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EAs and Circular 230


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Well, here is a draft of the memorandum which summarizes my thoughts on where we are with Circular 230 and the inconsistent privileges which seem to have given to the EA's under circumstances that are no longer warranted. Why consider what I have to say..well I am sure someone is brighter than I am and could do better, the point is they haven't

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EAs and Circular 230

  1. 1. To: Research File Matter # 6026.1    From: Jordan S Zoot, CPA    Date: August 14, 2015    Subject: Legislative Modification To 31 USC 330 to Harmonize with Current IRS Hiring Practice                            The current statutory provision 31 US 330(a)(1) which provides Treasury with the authority                          1 1   31 U.S.C.  United States Code, 2011 Edition Title 31 ­ MONEY AND FINANCE SUBTITLE I ­  GENERAL CHAPTER 3 ­ DEPARTMENT OF THE TREASURY SUBCHAPTER II ­  ADMINISTRATIVE Sec. 330 ­ Practice before the Department From the U.S. Government Printing  Office,  §330. Practice before the Department  (a) Subject to section 500 of title 5, the Secretary of the Treasury may—  (1) regulate the practice of representatives of persons before the                    Department of the Treasury; and  (2) before admitting a representative to practice, require that the                    representative demonstrate—  (A) good character;  (B) good reputation;  (C) necessary qualifications to enable the representative to provide to                    persons valuable service; and  (D) competency to advise and assist persons in presenting their cases.    (b) After notice and opportunity for a proceeding, the Secretary may suspend                        or disbar from practice before the Department, or censure, a representative                      who—  (1) is incompetent;  (2) is disreputable;  (3) violates regulations prescribed under this section; or  (4) with intent to defraud, willfully and knowingly misleads or threatens                      the person being represented or a prospective person to be represented.    The Secretary may impose a monetary penalty on any representative                    described in the preceding sentence. If the representative was acting on behalf                        of an employer or any firm or other entity in connection with the conduct                            giving rise to such penalty, the Secretary may impose a monetary penalty on                          such employer, firm, or entity if it knew, or reasonably should have known, of                            such conduct. Such penalty shall not exceed the gross income derived (or to be                           
  2. 2. derived) from the conduct giving rise to the penalty and may be in addition to,                              or in lieu of, any suspension, disbarment, or censure of the representative.  (c) After notice and opportunity for a hearing to any appraiser, the Secretary                          may—  (1) provide that appraisals by such appraiser shall not have any probative                        effect in any administrative proceeding before the Department of the                    Treasury or the Internal Revenue Service, and  (2) bar such appraiser from presenting evidence or testimony in any such                        proceeding.    (d) Nothing in this section or in any other provision of law shall be construed                              to limit the authority of the Secretary of the Treasury to impose standards                          applicable to the rendering of written advice with respect to any entity,                        transaction plan or arrangement, or other plan or arrangement, which is of a                          type which the Secretary determines as having a potential for tax avoidance or                          evasion.  (Pub. L. 97–258, Sept. 13, 1982, 96 Stat. 884; Pub. L. 98–369, div. A, title I,                                §156(a), July 18, 1984, 98 Stat. 695; Pub. L. 99–514, §2, Oct. 22, 1986, 100                              Stat. 2095; Pub. L. 108–357, title VIII, §822(a)(1), (b), Oct. 22, 2004, 118 Stat.                            1586, 1587; Pub. L. 109–280, title XII, §1219(d), Aug. 17, 2006, 120 Stat.                          1085.)  Historical and Revision Notes  Revised Section  Source (U.S. Code  Source (Statutes at Large)  330(a)  31:1026(1st sentence).  July 7, 1884, ch. 334, §3(proviso and sentence immediately after proviso under heading “War Department”),                              23 Stat. 258.  330(b)  31:1026(last sentence).    In the section, the words “representatives of persons” are substituted for “agents, attorneys, or                            other persons representing claimants before his department” to eliminate unnecessary words.  In subsection (a), before clause (1), the words “Subject to section 500 of title 5” are added for                                    clarity and to conform to title 5. In clause (1), the word “regulate” is substituted for “prescribe                                  rules and regulations” to eliminate unnecessary words. The words “the practice” are substituted                          for “before being recognized” for consistency with other revised titles of the United States Code.                              In clause (2)(C), the words “possessed of the” are omitted because of the restatement.  In subsection (b), the word “proceeding” is substituted for “hearing” because of subchapter II                            of chapter 5 of title 5. In clause (3), the words “violates regulations prescribed under this section”                                  are substituted for “who refuses to comply with said rules and regulations” to eliminate                            unnecessary words. In clause (4), the words “in any manner” are omitted as surplus. The word                               
