority and responsibility for overseeing a firm's practice of providing advice concerning federal tax issues must take reasonable steps to ensure that the firm has adequate procedures in effect for all members, associates, and employees. Any such practitioner will be subject to discipline for failing to comply with the requirements if the practitioner knows or should know that one or more individuals that don't comply with section 10.35 and the practitioner fails to take prompt action to correct the noncompliance. |
| The Secretary of the Treasury, or delegate, after notice and an opportunity for a proceeding, may censure, suspend, or disbar any practitioner from practice before the Internal Revenue Service if the practitioner is shown to be incompetent or disreputable. Additionally, this would also apply if the practitioner fails to comply with any regulation under the prohibited conduct standards or acts with intent to defraud. The Secretary of the Treasury, or delegate may also censure, suspend, or disbar any practitioner from practice if the practitioner willfully and knowingly misleads or threatens a client or prospective client. |
| You may be wondering what is considered incompetent or disreputable conduct. Incompetent or disreputable conduct for which a practitioner may be sanctioned includes contemptuous conduct in connection with the practice before the Internal Revenue Service, including the use of abusive language or making false accusations or statements, knowing them to be false. This type of conduct would also include willfully disclosing or otherwise using a tax return or tax return information in a manner which is not authorized by the Internal Revenue Service. Also if you fail to sign a tax return when the practitioner's signature is required by the federal tax laws, would be misconduct. It goes without saying that that it it would be misconduct of your part to give false or misleading information that you know to be false or misleading to the Department of the Treasury or any officer or employee thereof, or to any tribunal authorized to pass upon federal tax matters. |
| When you file a complaint, it would be sufficient to just fairly inform the respondent of the charges brought so that the respondent is able to prepare a defense. |
| To maintain active enrollment to practice before the Internal Revenue Service, each individual is required to have the enrollment renewed. The effective date of renewal is the first day of the fourth month following the close of the period for renewal. You don't have to wait to receive notification from the Director of the Office of Professional Responsibility of the renewal requirement. You are required to renew regardless if your renewal notification was not received, gets lost in the mail or the Director decided not to send such notification. |
| To qualify for continuing tax education credit for an enrolled agent, a course of learning must be a qualifying program designed to enhance professional knowledge in federal taxation or federal taxation related matters. The qualifying tax education program must be a qualifying program consistent with the Internal Revenue Code and effective tax administration. This tax education must be administered by a qualifying sponsor of tax education. |
| A practitioner may never take acknowledgments, administer oaths, certify papers, or perform official acts as a notary public with respect to any matter administered by the Internal Revenue Service. |
| A practitioner shall not represent a client before the Internal Revenue Service if the representation involves a conflict of interest. A conflict of interest exists if the representation of one client will be directly adverse to another client. If there is no significant risk that the representation of one or more clients will be materially limited by the practitioner's responsibility to another client, a former client or a third person, or by a personal interest of the practitioner then there is no conflict of interest. I don't think any conflict of interest is prohibited by law and as long as each affected client waives the conflict of interest by giving informed consent, the practitioner can represent the client before the Internal Revenue Service. |
| Tax advisors should provide clients with the highest quality representation concerning federal tax issues by adhering to best practices in providing advice and in preparing or assisting in the preparation of a submission to the Internal Revenue Service. Best practice includes establishing the facts, determining which facts are relevant, evaluating the reasonableness of any assumptions or representations, relating the applicable law to the relevant facts, and arriving at a conclusion supported by the law and the facts. Simply advising a client to take a position on a document, affidavit or other paper submitted to the Internal Revenue service would not be a best practice action. It would also not be a best practice for the practitioner to advise a client to submit a document, affidavit or other paper to the Internal Revenue Service if such impedes the administration of the federal tax laws. Neither would it be proper conduct to advise your clients to do anything necessary to avoid the payment of tax at all cost. A best practice would be to represent your client in a legal and ethical manner and this means following the tax laws and avoiding tax loopholes. After all, tax dollars benefit everyone. |
| In cases where any part of the understatement of the tax liability is due to a willful attempt by the return preparer to understate the liability, or if the understatement is due to reckless or intentional disregard of the rules or regulations by the tax preparer, the preparer is subject to the greater of $5,000 or 50% of income derived or to be derived from the misconduct. |
| A penalty will not be imposed on any part of an underpayment if there was reasonable cause for your position and you acted in good faith in taking that position. However, if you failed to keep proper books and records or failed to substantiate items properly, you should just pay the preparer penalty because you will not be able to avoid the penalty by disclosure. |
