Testimony before the IRS Public Hearing on the Circular 230 Notice on Proposed Rulemaking June 21, 2006

June 21, 2006

NAEA public hearing oral testimony:

  1. Introduction
    1. My name is Frank Degen. I’m an enrolled agent and I thank you for the opportunity to speak today on behalf of NAEA, which is the only organization that is solely dedicated to the interests of enrolled agents.
    2. NAEA submitted more complete written comments on April 28- due to time constraints, I will primarily focus on three areas.
  2. Roster/Records Requirements. (§10.90(a)(1)(i))
    1. NAEA is concerned with the distinction of “will make available for public inspection” with the new language in §10.90 “may make available for public inspection.” Why the backslide?
    2. Encouraging taxpayers to seek qualified representatives should be made easier, not more difficult. To illustrate this point, let’s assume a taxpayer is told by a practitioner that he/she is an enrolled agent. The public is better served if the taxpayer could then easily determine whether that practitioner is, in fact, an EA. Here’s something technology should help us with. Let me give you an example - in NYS, the license of professionals—CPAs, registered nurses and the like—can be checked online. Put in the name and license verification will be checked. OPR should develop a similar process that provides an on-line resource to check the federal license of enrolled agents. This would benefit both the public and IRS personnel.
    3. We are troubled by the juxtaposition of the proposed changes in §10.72 that would make disciplinary action public while at the same time this change in wording in §10.90 would make it easier to hide those actually following the rules. We urge you to continue use of the word “will”.
  3. Limited Practice. (§10.7(c)(1)(viii)
    1. This proposed change takes a giant step in bringing consistency to limited practice rights. We applaud the common sense approach
    2. Some of the written comments submitted for this hearing suggest a continuation of the rules that allow a “quasi” Circular 230 practice for those who prepare tax returns. Is there anyone among us who would say that a paralegal who prepared a client’s legal briefs would, by virtue of that preparation, be qualified to represent the client in court? Of course not. The notion is preposterous. Why then should an unenrolled practitioner simply by virtue of preparing a tax return be deemed qualified to represent the client before the IRS? The idea of limited practice by the unenrolled has always struck us as completely counterintuitive.
    3. Enrolled agents have always been puzzled by the current limited practice provision because it is clearly inconsistent with the requirement that ALL individuals permitted to practice demonstrate their qualifications. While there are competent tax preparers who are not Circular 230 practitioners, the Service has no ability, absent the criteria required to be a Circular 230 practitioner, to determine if a given preparer has the qualifications to advise and assist taxpayers in presenting their cases to the IRS.
    4. We wish to maintain the integrity of the system—NAEA has long asserted that its members have a dual responsibility—a responsibility to their clients and a responsibility to the system. Even though some taxpayers might not be able to use their return preparers to represent them at audit, a greater good is achieved—the protection of the taxpayer and the protection of the system.
    5. The whole point of having a requirement to practice is that the person representing the taxpayer has the requisite knowledge to adequately advocate for their client. As an example, how can we determine if non-Circular 230 practitioners have the knowledge and expertise to understand the strict substantiation rules enacted by Congress in §274(d) or the nuances in determining ordinary and necessary business expenses in §162 or the use of the Cohan Rule to advocate for a client? The simple answer is we cannot. If we cannot make this determination, is the taxpayer truly being served?
    6. Some have submitted written comments that a small set of taxpayers may be inconvenienced by the need to have a Circular 230 practitioner represent them. NAEA does not take this inconvenience lightly, but at the same time we suggest convenience is not the paramount issue here. If a citizen is arrested and their best friend is an experienced paralegal with a wealth of knowledge and 20 years experience, the paralegal can still not represent them in the court room. The citizen must secure a member of the bar or represent him/herself pro se. The courts have demanded qualified representatives. In a similar vein, inconvenience may be a necessary price to assure a taxpayer that the person representing them is indeed qualified to do so.
    7. We strongly support the Notice of Proposed Rule Making language and urge you to include the change in the final rule.
  4. Administrative Proceedings.
    1. The current disciplinary process is completely opaque and certainly in need of improvement.
    2. At the same time, approximately 65% of all sanction referrals come from within the IRS. We are concerned that if practitioners are vigorous in the defense of their clients (which, in fact, they should be), this now could be perceived as inappropriate by some in the Service. Disreputable conduct is never appropriate but it must be understood that a strong effort on the part of a practitioner, ipso facto, is not disreputable conduct.
    3. This is all the more important given the contemplated changes in hearing procedures. NAEA has serious concerns that appeal after a decision from an administrative law judge would no longer be a matter of right.
    4. We urge you to clarify the entire administrative appeal process for C230 practitioners and to retain language that would allow for a post-administrative law judge appeal as a matter of right.
  5. Close
    1. On behalf of 40,000+ enrolled agents, I once again express my appreciation for this opportunity to testify.
    2. The proposed change that protects taxpayers by further restricting limited practice is a very positive step.
    3. On the other hand, this iteration of rulemaking presents room for improvement with respect to public disclosure of EAs in good standing and due process in administrative proceedings.
    4. To reiterate:
      1. We urge you to continue use of the word “will” in §10.90.
      2. We urge you to remove §10.7(c) (1)(viii).
      3. We urge you to clarify the entire administrative appeal process and to retain language allowing for an appeal as a matter of right.

       

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