  3. 3. issue and enforce Circular 230, the document providing the structure for the registration,                          monitoring and discipline was originally enacted in 1884. The statute has been amended                          numerous times, and has a number of holes in it that ought be corrected. There is good reason to                                      shore up the statute expressly cover situations such as the one which resulted in Loving v. IRS,                                  742 F.3d 1013 (D.C. Cir. 2014).    The Enrolled Agent who derive their right to practice the IRS receive their authority through                              Circular 230 as enabled by 31 US 330(a). The certainly a reasonable argument to provide for a                                  special procedure where an individual has been employed by the Treasury for a substantial                            amount of time. It becomes much more difficult to justify the complete lack of an education                                requirement for individuals that take the Special Enrollment Exam. It becomes completely absurd                          when one notices that the Internal Revenue Service’s own hiring guidelines for Revenue Agent’s                            Grade GS­5, Series 512 requires that the applicant have   “deceive” is omitted as being included in the word “mislead”. The words “by word, circular,                              letter, or by advertisement” are omitted as unnecessary.  AMENDMENTS  2006 —Subsec. (c). Pub. L. 109–280 struck out “with respect to whom a penalty has been                              assessed under section 6701(a) of the Internal Revenue Code of 1986” after “any appraiser” in                              introductory provisions.  2004 —Subsec. (b). Pub. L. 108–357, §822(a)(1), inserted “, or censure,” after “Department” in                        introductory provisions and inserted at end “The Secretary may impose a monetary penalty on                            any representative described in the preceding sentence. If the representative was acting on behalf                            of an employer or any firm or other entity in connection with the conduct giving rise to such                                    penalty, the Secretary may impose a monetary penalty on such employer, firm, or entity if it                                knew, or reasonably should have known, of such conduct. Such penalty shall not exceed the gross                                income derived (or to be derived) from the conduct giving rise to the penalty and may be in                                    addition to, or in lieu of, any suspension, disbarment, or censure of the representative.”  Subsec. (d). Pub. L. 108–357, §822(b), added subsec. (d).  1986 —Subsec. (c). Pub. L. 99–514 substituted “Internal Revenue Code of 1986” for “Internal                          Revenue Code of 1954”.  1984 —Subsec. (c). Pub. L. 98–369 added subsec. (c).  EFFECTIVE DATE OF 2006 AMENDMENT  Amendment by Pub. L. 109–280 applicable to appraisals prepared with respect to returns or                            submissions filed after Aug. 17, 2006, see section 1219(e)(2) of Pub. L. 109–280, set out as a                                  note under section 170 of Title 26, Internal Revenue Code.  EFFECTIVE DATE OF 2004 AMENDMENT  Pub. L. 108–357, title VIII, §822(a)(2), Oct. 22, 2004, 118 Stat. 1587, provided that: “The                              amendments made by this subsection [amending this section] shall apply to actions taken after the                              date of the enactment of this Act [Oct. 22, 2004].”  EFFECTIVE DATE OF 1984 AMENDMENT  Section 156(b) of Pub. L. 98–369 provided that: “The amendment made by subsection (a)                            [amending this section] shall apply to penalties assessed after the date of the enactment of this                                Act [July 18, 1984].”   
  4. 4. A. You have at least 4 full years of progressive academic study (120 semester                          hours) at an accredited college or university that included at least 30 semester                          hours in accounting as outlined above; OR  B. You have a Certificate as a Certified Public Accountant (CPA) obtained through                        written examination in a state, territory or the District of Columbia; OR  C. You have a combination of education and experience that included at least 30                          semester hours in accounting as outlined above .  2 The requirements for further advancement include  For GS­7  A. You have earned Superior Academic Achievement: A bachelor's degree with                    either a 3.0 ("B") GPA overall or 3.5 ("B+") on a 4.0 scale in all accounting                                courses. You may also qualify under this requirement if you ranked in the upper                            one­third of your graduating class. You may also qualify if you possess                        membership in a national scholastic college honorary society above the                    freshman level that meets the requirements of the Association of College Honor                        Societies; OR  B. You have at least one year of graduate education in accounting, business,                        finance, law, economics, management, statistical/quantitative methods or              computer science; OR  C. You have at least one year of experience equivalent to the GS­5 level that                            required knowledge of, and skill in, applying principles, concepts and                    methodology of professional accounting and related fields; and skill in                    communicating and dealing with others; OR  D. You have at least one year of combined graduate education and experience as                          defined in paragraphs (B) and (C) above.  For GS­9  A. A master's or equivalent degree, or two academic years of graduate education in                          accounting or the fields of business, finance, law, economics, management,                    statistical/quantitative methods or computer science; OR  B. At least one year of experience equivalent to the GS­7 level that required                          knowledge of and skill in applying the principles, concepts and methodology of                        2  One full year of undergraduate academic study is defined as 30 semester hours and is equivalent to one                                      year of full­time experience. If your credits are in quarter hours, multiply the number of quarter hours you                                    have earned by 2/3 to determine the number of equivalent semester hours.  Your accounting coursework must have been such that it would serve as a prerequisite for more advanced                                  study in the field of accounting. This means that the courses should be acceptable toward an accounting                                  degree by a four­year college or university, and must include upper­level courses normally taken during the                                junior and senior years at a four­year college or university. Your coursework should reflect your knowledge                                of principles, intermediate and advanced accounting, cost accounting and auditing.  Click here for examples                          of qualifying courses .   