| The penalty for reckless or intentional disregard of a regulation may be avoided by disclosure only if the position represents a good faith challenge to the validity of the regulation and has a reasonable basis. Generally, the accurate-related penalty of any position of a tax underpayment attributable to negligence or disregard of the rules or regulations is 20%. |
| An understatement in the excess of the amount of tax required to be shown on the tax return over the amount of tax shown on the return for the tax year, reduced by any rebates. There is a substantial understatement if the amount of the understatement for any year exceeds 10% of the tax required to be shown on the tax return for the tax year or $5,000, whichever is greater. The $5,000 turns into $10,000 for a corporation. |
| Don't engage in disreputable conduct. Any individual engaged in limited practice before the IRS who is involved in disreputable conduct may be disbarred, suspended, or censured. |
| Many un-enrolled individuals can represent the specific taxpayers before the IRS, provided this individual presents satisfactory identification. You family member can represent you before the Internal Revenue Service. The officer of the corporation can represent the corporation before the IRS. Additionally, any employee can represent the employer before the Internal Revenue Service. |
| 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 Internal Revenue Service. Out of courtesy, the Internal Revenue Service will most likely send the individual, his client or both a letter notifying them of such non-recognition. |
| As for negotiation of taxpayer refund checks, practitioners who are unenrolled income tax return preparers must never endorse or otherwise cash any refund checks issued to the taxpayer. |
| Being convicted of any criminal offense under the revenue laws or of any offense involving dishonesty or breach of trust is considered disreputable conduct. |
| The Office of Professional Responsibility presides over a hearing on a complaint for disbarment based on a violation of the laws or regulations governing practice before the Internal Revenue Service. |
| When there is an issue or disagreement as to the status of tax practitioners, there are many departments involved. An appeal from the initial decision ordering disbarment is made by the Office of Professional Responsibility. |
| Individuals can lose their eligibility to practice before the IRS by not meeting the requirements for renewal of enrollment such as when the individual fails to comply with the continuing tax professional education requirements. The practitioner can also request to be placed in an inactive retirement status. Furthermore, individual can lose their eligibility to practice before the Internal Revenue Service by being suspended or disbarred by state authorities to practice as an attorney or certified public accountant. |
| A practitioner who knows that his or her client has not complied with the revenue laws or has made an error or omission in any return, has the responsibility to advise the client promptly of the noncompliance. Every practitioner also has the responsibility to advise the client of the consequences of any noncompliance. |
| An un-enrolled 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 un-enrolled tax return preparer cannot represent a taxpayer before other office of the Internal Revenue Service, such as collection or appeals including the Automated Collection System (ACS) unit. An unenrolled tax preparer cannot execute closing agreements or waivers. Unenrolled tax preparers are quite limited in about every aspect of their work when it come to Internal Revenue Service matters. For example, unenrolled tax preparers cannot extend the statutory period for tax assessments or collection of tax. |
| And talking about being extremely limited, if the un-enrolled tax return preparer does not meet the requirements for limited representation, he or she will be limited to receiving or inspecting your taxpayer information. |
| By the way, preparing a tax return, furnishing information at the request of the IRS, or appearing as a witness for the taxpayers is not considered practice before the IRS. |
| However, the following are considered practice before the Internal Revenue Service. Communicating with the IRS for a taxpayer regarding the taxpayer's rights, privileges, or liabilities under the laws and regulations administered by the IRS is one of them. Also, if you represent a taxpayer at conferences, hearings, or meetings with the IRS, it is considered practice before the IRS. Preparing and filing documents with the IRS for a taxpayer or corresponding and communicating with the IRS is also considered practice before the IRS. |
| A power of attorney is not required in some situations when dealing with the IRS. Situation that does not require a power of attorney is authorizing the disclosure of tax return information through Form 8821. Furthermore, allowing the Internal Revenue Service to discuss tax return information with a third party designee does not require such power of attorney. If you are representing a taxpayer through a non-written consent, you are not required to power of attorney. |
| After a valid power of attorney is filed, the IRS will recognize your representative. However, if it appears the representative is responsible for unreasonably delaying or hindering the prompt disposition of an IRS matter by failing to furnish, after repeated requests, non-privileged information, the IRS can contact the taxpayer directly. If the representative engages in such conduct, the matter can be referred to the Office of Professional Responsibility for consideration of possible disciplinary action. |
| The Office of Professional Responsibility is the one responsible for administering and enforcing the regulations governing practice before the IRS. |
| Executing claims of refunds is beyond the scope of authority permitted an unenrolled preparer. Likewise, executing closing agreements with respect to a tax liability or specific tax matter is not authorized for unenrolled preparers. An unenrolled tax preparer cannot receive checks in payment of any refund of Internal Revenue taxes, penalties, or interest. All of these are not within the scope of authority permitted an unrolled tax preparer. |
