Table of Contents EA Exam Part 3 2017-18 Introduction... 2 Examination Content Outline... 8 Course Content... 11 Practices and Procedures... 12 Practice before the IRS... 12 OPR and Practice before the Internal Revenue Service... 12 Who may practice?... 12 Compliance and suitability checks... 15 Requirements for Enrolled Agents... 17 Information to be furnished... 17 Knowledge of client's omission... 17 Assistance from or to disbarred or suspended persons... 17 Solicitation... 18 Fees... 18 Diligence as to accuracy... 19 Conflicting interests... 19 Negotiation of taxpayers checks... 19 Requirements for other written advice... 20 Standards... 20 Competence and covered opinions... 21 CPE requirements... 22 Term and renewal of status... 24 Prompt disposition of pending matters... 25 Return of clients records... 25 PTIN requirements... 25 Practitioner supervisory responsibilities... 25 Practice by former government employees... 26 Practice of law... 27
Best practices for tax advisors... 27 Sanctionable acts... 29 Incompetence and disreputable conduct includes, but is not limited to:... 29 Sanctions... 29 Receipt of information concerning practitioner... 30 Frivolous submissions... 30 Institution of proceeding... 31 Petition for Reinstatement... 31 Fraudulent transactions... 31 Rules and Penalties... 33 Assessment and appeal procedures for preparer penalties... 33 Types of penalties (e.g. negligence, substantial understatement, overvaluation)... 33 Furnishing copy to taxpayer... 36 Preparers identifying number... 36 Retain copy of the return... 36 Employees engaged or employed during a return period... 37 Preparer penalty involving the earned income credit... 37 Section Practice Questions... 39 Answers to Section Practice Questions... 45 Representation before the IRS... 51 Power of attorney... 51 Purpose of power of attorney... 51 Signature authority... 51 Proper completion of power of attorney... 52 Alternate forms of power of attorney (durable)... 52 Rules for client privacy... 53 Distinctions between power of attorney and tax information authorization... 54 Dropping representatives or withdrawal of representative... 54 Centralized Authorization File (CAF) number... 54 Conference and practice requirements (Pub 216)... 55 Building the case (preliminary work, taxpayers financial situation, and supporting documentation).. 56 Tax issue identification... 56
Transcripts from the IRS... 56 Potential for criminal aspects... 58 Taxpayer financial situation... 61 Taxpayer s ability to pay... 61 Discharge of the tax liability in bankruptcy... 62 IRS collection financial standards... 64 Supporting documentation... 65 Individuals... 65 Businesses... 66 Various... 67 Other documentation... 71 Fully Developed Cash T Account Method... 74 Legal authority and references... 76 Internal Revenue Code... 76 Regulation... 76 Revenue Ruling... 77 Revenue Procedure... 77 Private Letter Ruling... 77 General Counsel Memorandum... 77 Technical Advice Memorandum... 78 Notice... 78 Case law... 78 IRS publications, and forms and instructions... 80 Internal Revenue Manual... 80 Announcement... 80 Tax Treaties... 81 Related issues... 82 Statute of limitations... 82 Post-filing correspondence... 84 Third party correspondence... 84 Freedom of Information Act (FOIA) requests... 85 Tax avoidance vs. tax evasion... 89
Tax return disclosure statements... 89 Taxpayer Advocate Service... 92 Identity theft... 93 Higher levels of representation... 93 Section Practice Questions... 94 Answers to Section Practice Questions... 100 Specific Types of Representation... 106 Representing a taxpayer in the collection process... 106 Extension of time to pay... 106 Installment agreement... 107 Offer in compromise... 108 Collections appeal program and due process... 109 Abatements... 111 Audit reconsideration... 112 Decedent issues... 112 Federal Tax Lien and levy... 113 Case being reported Currently Not Collectable... 116 Summons... 117 Collection statute of limitations... 117 Trust fund recovery penalty... 118 Other taxpayer penalties... 119 Penalties and/or interest abatement... 123 Basis for having penalties abated... 123 Basis for having interest abated... 131 Interest recalculation... 132 Procedure for requesting abatement... 134 Representing a taxpayer in audits/examinations... 134 IRS authority to investigate... 134 IRS authority to fix time and place of investigation... 134 Examinations in general... 134 Innocent spouse... 139 Special provisions for partnership audits... 143
Preparer conflict of interest... 145 Representing a taxpayer before appeals... 147 Appeals in general... 147 Issuance of 90-day letter... 155 Section Practice Questions... 156 Answers to Section Practice Questions... 161 Completion of the Filing Process... 166 Accuracy, information shared with taxpayer, and record maintenance... 166 Recordkeeping requirements... 166 Significance of signature and consequences of dishonesty... 168 List of returns prepared and length of time to retain returns and records... 169 EITC due diligence requirements... 172 Electronic filing... 174 Application process to be an e-file provider... 174 E-file mandate... 177 Advertising standards... 178 Definitions and responsibilities of an ERO... 179 Levels of infractions... 181 Revocation... 182 Sanctioning... 182 Appeal process... 182 E-file authorization and supporting documentation... 183 Rejected returns and resolution... 185 Identity theft procedures and resolution... 186 Section Practice Questions... 188 Answers to Section Practice Questions... 192 References... 196