Wednesday, July 23, 2014


A recent “issue” of the National Association of Tax Professional’s TAXPRO WEEKLY email newsletter included the following item (the highlight is mine) -

The following is from Rev. Proc. 2014-42:

‘Revenue Procedure 81-38 is modified and superseded for tax returns and claims for refund prepared and signed (or prepared if there is no signature space on the form) after December 31, 2015.

Unenrolled tax return preparers may not rely on Revenue Procedure 81-38 to represent taxpayers during an examination of a tax return or claim for refund prepared or signed after December 31, 2015.’

This essentially means that after December 31, 2015, if you don’t volunteer to participate in this program and you aren’t an EA, CPA or attorney, you can’t correspond with the IRS about tax law on a return you prepared unless your client is present.”

First – “you can’t correspond with the IRS about tax law on a return you prepared unless your client is present”.  According to Mirriam-Webster the applicable definition of correspond is “to communicate with a person by exchange of letters”.  Does this mean that I can write a letter to the IRS if my client is in the room with me when I do so?  Does my “correspondence” with the IRS need to include a certified statement from the client that he/she was looking over my shoulder as I typed the letter?

I contacted the NATP publications editor, for whom I have written in the past, and asked how this affects the “check the box” Third party Designee procedure.  Here is the answer I received –

The volunteer program did not change the procedures or rules for naming a third party designee. Anyone can be named as a third party designee. Carol Campbell told me that herself.”

That is good news.

What is “check the box”?

On the bottom of Page 2 of the Form 1040, under the heading “Third Party Designee” taxpayers are asked “Do you want to allow another person to discuss this return with the IRS?”  You would “check the box” to indicate yes.  I have the client “check the box” on all returns I prepare, indicating “Preparer” as the “designee’s name”.  This option is also available on many state returns, like NJ and NY.

The instructions for Form 1040 tells us -

If you check the “Yes” box, you, and your spouse if filing a joint return, are authorizing the IRS to call the designee to answer any questions that may arise during the processing of your return. You are also authorizing the designee to:

·      Give the IRS any information that is missing from your return,

·      Call the IRS for information about the processing of your return or the status of your refund or payment(s),

·      Receive copies of notices or transcripts related to your return, upon request, and

·      Respond to certain IRS notices about math errors, offsets, and return preparation.”

There is no doubt that this “check the box” procedure has done much to expedite and streamline the resolution of basic tax return issues.    

Under this procedure, I can call the IRS (which I never have done and never will do) or the IRS can call me (which actually happened once when a client forgot to sign his tax return before mailing it to the IRS), or I can write to the IRS to respond to a question or concern that the Service has about a return I have prepared, or to explain a processing or assumption error that resulted in a notice to a client about a return I have prepared.

I have prepared the client’s tax return, and have an intimate knowledge of what is reported on the return.  Who better to respond to IRS questions or to explain to the IRS the nature or method of calculation of items on the return?

I am glad the IRS did not change the “Third Party Designee” procedure.  Forbidding me from dealing with the IRS in this manner unless I “volunteer” would be stupid. 



Anonymous said...

According to this PDF ( posted by NATP, here are the differences between a preparer being a "third party designee" on a return and actually getting a certificate of completion in the Annual Filing Season Program, when you talk to the IRS. The differences seem minimal.

1. You can't disagree/argue with the IRS. Not exactly sure what this means... a fact is either a fact or not, as it is presented on the return - if they need more information you either provide it or not. This is a little fuzzy to me - Robert, perhaps you could "interpret" this one for us?
2. You can't talk to the IRS as part of an Audit. This one I understand.

Robert, do you have any further insight after reading this NATP article? Does acquiring the AFSP certification really do a whole lot aside from when an audit takes place? Inquiring minds want to know! ~DJ

Also, I'm curious how the addition of an 8821 might "bolster" representation rights for a preparer who does not have his/her certificate of completion with the AFSP. Thanks! ~DJ

PS, here is a good FAQ on the program:

Robert D Flach said...


I think you can disagree with the IRS on CP-2000 notices, but you just cannot "argue tax law". I doubt that the new regulations really do affect much other than being able to represent a client whose return you have prepared as a legal representative (in place of having the client attend the audit). It does not, in my opinion, stop a tax preparer from attending an audit with a client, not as legal representative but as a "resource" to answer questions about how the return was prepared.

In the past I would respond to the IRS via written correspondence. If there is a topic I can no longer address via correspondence under my signature I would just compose a letter as if it was written by the taxpayer himself/herself on Word-created letterhead with the taxpayer's name and address and have the client sign the letter.

I am not sure if a Form 8821 will allow a non-AFSP participant to do more - but I guess filing one "couldn't hurt".