| The unenrolled preparer who has been determined ineligible for limited practice before the Internal Revenue Service may request, after 2 years following the notice of final determination of ineligibility or decision of appeal, that eligibility for limited practice be reinstated. |
| An unenrolled preparer may, in a dignified manned, publish, use, or broadcast through any means of communication the names of individuals associated with the firm, a factual description of the services offered and the appropriate fee information. |
| The unenrolled preparer will be expected to recognize questions, issues and factual situations as expected of enrolled agents. |
| An unenrolled individual who signs a return as its preparer may act as the taxpayer's representative if accompanied by the taxpayer or by filing a written authorization from the taxpayer. |
| The unenrolled tax preparer cannot use false, fraudulent, misleading or deceptive advertising and he or she cannot make uninvited solicitation of employment in matters relating to the Internal Revenue Service. |
| An examining officer, or other Service 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 Internal Revenue Service shall communicate this information to the District Director of the taxpayer. |
| Any unenrolled preparer who knows that the client has not complied with the revenue laws, or that the client has made an error in or omission from any return, document, affidavit, or other paper that the client is required by law to execute, shall advise the client promptly of the fact of the noncompliance, error or omission. |
| An attorney is any person who is a member of good standing of the bar of the highest court of any state, territory, or possession of the United States, including a commonwealth, or the District of Columbia. |
| Enrollment as an enrolled agent based on an applicant's former employment with the Internal Revenue Service may be of unlimited scope. Enrollment as an enrolled agent based on an applicant's former employment with the Internal Revenue Service may also be limited to permit the presentation of matters only of the particular class for which the applicant's former employment has qualified the applicant. Enrollment may also be limited to permit the presentation of matters only before the particular unit or division of the Internal Revenue Service for which the applicant's former employment has qualified the applicant. |
| Individuals may always appear on their own behalf before the Internal Revenue Service that is why we have enrolled agents. |
| An applicant for enrollment as an enrolled agent who is requesting such enrollment based on former employment with the Internal Revenue Service must have had a minimum number of years of continuous employment with the Internal Revenue Service during which the applicant must have been regularly engaged in applying and interpreting the provisions of the Internal Revenue Code and the regulations relating to income, estate, gift, employment, or excise taxes. Minimum years of continuous employment must be 5 years. |
| The director of the Office of Professional Responsibility must inform the EA enrollment applicant as to the reason for any denial of an applicant for enrollment. The applicant may within 30 days after receipt of the notice of denial of enrollment, file a written appeal of the denial with the Secretary of the Treasury or his or her delegate. |
| Each individual applying for renewal of their EA enrollment must retain for a period of 4 years following the date of renewal of enrollment the information required with regard to qualifying continuing professional education hours. Such information may include the name of the sponsoring organization, the location, title and description of the content of the program. However, this information may not include the publisher information of the study material used. |
| Subject to certain limitations, an individual who is not a practitioner may represent a taxpayer before the Internal Revenue Service, even if the taxpayer is not present, provided the individual presents satisfactory identification and proof of his or her authority to represent the taxpayer. For example, an individual may represent a member of his or her immediate family. Furthermore, a regular full-time employee of an individual employer may represent the employer. Also, a general partner or a regular full-time employee of a partnership may represent the partnership. |
| Any individual may prepare a tax return, appear as a witness for the taxpayer before the Internal Revenue Service, or furnish information at the request of the Internal Revenue Service or any of its officers or employees. |
| 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 that tax return. However, this right does not permit such individual to represent the taxpayer before the appeals officers, revenue officers, counsel or similar officers or employees of the Internal Revenue Service. |
| A practitioner must, on a proper and lawful request by a duly authorized officer or employee of the Internal Revenue Service, promptly submit records or information in any matter before the Internal Revenue Service unless the practitioner believes in good faith and on reasonable grounds that the records or information are privileged. |
| A "Declaration of Representative" is a written statement made by a recognized representative that he or she is currently eligible to practice before the Internal Revenue Service and is authorized to represent the particular party on whose behalf he or she acts. |
| A Durable power of attorney is a power of attorney which specifies that the appointment of the attorney-in-fact will not end due to either the passage of time (i.e. the authority conveyed will continue until the death of the taxpayer) or the incompetency of the principal (e.g. the principal becomes unable or is adjudged incompetent to perform his or her business affairs). |
| A power of attorney must contain the name, mailing address and the identification number of the taxpayer. The power of attorney must also contain the name and mailing address of the recognized representative and also a description of the matter or matters for which representation is authorized. Also, if applicable, the power of attorney must contain the employee plan number. |
