While every taxpayer could represent his or her business before the IRS when an audit or complicated tax issue arises, reaching out to a tax expert is often the best decision. In the content below, we define IRS representation then explore the process of finding the right financial professional for successful IRS representation.
What is IRS Representation?
IRS representation is a taxpayer’s representative that appears before the IRS on your behalf. For many, the representative is the taxpayer him/herself. However, certain cases may require outside representation. If so, the taxpayer may elect for someone else to speak on their behalf before the IRS.
When it is valuable to find expert representation?
If your company is preparing for an upcoming audit or facing a complicated tax problem, it may be in your best interest to find a tax expert to represent you and your business before the IRS. Representation will replace you with a professional who is experienced with IRS interaction, can explain information for you, and will ultimately pursue an agreement with the IRS.
Before the IRS, the expert chosen to represent you and your company assumes your identity.
Can a business owner prepare in advance for an audit?
Often, the answer is no. Many business audits occur randomly. However, certain tax-return-related items can raise red flags before the IRS and prompt investigation. Examples include:
- Inconsistencies between tax filings, including past filings and your most current filing
- Significant inconsistency between gross profit margin and/or expenses in your business and others in your industry
- Abnormally high deductions
Who Can Represent You Before the IRS?
An enrolled agent, attorney, CPA, or any individual who is authorized to practice before the IRS can represent you. Enrolled agents, attorneys, and CPAs have unlimited representation rights, allowing any of these professionals to “represent their clients on any matters including audits, payment/collection issues, and appeals.”
Officially licensed by the IRS, enrolled agents are required to complete an Enrolled Agent Program before practicing. The Program involves an intensive examination as well as 72 hours of upkeep training every three years. Ultimately, enrolled agents must show demonstrated proficiency in tax planning, representation, and tax return preparation.
Most attorneys have earned a law degree, passed a bar exam, and are licensed by state courts. Similar to enrolled agents, attorneys often complete ongoing training programs to maintain an optimal level of proficiency. Some attorneys specialize in tax planning and preparation.
Certified Public Accountants
CPAs have passed an in-depth examination to receive the title of “Certified Public Accountant,” licensed by U.S. territories, state boards of accountancy, and the District of Columbia. All CPAs have completed “a study in accounting at a college or university and also met experience and good character requirements established by their respective boards of accountancy.” To maintain an active license, CPAs also complete ongoing education and must adhere to ethical requirements.
How to Identify the Right Tax Professional for IRS Representation
Who to Hire?
As a business owner looking for professional IRS representation, should you pursue an enrolled agent, attorney, or a CPA? Although the final decision is yours to make, finding CPA IRS representation is beneficial for ongoing support. Businesses should have all financial prospects in order and pursue accurate federal tax filing at all times, not only when an IRS audit is requested.
Finding a CPA to help your company with audit and accounting services can be extraordinarily beneficial. Staying on top of accounting and audit responsibilities – from bookkeeping and financial reporting to internal audits – helps you procure detailed insights needed to ensure your business is on firm financial footing.
Where to Start?
Once you have identified the tax expert who will represent you, file Form 2848, Power of Attorney and Declaration of Representative, with the IRS. Both you and your IRS representative (Power of Attorney) must sign the form upon agreement. After filing is completed, your selected tax professional can represent you before the IRS.
Form 2848 will remain in effect until manually withdrawn by you or your representative – or until seven years have passed. If seven years pass before you or your representative withdraw Form 2848, the IRS will automatically terminate it.
Responding to an IRS Audit Request with DHJJ CPA Representation
Fortunately, some audits do not require physical representation. The IRS may reach out to your business, requesting documentation to support specific claims or deductions or ask you to bring documentation to a local IRS office.
However, in the case of a field audit, and you are required to meet with IRS auditors, DHJJ CPAs can often represent you before the agent. In addition, the IRS never demands an immediate meeting. Working with a financial professional, you have time to gather and prepare necessary records and documentation.
What can DHJJ CPAs help you with?
- Responding to the initial audit request letter
- Understanding what exactly the IRS is disputing
- Gathering all records and documentation
- Effectively responding to the audit request
DHJJ: Trusted CPAs and Business Advisors
If you are feeling uncertain about representing your business before the IRS, or would like to pursue ongoing audit and accounting services, our team of experienced CPAs at DHJJ are eager to discuss how we can help your business.
Have questions? Please do not hesitate to reach out at 630.420.1360 or submit your information on our online contact form. A team member will be in touch right away.