Practice Before the IRS; Attorney's Fees Tax Proceedings (Portfolio 620)

Tax Management Portfolio, Practice Before the IRS; Attorney's Fees in Tax Proceedings, No. 620-3rd, discusses the practice regulations in Circular No. 230 with a special focus on the rules governing practice before the IRS by attorneys, certified public accountants, enrolled agents, and enrolled actuaries.

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Tax Management Portfolio, Practice Before the IRS; Attorney's Fees in Tax Proceedings, No. 620-3rd, discusses the practice regulations in Circular No. 230 with a special focus on the rules governing practice before the IRS by attorneys, certified public accountants, enrolled agents, and enrolled actuaries.

Also discussed are power of attorney and tax information authorization filing requirements, which are imposed on all categories of representatives with respect to practice before the IRS. Circular No. 230 also prescribes rules for the issuance of tax opinions, disciplinary proceedings for violations of Circular No. 230, and disciplinary hearings before Administrative Law Judges.

While focusing on the practice rules for attorneys and CPAs, this Portfolio also considers the requirements for practice before the IRS by non-attorneys and non-CPAs. The enrollment procedures for qualifying to practice, the procedures for establishing technical competency by written examination, and the steps in applying for enrollment are all discussed. In addition, this Portfolio considers limited practice before the IRS as well as statutory and regulatory prohibitions relating to representation before the IRS by former government officers and employees.

Also discussed are §7430 and the requirements for attorney's fees and other costs involved in an IRS administrative or court proceeding.

This Portfolio may be cited as Dennehy, Ehrlich and Dennehy,  620-3rd T.M., Practice Before the IRS; Attorney's Fees in Tax Proceedings.


Edward K. Dennehy, C.P.A. Esq.

Edward K. Dennehy, B.B.A., M.B.A., Pace University; J.D., Brooklyn Law School; LL.M. in Taxation, New York University; member of: the Bar of the United States Supreme Court, New York Bar, New Jersey Bar, American Bar Association, American Institute of Certified Public Accountants, and the New York State Society of Certified Public Accountants.

Stephen E. Ehrlich, C.P.A., Esq.

Stephen Ehrlich, B.B.A., Hofstra University; J.D., Hofstra University School of Law; LL.M. in Taxation, New York University; member of the New York Bar and the American Institute of Certified Public Accountants.

Annmarie Dennehy, Esq.

Annmarie Dennehy, A.B., Lafayette College; J.D., Seton Hall University School of Law; member of the New York and New Jersey Bars.

