This section of the exam tests your knowledge of what constitutes practice before the IRS, the requirements for Enrolled Agents, and sanctions and penalties against Enrolled Agents.
Becoming an Enrolled Agent
An Enrolled Agent is a federally-authorized tax practitioner who completed the steps required to represent taxpayers before the United States Internal Revenue Service (IRS). Like attorneys and certified public accountants (CPAs), enrolled agents have unlimited rights to represent taxpayers before the IRS. Therefore, Enrolled Agents are not restricted in terms of the taxpayers they can represent, the IRS office(s) before which they can represent clients and the types of tax matters they can manage. The Enrolled Agent status is the highest credential awarded by the IRS, and individuals who earn it must follow strict ethical standards and complete a minimum of 72 continuing education hours, reported every three years, to maintain the Enrolled Agent status. Enrolled agents should be familiar with the following concepts regarding the Enrolled Agent status:
- What is an Enrolled Agent
- Who can become an Enrolled Agent
Requirements for Enrolled Agents
A previous section of this guide entitled "Becoming an Enrolled Agent" details the process by which you can earn the Enrolled Agent status. Much of the requirement information from this section is covered in Treasury Department Circular 230 (sometimes called "Circular 230"), "Regulations Governing Practice before the Internal Revenue Service." Circular 230 provides comprehensive information regarding: rules governing the authority to practice; duties and restrictions relating to practice; sanctions for violation of regulations; rules applicable to disciplinary proceedings; and general provisions. Enrolled Agents should be familiar with Circular 230 and the requirements for Enrolled Agents including:
- Advertising, solicitation and fee information
- Advising a client about an omission or error on a return, document or affidavit
- Conflict of interest
- Continuing professional education (CPE) requirements – a minimum of 16 CPE hours every year; 72 CPE hours every three years
- Due diligence and return accuracy
- Information furnished to the IRS
- Refund check negotiation
- Rules regarding disbarred or suspended persons
- Tax return and preparation standards
- PTIN requirements
- Practioner supervisory responsibilities
Sanctions Against Enrolled Agents
The U.S. Secretary of the Treasury, or delegate, may censure, suspend or disbar any practitioner, including Enrolled Agents, from practice before the IRS. If, after notice and the opportunity for a proceeding, the practitioner is found to be incompetent or disreputable, fails to comply with any regulations, or willfully and knowingly misleads or threatens a client or prospective client, he or she may be censured, suspended or disbarred. Enrolled Agents should know what constitutes disreputable conduct, as well as other topics regarding sanctions including:
- Disreputable conduct
- Sanctions imposed by the Office of Professional Responsibility (OPR)
- Frivolous submissions - returns and documents
- Fraudulent transactions - badges of fraud
Types of Penalties
In addition to censure, suspension or disbarment, certain monetary penalties can be assessed against Enrolled Agents. Enrolled Agents should be knowledgeable regarding the assessment and appeal procedures for preparer penalties and other penalty-related topics including:
- Negligent and intentional disregard of rules and regulations
- Preparer penalty involving earned income credits
- Rules for holding copies or lists of prepared returns
- Rules for providing copies of returns to taxpayers
- Rules regarding filing an information return involving employees engaged or employed during a return period
- Rules regarding signing returns
- Willful understatement of liability
Representation Before The IRS
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