small business accountant

Who Can Legally Represent You Before the IRS?

On the list of things that are designed to stress you out, getting a letter from the IRS has to be in the top five. Finding out that the government is putting your tax returns under a microscope is bound to make you break out in a sweat. After all, with all the federal tax returns that are filed every year, there is comfort in the idea of your return remaining safely in the pile, unnoticed. When yours is singled out for an audit it can feel like the opposite of winning the lottery. However, you should never ignore such a letter. You should already have a small business tax professional helping you prepare your federal tax return, but if you didn’t consult anyone before filing your returns, you definitely need to find someone to represent you when you are audited by the IRS. In this article, we will take a look at who you can rely on to represent before the IRS.

Tax Return Preparers – Limited vs. Unlimited Rights

It is important to understand who can represent you and what the scope of that representation is. To begin with, anyone who accepts money in return for preparing all or substantially all of your federal tax return is required to have a valid Preparer Tax Identification Number (PTIN). That is one of the first things you will want to ask any small business tax professional about.

Next, you should know that such professionals have representation rights, also known as practice rights, which fall into two categories – Limited Rights and Unlimited Rights. It is important to know which category your tax professional falls into and how those categories affect their ability to represent you.

When you hire a properly credentialed tax professional, they have unlimited representation rights and can advocate for you before the IRS on virtually any tax matter. They don’t even have to have been the person who prepared your federal tax return. Unlimited representation rights are given to credentialed professionals such as Certified Public Accountants (CPA’s), enrolled agents and attorneys.

Non-credentialed tax professionals who prepare and sign your federal tax return are afforded limited representation rights. These limited rights mean that they can only represent you before IRS revenue agents, customer service representatives, and similar IRS employees. They are not allowed to represent anyone whose federal tax returns they didn’t prepare. They also cannot represent anyone for appeals or collection issues regardless of whether they prepared that person’s tax returns.

There are a couple of other items regarding limited representation rights that you should know about. For more recent returns that were filed after December 31, 2015, only the Annual Filing Season Program (AFSP) participants are given limited representation rights. The program allows non-credentialed tax return preparers to gain experience. If your tax return was filed before January 1, 2016, there may be other tax return preparers who have limited representation rights.

It is important that you keep the distinction between limited and unlimited representation in mind when you engage in tax preparation and planning for small businesses. You should strongly consider hiring a tax professional with the credentials to both prepare your returns and represent you on an unlimited basis if you have to go through the unpleasant experience of being audited by the IRS.

Tax preparation and planning for small businesses go beyond just this year’s tax returns. IRS audit agents often pursue a much broader set of records. They can include both additional years of returns and get into other areas of returns than the ones initially scrutinized in the returns. An experienced and licensed tax preparer will help you in a number of ways. They help you organize your records so that everything is ordered. They help you minimize the range of records that the IRS is looking at. They will help you properly identify what part of your tax return is being audited. They know your rights as a taxpayer and help you protect those rights.  They help you reduce or even eliminate the debt you owe the IRS, ensuring that you don’t pay more than you owe. They can set up payment installment agreements or an Offer in Compromise (OIC) that will make your debt manageable. They can represent you in defending or appealing an audit.

Hiring the right small business professional to represent you before the IRS can make a word of difference when you have to take on the IRS. Give us a call today and let us tell you how we can help you with your audit!