Free SEE-3 flashcards

Under Circular 230, what defines 'practice before the IRS'?

It turns on the substance of the dealing, not its form or fee. Practice covers all matters connected with a presentation about a taxpayer's rights, privileges, or liabilities under the laws the Service administers, including communicating and corresponding with it. This is broader than formal appearances yet narrower than every paid tax service.

Any service for which a person charges a fee in federal taxation, such as bookkeeping or payroll, is practice before the IRS.

Tying the definition to charging a fee feels intuitive, but Circular 230 defines practice by the nature of the dealing with the Service rather than by whether a fee was charged. This wrongly sweeps in unrelated paid services that involve no presentation about a taxpayer's rights or liabilities.

How does the authority granted by Form 2848 differ from the authority granted by Form 8821?

Form 2848 is a power of attorney: its holder can advocate, sign, and bind the taxpayer within the granted scope. Form 8821 is a disclosure consent only: the designee may see information but can never speak or act for the taxpayer. The decisive line is acting versus merely receiving.

Form 2848 lets a person only inspect confidential information, while Form 8821 lets that person argue the taxpayer's position and sign agreements.

This reverses the two instruments, which is tempting because both grant third-party access. In fact Form 2848 confers representation and Form 8821 confers disclosure only, so the roles are swapped and the statement is wrong.

When is the IRS required to grant a guaranteed installment agreement, and what does it not demand in return?

Acceptance is mandatory at a low dollar level: where the income tax owed apart from penalties and interest is 10,000 dollars or less, the taxpayer agrees to full payment within three years, and recent filing and payment compliance is met. No financial statement and no collateral are required, removing IRS discretion.

The IRS must grant a guaranteed agreement to any taxpayer owing 50,000 dollars or less who pays over up to seventy-two months.

The 50,000 dollar figure and the seventy-two month term describe the streamlined agreement, not the guaranteed one. Borrowing those parameters confuses the two categories and misstates the guaranteed rule, which is capped at 10,000 dollars and a three-year payoff.

Which tax benefits does paid-preparer due diligence under Form 8867 cover?

Congress widened the duty beyond the earned income credit so the same documented checks apply to the child tax credit family (with the additional child tax credit and the credit for other dependents), the American opportunity credit, and head of household status, because each carries a comparable risk of an erroneous claim.

Does Form 8867 due diligence apply to the earned income credit alone, leaving the child tax credit and American opportunity credit with no recorded duty?

The earned income credit was the original focus, which makes this tempting, but the duty now extends well beyond it, so limiting Form 8867 to that one credit understates the rule and is wrong.