Tax Preparation vs. IRS Representation: Where New Preparers Need to Draw the Line

Preparing a tax return and representing a taxpayer before the IRS are different roles.

In this episode, Jason Carr explains where new tax preparers need to draw the line. He covers the practical difference between explaining an IRS notice and representing a taxpayer, the distinction between Form 2848 and Form 8821, the limits on unenrolled preparers, and why engagement letters should clearly define scope.

Jason covers:

• Why tax preparation and IRS representation are different roles
• How to recognize when a client is asking for representation
• The difference between Form 2848 and Form 8821
• What limited representation rights may apply to AFSP participants
• Why engagement letters should exclude tax controversy work unless separately agreed
• How to triage IRS notices
• When to refer matters to an appropriate professional

Key Takeaways

• Preparation and representation are different roles: Preparing a return does not automatically mean representing the taxpayer before the IRS.
• Form 2848 is for representation: It authorizes an eligible individual to represent a taxpayer before the IRS.
• Form 8821 is for information access: It allows access to confidential tax information, but it does not authorize representation.
• AFSP rights are limited: AFSP participants may have limited representation rights for returns they prepared and signed.
• Scope should be written down: Engagement letters should clarify that IRS representation is outside the preparation engagement unless separately agreed.
• Referrals build trust: Knowing when to refer is part of being a professional.

Resources Mentioned

• MuseSpring: https://musespring.com
• Tax Business Blueprint Program: https://musespring.com
• The Law Office of Jason Carr, PLLC: https://carrtaxlaw.com 

Disclaimer

Content on this channel is provided by MuseSpring LLC for educational and informational purposes only. It does not constitute legal or tax advice or establish an attorney-client relationship. MuseSpring LLC is not a law firm. Jason D. Carr appears in MuseSpring content in his capacity as an educator and founder of MuseSpring LLC, not in his capacity as an attorney with The Law Office of Jason Carr, PLLC. For advice specific to your situation, consult a qualified tax professional or licensed attorney.

Comment Policy

Please do not post confidential, sensitive, or personally identifiable tax information in the comments. We do not provide individualized legal or tax advice in the comments or social media replies.

Transcript

SPEAKER_00 0:02

You trained for the career. Now build the business. This is the New Spring Minute, where inspiring tax professionals learn to lunch and scale their own productive. Here's your host, Jason Kamar.

SPEAKER_01 0:22

One of the most important lines in the tax profession is the line between preparing a tax return and representing a taxpayer before the IRS. New preparers need to understand that line early. The point is not to make you afraid of IRS notices. The point is to make sure you know exactly what role you're playing when the client asks for help. Preparing a tax return is one role. Representing a taxpayer before the IRS is another role. The IRS says Form 2848 is used to authorize an individual to represent a taxpayer before the IRS, and the individual authorized must be eligible to practice before the IRS. That matters because a client may not understand the difference. A client may say, can you handle this notice for me? But that one sentence can mean several different things. It may mean, can you explain what this letter says? It may mean, can you help me gather documents? Or it could mean, can you prepare an amended return? Or it may mean, can you call the IRS, advocate for me, and resolve the matter. Those are different requests. For a new tax preparer, the practical question is, am I explaining, preparing, gathering information, or representing? If a client hires you to prepare and file a return, you're preparing the return. If a client receives a notice and asks you to help them understand what the notice appears to say, you may be helping them understand the issue. If the client asks you to call the IRS, dispute an adjustment, negotiate, respond to an examination, or act on the client's behalf, you're definitely entering representation territory. That's where the distinction becomes important. Many IRS notices are fairly routine. They may just include a math adjustment, a missing form, a proposed change based on a mismatched 1099, a balanced due notice, an identity verification letter. A client may simply need help understanding what the notice is asking for. You might say, This notice says the IRS received a 1099 that was not reported on the return. You need to compare the notice to your records and decide whether you agree or disagree. That's an explanation. But if you say, I will respond to the IRS for you, dispute the proposed adjustment, and handle the matter, that's closer to representation. And the form distinction is useful here. Form 2848 is the power of attorney form. It authorizes an eligible individual to represent the taxpayer before the IRS. Conversely, Form 8821 is different. Form 8821 authorizes a designee to inspect or receive confidential tax information, but it does not authorize the designee to speak for the taxpayer, advocate the taxpayer's position, execute waivers or closing agreements, or represent the taxpayer before the IRS. Put simply, Form 8821 is information access. Form 2848 is representation authority. New preparers should not blur those. Now let's talk about unenrolled preparers. An unenrolled preparer is someone who is not an attorney, CPA, enrolled agent, enrolled actuary, or other credentialed professional with broader practice rights. Many new preparers fall into that category. The IRS annual filing season program or AFSP is voluntary. The IRS says non-credential preparers can receive a record of completion by meeting continuing education requirements, reviewing their P10, and consenting to certain 230 obligations. AFSP participants may have limited representation rights. The IRS indicates that AFSP participants can represent clients for whose returns they prepared and signed, but only before revenue agents, customer service representatives, and similar IRS employees. Attorneys, CPAs, and enrolled agents have unlimited representation rights before the IRS. And that's a narrow lane. If you're a new preparer, do not market yourself as someone who handles IRS representation unless you actually have the authority, credentials, experience, and system to do that work. This is where the attorney lens matters. The risk is not only making a technical mistake. The risk is taking on a role the client thinks is broader than the role you're authorized and prepared to perform. That creates confusion. It can delay the client from getting the right help. It can also create professional risk for your business. So how should a new preparer handle this? Well start with the engagement letter. If you're preparing returns only, say that. Say that IRS notice response, audit representation, collections work, appeals, penalty abatement, amended returns, and tax controversy services are outside the scope unless separately agreed in writing. That does not mean you can never help with a notice. It means the client should not assume that return preparation includes IRS representation. Next, create a notice triage policy. When a client sends a notice, do not immediately start solving it. First, classify it. Is it informational? Is it a simple correction? Is it asking for documents? Is it proposing more tax? Is it an examination? Is it a collections notice? Is there a deadline? Is there a risk of levy, lien, penalty, or appeal rights expiring? That classification tells you what kind of help may be needed. Then decide what you can do next. You may be able to explain the notice. You may be able to help the client gather documents. You may be able to prepare an amended return if that's within the service scope. But if the matter requires advocacy, negotiation, legal analysis, or formal representation, the right move may be referral to an appropriate professional. That referral is good practice management. A strong tax prep practice should have referral relationships. You may need a bookkeeper, payroll provider, CPA, enrolled agent, tax attorney, business attorney, or financial advisor in your network. Your client does not need you to be all those people. Your client needs you to know when each one is needed. At Muse, this is one of the reasons the tax business blueprint program is attorney-led. A lot of tax prep training teaches forms. And forms do matter, but judgment matters as well. You need to know what you can prepare, what you can explain, what you can sign, what you can represent, and what you should refer. That's how you build a professional practice instead of just filling out returns. So if you're new, take this seriously. Prepare returns within your competence. Use engagement letters. Be clear about scope. Do not casually agree to handle the IRS unless you know exactly what that means. And when a client's issue moves beyond preparation, make the right referral quickly. That protects a client, it protects your business, it also builds trust because clients remember the professional who told them the truth about what the situation required. I'm Jason Carr. Thanks for listening to the Mew Spring Minute.

SPEAKER_00 7:15

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