This section of the exam covers topics including power of attorney, building the taxpayer's case, taxpayer tax information and financial situation, and legal authority and reference for Enrolled Agents. Representation before the IRS includes presentations regarding a taxpayer's rights, privileges or liabilities under laws and regulations administered by the IRS. Enrolled Agents can represent clients by corresponding and communicating with the IRS, representing the client at conferences, hearings or meetings with the IRS, preparing and filing documents on behalf of a taxpayer, and providing written advice.

Power of Attorney
A power of attorney is a taxpayer's written authorization for an individual (such as an Enrolled Agent) to act on his or her behalf in tax matters. A power of attorney is submitted when an individual wants to authorize an Enrolled Agent to represent him or her before the IRS. Form 2848, Power of Attorney and Declaration of Representative, is used by a taxpayer to appoint an eligible person. By signing Form 2848, the individual authorizes the representative to receive confidential tax information and to perform the specified acts, subject to any modifications made by the taxpayer. The IRS will accept a power of attorney other than through Form 2848; however, the power must be in writing and contain the necessary elements as determined by the IRS. In regards to power of attorney, Enrolled Agents must be familiar with the following concepts:

  • Acting on behalf of a taxpayer
  • Alternate forms of power of attorney
  • Centralized Authorization File (CAF) system
  • Client privacy and consent to disclose
  • Limitations of authority
  • Power of attorney requirements (Form 2848)
  • Prohibition for cashing or depositing taxpayer refund check
  • Prohibition for signing tax returns
  • Purpose of filing a tax information authorization
  • Requirements for changing or dropping a representative
  • Signature authority
  • Conference and practice requirements 

Building the Taxpayer's Case - Preliminary Work
In order to effectively represent a taxpayer before the IRS, the Enrolled Agent must determine the details of the taxpayer's concerns by gathering information. In addition, the Enrolled Agent must perform certain actions and make considerations including:

  • Determining the taxpayer's issue – type, details, etc.
  • Determining the potential for illegal activity
  • The agent's competence, expertise and ability/time to handle the issue(s)
  • Any potential or current conflicts of interest
  • Transcripts from the IRS

Taxpayer Financial Situation
The Enrolled Agent may have to make an in-depth analysis of the client's financial situation to determine the taxpayer's ability to pay taxes and his or her general financial health. As an Enrolled Agent, you will need to perform research to determine and evaluate many aspects of the client's financial situation:

  • Ability to pay tax – installments, offer in compromise
  • Discharge of tax liability in bankruptcy
  • Financial health – bankruptcy, lawsuits, liens, garnishments, etc.
  • Third-party research- property assessment, state/local taxes, etc.
  • IRS Collection Financial Standards

Supporting Documentation
The determination of a taxpayers financial situation may also include the finding, review and comparison of a variety of financial documents. As an Enrolled Agent you will therefore need to know how to read and understand: 

  • Supporting documents for business entities – Articles of Incorporation, bylaws, etc.
  • Previous tax returns
  • Legal documents – birth certificate, lawsuit settlements, etc.
  • Financial documents – credit card and bank statements, etc
  • Employment reimbursement policies

Legal Authority and References
Enrolled Agents have the legal authority to represent taxpayer clients before the IRS. Enrolled Agents should understand the extent of the authority as well as the authority of the IRS, and be familiar with the following:

  • Case law
  • Form instructions
  • Internal Revenue Code (IRC)
  • Internal Revenue Manual (view at www.irs.gov/irm/)
  • IRS notices
  • IRS publications
  • Private letter rules
  • Revenue procedures
  • Revenue rulings
  • Source material – authoritative versus non-authoritative
  • Treasury regulations

Related Issues
Other issues related to representation before the IRS that Enrolled Agents should have familiarity include:

  • Statute of limitations
  • Post-filing correspondence
  • Requirements for deadlines and timeliness
  • Third-party correspondence
  • Freedom of Information Act requests
  • Tax avoidance versus tax evasion
  • Tax return disclosure statements
  • Taxpayer Advocate Service - criteria for requisition assistance
  • Identity theft
  • Higher levels of representation, beyond the Enrolled Agent - tax court, district court, claims court, Court of Appeals, Supreme Court


Specific Types Of Representation

Related Articles
  1. Taxes

    Match Your Tax Preparer to Your Tax Picture

    A tax pro can not only minimize the taxes you pay on tax day but may be able to help with other tax matters. Here's how to find the right one for you.
  2. Taxes

    IRS Asset Seizures: Could It Happen To You?

    If you can't pay your taxes, know that the IRS has many avenues for collecting what you owe.
  3. Taxes

    Start Over With The IRS

    If you're struggling to pay back taxes, try a fresh start with the IRS. They really can help.
  4. Taxes

    Need To Enroll In Obamacare? File Your Taxes

    Taxpayers who need to obtain health coverage under the Affordable Care Act can now do so easily and conveniently when they file their taxes through an eligible preparer.
  5. Financial Advisor

    How to Find the Best Life Insurance Agent

    Choosing a life insurance agent is the first and most important step in obtaining coverage. Buyers should pay attention to five key factors.
  6. Taxes

    Getting A Job As The Tax Man

    If you'd like the IRS to pay you some money for a change, consider a career working in taxes.
  7. Retirement

    Don't Give Away Control Over Your Assets Without Planning

    Most people don't realize what they agreed to when they signed a power of attorney, and are blissfully unaware of the possible harm from poor planning.
  8. Investing

    Do You Need A Real Estate Agent?

    There's no guarantee that realtors will act in your best interest, but it may be worth hiring one anyway.
  9. Financial Advisor

    A Day In The Life Of A Real Estate Agent

    While every day is unique for a real estate agent, there are some activities that may be a typical part of an agent's day.
  10. Taxes

    Tax Court: Your Last Resort

    Appealing an unfavorable or unfair tax ruling may be your last chance to save your finances.
Frequently Asked Questions
  1. Why is social responsibility important to a business?

    Take social responsibility seriously, and your business could benefit from happier, more productive staff members while helping ...
  2. Which socially responsible retailers appeal most to ethical investors?

    Learn why ethical investors have many options in the retail sector, and discover which retail companies are most popular ...
  3. What are Some Examples of Free Market Economies?

    Learn which of the world's economies best resemble free market economies, marked by free trade, low government involvement, ...
  4. Who Decides When to Print money in India?

    Find out the role of the Reserve Bank of India, or RBI, and the amount of authority given to the government. Learn who is ...
Trading Center