You Hired a Taxpayer Representative, Now What?
Deciding to hire an authorized representative (Attorney, CPA, or Enrolled Agent) to assist you with your IRS matter is often a huge stress reliever for a taxpayer that is faced with a pending examination, collection issue, or notice inquiry. But does that mean the taxpayer’s job is now done? In most cases, the answer is no! Hiring the representative is just the beginning. Your chosen representative will need your assistance to achieve the results you desire in your case.
Here are some things you can do to help your authorized representative upon the commencement of your engagement and throughout the process.
Types of Taxpayer Representatives
You will usually be represented by one (or more) of three types of professionals.
- Attorney – There are Attorneys that have training in tax and IRS matters. You will want an Attorney with this training, experience and education.
- Certified Public Accountant (CPA) – If you choose a CPA, make sure they have experience in representing taxpayers in IRS matters.
- Enrolled Agent (EA) – The IRS requires that an individual who is not an Attorney or CPA complete an IRS approved program to represent taxpayers before the IRS. Individuals who complete these requirements are called Enrolled Agents.
Complete a Form 2848 Power of Attorney
The IRS requires that you complete a Form 2848 Power of Attorney authorizing your representative to communicate on your behalf. Within the Form 2848, you as the taxpayer indicate the type of tax matter(s) and relevant period(s) for which you are allowing the communications to occur (for example Form 1040 income taxes and 2018 respectively). You can even indicate on the Form 2848 that you would like your representative to be mailed a copy of all communications concerning the authorized matter(s) and relevant period(s) indicated.
In certain situations, it may make sense to select only the period involved in the matter you are seeking to resolve. However, in many instances, it may make sense to extend Form 2848 to authorize communications regarding previous and/or subsequent years as well. Tax situations oftentimes do not exist within a vacuum of a single year, and the more the representative starts uncovering the details, it may be necessary to communicate regarding previous or subsequent year(s) to achieve the desired result. Be sure to communicate with your representative about which tax matters and time periods your Form 2848 should cover.
Communicate with Your Taxpayer Representative About Your Desired Outcome
Depending on the type of tax matter involved, your desired outcome can run the gamut of seeking a waiver to reduce or eliminate IRS penalties, putting an installment agreement in place to pay your tax debt over time, achieving a lien release from the IRS allowing you to sell a home that is subject to a tax lien, or settling multiple years of tax debt with a lump sum Offer In Compromise. When communicating with your representative about your desired outcome, please consider the following factors:
- Be Specific– If there is something specific you are looking to achieve as an outcome, be sure to let your representative know. This is especially true if you will not be satisfied with any other result. Informing your representative of your goals upfront (preferably as early in the process of the representation as possible) will enable you to discuss whether the goal is achievable and even if the representation should commence. For example, if your goal is to take your case to Tax Court or to have the option to do so, you will want to select a practitioner who is eligible to represent taxpayers in that forum.
- Be Open to Your Representative’s Advice– The reason that most taxpayers hire an authorized representative is for the benefit of the Attorney’s, CPA’s, or EA’s expertise. Sometimes upon communicating the taxpayer’s desired goal, the representative may express that another alternative may present a potentially better result. Be open to listening to your representative’s advice, as he or she has likely assisted taxpayers with other matters similar to yours and attends continuing education to stay up to date on the latest resolution options.
One common example is that taxpayers oftentimes see the late-night commercials about the Offer In Compromise program and want to settle their tax debt for “pennies on the dollar”. But is that the best choice for you? Many taxpayers are unaware that an OIC is unavailable to taxpayers who are not in compliance, and that your OIC can be revoked if you get into more tax trouble within the next five years (such as failing to file or pay taxes as they come due). All that tax debt you settled can come roaring back! The OIC result requires a significant amount of discipline and commitment from the taxpayer over a substantial period of time.