  5. 5. professional accounting and related fields, and skill in communicating and                    dealing effectively with others; OR  C. At least one year of combined graduate education and experience as defined in                          paragraphs (A) and (B) above. Only graduate education in excess of the amount                          required for the GS­7 level may be combined with experience to qualify for GS­9.  The full set of criteria for Revenue Agent Series 0512  are detailed at   3 3  Internal Revenue Agent Series, 0512  Individual Occupational Requirements  Basic Requirements  1. Degree:  accounting, that included at least 30 semester hours in                  accounting  or 24 semester hours in accounting and an additional 6                    semester hours in related subjects such as business law, economics,                    statistical/quantitative methods, computerized accounting or financial            systems, financial management, or finance.     2. Combination of education and experience:  equivalent to 4 years that                  included courses equivalent to a major in accounting, i.e., at least 30                        semester hours in accounting  or  24 semester hours in accounting and 6                    semester hours in related subjects as described in A above, in                      combination with appropriate experience or additional education.  Certificate  A certificate as a Certified Public Accountant (CPA) obtained through written                      examination in a State, territory, or the District of Columbia meets the                        requirements for GS­5. Applicants with CPA certificates may also qualify for                      higher grade levels based on their education and/or experience.  Graduate Education  May have been in accounting,  or  with completion of the basic requirements                    described above, may have been in a related field such as business, finance,                          law, economics, management, statistical/quantitative methods, or computer              science. The key consideration in determining if such graduate education should                      be credited is whether or not it provided the knowledge, skills, and abilities                          identified as necessary to perform the work at the grade level of the position                            being filled.  Specialized Experience  Qualifying specialized experience for positions at grades GS­7/11 may have                    been in accounting, auditing, tax, financial, legal, or other work that required: 
  6. 6. The Senior Revenue Agents for Large Business and International are responsible for the                          more highly complex tasks performed by the IRS. They are divided into   For GS­7 and GS­9:  1) Knowledge of and skill in applying the principles,                      concepts, and methodology of professional accounting and related fields, and                    2) skill in communicating and dealing effectively with others.  For GS­11:  1) Knowledge of and skill in applying professional accounting                  principles, concepts, and methodology to the examination of accounting books,                    records, and systems; 2) skill in interpreting and applying tax law for individuals                        and business and/or exempt organizations; 3) knowledge of business and trade                    practices to analyze business operations and financial conditions; and 4) skill in                        interacting effectively in a wide range of situations with a broad range of                          individuals.  For positions at GS­12 and above :  Qualifying experience must have been in                      progressively responsible and diversified professional accounting or auditing                work that required 1) knowledge of and skill in applying professional accounting                      principles, theory, and practices to analyze and interpret accounting books,                    records, or systems specifically to determine their effect on Federal tax liabilities                        and their adequacy for recording transactions affecting tax liabilities; 2) skill in                      interpreting and applying Federal tax law for individuals, business, and/or exempt                      organizations, partnerships, and corporations; 3) knowledge of business and                trade practices to develop tax issues based on analysis and evaluation of overall                          business operations and financial condition; 4) knowledge of corporate financial                  transactions and financial management principles and practices; and 5) skill in                    interacting effectively with a broad range of individuals and in negotiating with                        specialists in accounting, legal, tax, and other similar business­related                  professions.  Some positions may require additional specialized knowledge and skills, such as                      those dealing with employee benefit plans, exempt organizations, excise tax,                    computer auditing, and international or specialized industry/market segment                programs.  Additional Requirements  Employment is conditional on a satisfactory report of background investigation,                    including a tax audit, conducted when and as may be necessary under the                          security requirements of the Internal Revenue Service.     
