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Not Just Anyone Can Speak To The IRS

02/17/2016 10:56 EST | Updated 02/17/2017 05:12 EST
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U.S. taxman only allows certain qualified preparers to contact them on behalf of clients

In Canada, you can easily contact the Canada Revenue Agency (CRA) and get information whether you are a taxpayer or a designate for a taxpayer if you have the right paperwork and identification information.

For U.S. taxpayers, the process is not so simple. The Internal Revenue Service (IRS) has rules for tax preparers and which ones can contact them on behalf of a client. It means if you want your tax preparer to handle anything with the IRS on your behalf, they need to have specific qualifications.

Anyone preparing U.S. tax returns and getting paid for it is required to have an IRS Preparer Tax Identification Number (PTIN) and to sign the paid preparer section of the tax form to prepare federal returns. Having a PTIN does not allow a tax preparer to contact the IRS on behalf of a taxpayer. As long as you pay your fee and complete the right paperwork, you can get a PTIN. It is not an indication of tax qualifications.

There are only three groups with unlimited representation rights. Enrolled Agents, Certified Public Accountants and attorneys can represent their clients with the IRS on any matters including audits, payment or collection and appeals.

Attorneys are licensed by state courts, the District of Columbia or their designees like the state bar association. And usually they have earned a law degree and passed the bar exam. They are generally required to complete ongoing continuing education and professional courses and can offer a range of tax preparation and planning activities.

Certified Public Accountants are licensed by state boards of accountancy, the District of Columbia and U.S. territories. Certified public accountants must pass the Uniform CPA Examination. They have completed accounting studies at a college or university and also met experience and good character requirements established by their respective boards of accountancy. In addition, CPAs must comply with ethical requirements and complete specified levels of continuing education in order to maintain an active CPA license.

Enrolled Agents are licensed by the IRS and are subject to a suitability check. They must also pass a three-part Special Enrollment Examination which is a comprehensive exam that tests proficiency in federal tax planning, individual and business tax preparation and representation.

Tax preparers who achieve Enrolled Agent status are federally licensed by the United States Treasury. There are only 46,000 practicing Enrolled Agents in the U.S. Only Enrolled Agents are required to demonstrate their competence to the IRS in all areas of taxation, representation and ethics before they are given their unlimited representation rights with the IRS. Unlike some attorneys and CPAs, all Enrolled Agents specialize in taxation.

Some preparers without one of the above credentials have limited practice rights. They may represent clients whose returns they prepared and signed but only before revenue agents, customer service representatives and similar IRS employees but not in every circumstance. They cannot represent clients whose returns they did not prepare or in appeals or collection even if they did prepare the return in question.

Starting in 2016, a tax preparer must have a PTIN and a valid "Annual Filing Season Program Record of Completion" for the calendar year of the tax return. If the person does not meet this requirement, the IRS will only allow them to inspect or request your information with a signed authorization but they cannot speak to the IRS on your behalf or correct any outstanding problems.

The ultimate designation is called the United States Tax Court Practitioner (USTCP). Since 2000, there are only 84 people in the world who have passed the exam to represent taxpayers in U.S. Tax Court without being an attorney. USTCPs must pass a four part exam that acts almost like a "mini" bar exam covering the Federal Rules of Evidence, Tax Court Rules and Procedures, and Legal Ethics as well as federal taxation.

If you are thinking none of this applies to you, you may be right. However, the Canada Revenue Agency is starting to require the U.S. equivalent of a Notice of Assessment to support all Foreign Tax Credit claims for taxes paid in the U.S. But the IRS does not provide Notices of Assessment. If your claim is reviewed, taxpayers will need to obtain transcripts for any U.S. returns that were filed. It will take a minimum of two weeks to obtain a federal return transcript and can take much longer for the state. None of these timelines include mailing time. Only qualified tax preparers with the right U.S. credentials can contact the IRS and most state tax authorities on your behalf to get this information.

If you need to find a U.S. tax expert, the IRS does have a searchable database here.

For U.S. citizens living in Canada, there are Enrolled Agents preparing returns in this country. Depending on your situation, it may be very useful to have someone who can speak to the IRS on your behalf or represent you if needed. Dealing with the IRS is more difficult than the CRA. Having someone who knows the system and the rules can make your IRS experience much easier.

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