- Be Honest– Attorneys, CPAs, and EAs who represent clients before the IRS have obligations to both the client and also to the tribunal, or IRS forum, under Circular 230. A representative cannot present a position to the IRS that is misleading or knowingly false. Providing your representative with accurate information and documents not only helps her with her professional responsibilities, but it also may uncover that more options are available or may prevent your representative from taking a strategy that may be detrimental in the long run. Additionally, keep in mind that taxpayers can face civil and criminal penalties for presenting false information to the IRS.
A strong level of privilege applies to attorney-client communications, so in many cases, it may be the best option to seek a licensed Attorney for your representation matter. This is especially true if there are indicators of fraud or criminal conduct within your tax matter. In certain cases, a CPA or EA can be compelled to testify against his client in court. Hiring an Attorney in your tax representation matter allows you to be completely honest about the facts of your case, which may prevent you from encountering land mines down the road.
Provide Your Taxpayer Representative With All Requested Documents
One of the best things you can do to achieve the result you want in your case is to be responsive to the requests of your representative. There have been several cases in my career where I have started an engagement to assist a taxpayer with a matter and the taxpayer becomes unresponsive over time or does not provide the evidentiary support that I need to resolve the matter favorably. In contrast, I have had clients that would provide everything I asked for, in spades, and those are generally the clients who were able to achieve the most significant results! The taxpayers who are willing to do some leg work, dig for documents to present the best evidence in their case, and communicate timely and effectively not only make our jobs easier as representatives but also have the best chance of achieving their desired outcome.
Open Your Mail!
When a taxpayer has a matter pending with the IRS, it is extremely important for the taxpayer to check the mail frequently and open it! A taxpayer’s due process rights could be triggered by certain IRS communications, and failure to act can eliminate certain due process rights. As a backup, it is generally a good idea to check the box on Form 2848 allowing your representative to also receive a copy of communications relevant to your matter. But even so, you as the taxpayer may receive a communication from the IRS that is not covered under your Form 2848, and thus your representative will not receive it. You as the taxpayer are where the buck stops. The IRS is required to send you copies of all communications concerning your tax situation.
Keep in mind that if you have moved or if the IRS does not have your current address, it may be a good idea to notify the IRS of your new location. Sometimes taxpayers think it is easier to hide when they owe a tax debt to prevent the IRS from contacting them. But oftentimes that is the worst thing you can do. In addressing the situation, you may be in the circumstance where you are “uncollectible” and the IRS can know where you are and not collect anyway. But if the IRS does NOT know where you are, you may be losing valuable due process rights and protections as the IRS sends notices to an address where you no longer live.
Notify Your Representative About Relevant Updates & Changes
While you have a pending matter or case with the IRS, be sure to keep your representative informed about notices you receive (whether they involve the matter in the engagement or not), and relevant life changes or changes in circumstances that could potentially be relevant to your case. Sometimes it is difficult for taxpayers to share personal details about their lives. However, the representative cannot help you if he or she is unaware of potentially relevant details.
For example, if you as a taxpayer have been diagnosed with cancer and have failed to file taxes due to your treatment, that may be a relevant factor in reducing penalties for failure to file. Or if you have a child that has been diagnosed with a learning disability, that may allow for some related additional expenses that you can factor in to reduce your installment agreement payments or Offer In Compromise settlement amounts. It is also important to notify your representative if you get married, divorced, or have a new child. All of these factors can determine whether particular resolution options may be available. Facts and circumstances are everything!
Pay Your Representative Promptly
This one probably goes without saying, but I’m going to say it anyway for the benefit of those who are unaware. Most taxpayer representatives indicate in their engagement letter for the relevant tax matter that failing to pay for services will result in a suspension of services. You could be in a key stage of a case, fail to pay your representative, and your case may stall or fall apart. Be sure that you have discussed with your representative the potential budget for your case and that upfront you are aware of whether you can afford the representation.
If you cannot afford the representation, there are options to proceed pro se (representing yourself) or you may seek representation from a low-income taxpayer clinic. It is always best to know upfront what the best option is for you and what resources you have available to pursue representation so that your case does not stall for lack of payment.
Thanks for reading this article! If you receive an IRS or state department of revenue notice, feel free to contact me and I would enjoy assisting you with your case!