| A properly completed Form 2848 satisfies the requirements for a power of attorney and a declaration of representative. |
| The Internal Revenue Service will not accept a power of attorney which fails to include the name and mailing address of the taxpayer, the description of the matter for which representation is authorized or the identification number of the taxpayer such as the social security number and/or employer identification number. |
| In general, when a fiduciary is involved in a tax matter, a power of attorney is not required. |
| If no executor, administrator, or trustee name in the will is acting or responsible for disposition of the matter and the estate has been distributed to the residuary legatee (s) the Internal Revenue Service officials may require the submission of a statement from the court certifying that no executor, administrator, or trustee name under the will is acting or responsible for disposition of the matter, naming the residuary legatee (s), and indicating the proper share to which each is entitled. |
| A power of attorney is required by the Internal Revenue Service when the taxpayer wishes to authorize a recognized representative to perform one or more acts on behalf of the taxpayer. A power of attorney is required if there is a waiver offer and/or execution of either a waiver of restriction on assessment or collection of a deficiency in tax, or a waiver of notice of disallowance of a claim for credit or refund. A power of attorney would also be required if there is an execution of a consent to extend the statutory period for assessment or collection of a tax. If there is an execution of a closing agreement under the provisions of the Internal Revenue Code and the regulations thereunder, a power of attorney would be required. |
| However, a power of attorney is not required in the case of a trustee, receiver , or an attorney (designed to represent a trustee, receiver, or debtor in possession) appointed by a court having jurisdiction over a debtor. |
| A new power of attorney revokes a prior power of attorney if granted by the taxpayer to another recognized representative with respect to the same matter. |
| A taxpayer may revoke a power of attorney without authorizing a new representative by filing a statement of revocation with those offices of the Internal Revenue Service where the taxpayer has filed the power of attorney to be revoked. The statement of revocation must indicate that the authority of the first power of attorney is revoked and must be signed by the taxpayer. |
| Permission to by-pass a recognized representative and contact a taxpayer directly does not automatically disqualify an individual to act as the recognized representative of a taxpayer in a matter. However, such information may be referred to the Director of Practice for possible disciplinary proceedings. |
| Information from both powers of attorney and tax information authorizations is recorded onto the CAF system. Such information enables the Internal Revenue Service personnel who do not have access to the actual power of attorney or tax information authorization to determine whether a recognized representative or a designee is authorized by a taxpayer to receive and/or inspect confidential tax return information. Also, the authorization would be to determine, in the case of a recognized representative, whether that representative is authorized to perform the acts set forth in section 601.504(a. This also enables the IRS personnel to send copies of computer generated representatives or a designee so authorized by the taxpayer. |
| A Centralized Authorization File (CAF) number generally will be issued to a recognized representative who files a power of attorney and written declaration for representative or a designee authorized under a tax information authorization. |
| Any notice or other written communication (or a copy thereof) require or permitted to be given to a taxpayer in any matter before the Internal Revenue Service must be given to the taxpayer and, unless restricted by the taxpayer, to the representative according to procedure. If the taxpayer designates more than one recognized representative to receive notices and other written communications, it will be the practice of the Internal Revenue Service to give copies of such to only one individual so designated (even if there are more than two individuals). In a case in which the taxpayer does not designate which recognized representative is to receive notices, it will be the practice of the Internal Revenue Service to give notices and other communications to the first recognized representative appointed on the power of attorney. Failure to file notice or other written communication to the recognized representative of a taxpayer will not affect the validity of any notice or other written communication delivered to a taxpayer. |
| Where there is a dispute between two or more recognized representatives concerning who is entitled to represent a taxpayer in a matter pending before the Internal Revenue Service (or to receive a check drawn on the United States Treasury), the Internal Revenue Service will not recognize any of the disputing representatives. |
| The Tax Court has its own rules of practice and procedure and its own rules respecting admission to practice before it. Accordingly, a power of attorney is not always required to be submitted by an attorney of record in a case which is docketed in the Tax Court. |
| Form 2848 is the Internal Revenue Service power of attorney form which may be used by a taxpayer who wishes to appoint an individual to represent him or her before the Internal Revenue Service. |
| The office of each district director, the office of each service center, the office of each compliance center, the office of each regional commissioner, and the National Office constitute separate and distinct offices of the Internal Revenue Service. |
| References:
https://en.wikipedia.org/wiki/Golden_Rule
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| Copyright © 2015 [Hera's Income Tax School]. All Annual Filing Season Program rights reserved. |
| Revised: 06/15/15 |
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