Table of Contents

Detailed Analysis
Part I: Practice Before the IRS
1:I. Introduction
1:II. Practice Regulations
A. Treasury Regulations
B. IRS Conference and Practice Requirements
C. Jurisdiction of Treasury Secretary
D. Jurisdiction of Director of the Office of Professional Responsibility (OPR)
E. Inquiries
1. Inquiries to Director of the Office of Professional Responsibility
2. Inquiries to Alcohol and Tobacco Tax and Trade Bureau
1:III. Practice Before the IRS
A. In General
B. Electronic Return Preparation and/or Filing of Individual Tax Returns
C. Appearance as Witness for Taxpayer
D. Summons by IRS to Appear as Witness
1:IV. Authorization to Practice
A. Why Authorization Is Necessary
B. Statutory Authorization for Attorneys and Certified Public Accountants
C. Administrative Authorization to Practice for Enrolled Agents
D. Administrative Authorization for Enrolled Retirement Plan Agent
E. Administrative Authorization for IRS Employees as Enrolled Agents
F. Administrative Authorization for IRS Employees as Enrolled Retirement Plan Agents
G. Authorization for Special Appearance
H. Limited Statutory Authorization for Government Officers and Employees
I. Administrative Authorization for Enrolled Actuaries
J. Administrative Authorization for Public Accountants (Non-CPAs)
K. Annual Filing Season Program for Unenrolled Preparers
1:V. Application, Renewal and Continuing Education Process
A. Application Procedures for Enrolled Agents and Enrolled Retirement Plan Agents
B. Compliance and Suitability Checks
C. Preparer Tax Identification Numbers (PTINs)
1. Forms Requiring/Not Requiring PTIN
2. PTIN Rules for Supervised Preparers
3. PTIN Rules for Support Staff, Interns and Others
4. PTIN Rules for Retirement Plan Agents
D. Temporary Recognition, Requests for Additional Information, Protests of Denials
E. Term and Renewal of Enrollment/Registration
1. Renewal of Enrollment
2. Condition for Renewal
3. Qualifying Continuing Education Programs for Enrolled Agents
4. Measurement of Continuing Education Hours
5. Waiver of Continuing Education Requirements
6. Periodic Examination in Lieu of Continuing Education
7. Failure to Comply with Renewal Requirements
8. Inactive Retirement Status
F. Termination of Enrollment
G. Maintenance of Rosters
1:VI. Limited Practice Without Enrollment
Introductory Material
A. Self-Representation
B. Relationship to Taxpayer or Tax Entity
C. Rulemaking Proceedings
D. Foreign Representation
E. Unenrolled Tax Preparers
F. Special Appearances
1:VII. Taxpayer Consent to Disclose or Use Tax Return Information
Introductory Material
A. Disclosure for Educational, Informational and Additional Preparation Purposes
B. Statistical Compilations
C. Disclosure for Quality, Peer or Conflict Reviews
D. Disclosures or Use Requiring Taxpayer Consent
E. Penalties for Unauthorized Disclosures
1:VIII. Powers of Attorney and Tax Information Authorizations
A. Powers of Attorney
1. In General
2. When Power of Attorney Is Required
3. When Power of Attorney Is Not Required
4. Requirements of Power of Attorney
a. Contents
b. Declaration of Representative
c. Curing Defective Power of Attorney
5. IRS Form 2848
a. Signature Requirements
b. Multiple Representatives
c. CAF System
6. Non-IRS Forms
7. Filing Requirements
8. Revocation of Power of Attorney
9. Withdrawal by Representative
10. Power of Attorney Litigation
B. Copies of Notices
C. Refund Checks
D. Tax Information Authorization (Form 8821)
E. Third-Party Designations
1:IX. Certain Prohibited or Restricted Representation
A. Statutory Prohibitions
B. Practice by Government Officers and Employees — Circ. No. 230
C. Practice by Former Government Employees — Circ. No. 230
1. General Rules
2. Firm Representation
3. Definitions
1:X. Practice Duties and Restrictions
Introductory Material
A. Furnishing Information
B. Knowledge of Client's Omission
C. Diligence as to Accuracy and Standards of Conduct
1. Due Diligence
2. Standards for Tax Returns and Documents, Affidavits and Other Papers
3. Competency
D. Prompt Disposition of Pending Matters
E. Assistance From Disbarred or Suspended Persons and Former IRS Employees
F. Notaries
G. Fees
H. Return of Client Records
I. Conflicting Interests
J. Advertising and Solicitation
1. In General
2. Standards for Electronic Filing Providers
K. Negotiation of Taxpayer Refund Checks
L. Practice of Law
M. Best Practices
N. Written Advice
1. Post-June 12, 2014 Rules on Written Advice
2. Pre-June 13, 2014 Rules on Covered Opinions and Other Written Advice
3. Disciplinary Standards
O. Non-Tax Disclosures
P. Firm Oversight Procedures to Ensure Compliance with Circular No. 230
1:XI. Disciplinary Proceedings
A. Authority to Sanction or Enjoin
B. Basis for Action
1. Disreputable Conduct
2. Any Violation
3. Tax Shelter Opinions
C. Preliminary Procedure
1. Notification to Representative
2. Response by Representative
3. Negotiated Dispositions
D. Institution of Proceeding
1. Complaint
2. Answer
3. Supplemental Charges
4. Reply to Answer
5. Variance Between Pleading and Proof
6. Motions and Requests
E. Hearing on Complaint
1. Parties to Proceedings
a. Administrative Law Judge
b. Representation
2. Discovery
3. The Hearing
a. Time and Place
b. Type of Hearing
c. Failure to Appear
4. Powers of Administrative Law Judge
a. General
b. Motions and Requests
c. Denied Motions
5. Conduct of Hearing
6. Administrative Law Judge's Decision and Appeal
7. Final Decision
8. Petition for Reinstatement
F. Procedure for Expedited Suspension
G. Disqualification of Appraisers
1. Authority to Disqualify
2. Circular No. 230 Regulations
a. Disciplinary Proceedings
b. Petition for Reinstatement
H. Discipline of Electronic Filers
1. Monitoring and Suspension
2. Administrative Review
a. Review of Denial of Participation in e-File Program
b. Review of Suspension from E-File Program
Part II: Attorney's Fees in Tax Proceedings
2:I. Introduction
2:II. Requirements of Section 7430
Introductory Material
A. Administrative or Court Proceeding
B. Type of Proceeding
C. Exhaustion of Administrative Remedies
1. In General
2. Exceptions to Exhaustion Requirement
D. Prevailing Party
1. IRS's Position Not Substantially Justified
a. In General
b. Determining What Is the IRS's Position
c. Examples Where IRS's Position Is Substantially Justified
d. Examples Where IRS's Position Not Substantially Justified
e. Effect of Jury Verdict
2. Taxpayer Substantially Prevails as to Amount in Controversy or Most Significant Issue
a. Amount in Controversy
b. Most Significant Issue
3. Filing Requirements
4. Net Worth Requirements
5. Qualified Offer
6. Creditors of Taxpayer
2:III. Limitations on Awards
A. No Award for Protracted Proceedings
B. Declaratory Judgments
2:IV. Recoverable Fees and Costs
Introductory Material
A. Reasonable Administrative Costs
1. Types of Costs
2. Limitations on Recoverable Costs
3. Cost-of-Living Adjustment
4. Specially Qualified Representative's Fees
5. Special Factor
B. Reasonable Litigation Costs
1. Types of Recoverable Costs
2. Limitations on Recoverable Costs
3. Cost-of-Living Adjustment
4. Special Factor
5. Other Costs
2:V. Procedures for Recovery of Costs and Fees
A. Administrative Costs and Fees
1. Request for Award
2. Location of Filing
3. Time for Filing
4. Appeal to Tax Court
B. Litigation Costs and Fees
1. Tax Court
a. Motion
b. Time for Filing
c. Disposition of Claims for Litigation and Administrative Costs
d. Appeal
2. Other Federal Courts
C. Multiple Actions
D. Standard of Appellate Review
2:VI. Recovery of Fees Under Other Statutes

Working Papers

Table of Worksheets
Worksheet 1 Administrative Practice; General Provisions — 5 U.S.C. §500; Individuals Qualified to Represent a Person Before the IRS
Worksheet 2 Practice Before the Treasury Department — 31 U.S.C. §330
Worksheet 3 Disciplinary Sanctions Under Circular No. 230
Worksheet 4 IRS Overview of Tax Return Preparer Requirements
Worksheet 5 Sample Statement to Acknowledge Taxpayer's Choice to File Return in Paper Format
Worksheet 6 Sample CAF Client Listing Request
Worksheet 7 Sample Individual Tax Return Engagement Letter
Worksheet 8 Statutory Hourly Rate for Attorney's Fees