  7. 7. ● IRS Large Business and International Division Grade 13 Internal Revenue Agent  o Looking for a second career that offers everything you need to have a great                            lifestyle? The Large and Mid­Size Business (LB&I) Revenue Agent is a                      professional accountant who examines and audits individual, business and                  corporate tax returns to determine correct federal tax liabilities and ensures                      compliance with technical requirements imposed by the Internal Revenue                  Code.  o As an LB&I Internal Revenue Agent you will be responsible for administering                        the tax examinations of the largest corporations in America. You may work on                          teams or individually, coordinating examinations of multinational and national                  companies, and other complex entities. You will be supported by a variety of                          specialists to assist in addressing numerous complex tax issues as you deal                        with corporations on the most complex issues. These often include tax                      shelters, mergers and acquisitions, global operations, transfer pricing and                  others. You will work closely with your customers, often dealing with the                        senior levels of corporate tax departments and/or their representatives. You                    will be challenged every day, both in your research, development of issues                        and in communications with taxpayers.  o In addition to serving the American public and helping to fund its economy,                          working at IRS will give you the job security you’re looking for, a defined                            40­hour work week and the ability to step into roles that let you make an                              immediate impact. What’s more, you’ll receive extensive benefits, including                  comprehensive health care, a retirement fund, flexible spending accounts,                  and continuing education assistance that can help keep you moving forward                      in your career.  o The IRS Large Business and International Division has a number of important                        specialists within the tax examination programs, including:  ● Financial Products and Transactions Examiners (FPTE)  provide financial              product/activity and tax implication expertise to the corporate tax program, often                      dealing with the largest corporations in America. As an FPTE, you will examine,                          research and assess corporate tax returns to determine an appropriate amount of tax                          as it relates to financial transactions and activities. You will interact with corporate                          taxpayers, their representatives and other agents regarding many of the most                      complex financial activities and the resulting tax issues. These include domestic and                        international financial products, trading activities, global marketplaces, structured                transactions and others.  ● International Examiners (IE)  provide international tax expertise to the corporate tax                    program, often dealing with the largest corporations in America. They also work with                          other parts of the IRS to provide examination support. As an IE, you will be                              responsible for examining, researching and assessing corporate tax returns to                    determine the appropriate amount of tax as it relates to international transactions.                        You will interact with corporate taxpayers regarding many of the most complex tax                          issues, including overseas operations, tax shelters, transfer pricing, foreign tax                    treaties and other issues. 
  8. 8. ● Employment Tax Specialists (ETS)  conduct examinations of employment tax                returns filed by large and complex business firms. The businesses generally have                        extensive operations and contain several operating subdivisions. The examinations                  require special ability in accounting and auditing, as well as a highly­advanced                        knowledge of tax law and industry practices. As an ETS, you will conduct                          independent examinations and serve as the employment tax expert on an audit team                          in the examination of a controlled large case. You will interact with corporate                          taxpayers, their representatives and other agents regarding many of the most                      complex wage issues.  ● Computer Audit Specialists (CAS)  analyze complex computerized accounting              systems, recommending the most effective method for providing audit data.                    Recognized experts in applying statistical sampling techniques, these professionals                  also provide computer analyses of large volumes of data, independently designing                      applications and continually searching for creative and innovative ways to use                      computer­assisted audit technique  One initiative that the National Association of Enrolled Agents has undertaken is                        “Educating America” which is an effort to bolster the status of the Enrolled Agent as a                                professional occupation through the combination of   ● Strongly advocating for the implementation of NAEA's "Educating                America" initiative, a critical differentiator.  ● Without it IT looks and smells too much like RTRP  ● Explicit acknowledgment that while EA is a professional under CIrcular                    230,  it is an entry­level credential that gets folks into the profession.   ● This is in sharp contrast to CPA’s, for whom paying for six years of school                              is a real burden.  ● The EA has always had the option to augment education why not                        harmonize all of the education tracks for tax professionals  The level of specialization with the CPA profession has increased substantially. As a                          consequence, the AICPA must act to create a second level Advanced Tax Credential                          [“ATC”]. The ATC could become a certificate program that essentially fills in the gaps                            for an individual that cobbled together their experience and education. The ATC                        could be awarded to CPA’s with an MS in Taxation and attorneys with an LLM‐Tax                              upon completion of the NTPI program. Thus the path to the top is CPA ‐ MST, JD‐LLC                                  or EA, NTPI and ATC.    The single most important component that is missing is dialogue on a process and                            the blame for belongs to NAEA and NATP for perpetuating the fallacy that EA is                              what it isn’t doesn’t reflect on the individual EA its the culture that has been                              manipulated for an organization based agenda.   
  9. 9. The proposed remedy for one portion of the issues would be for Congress to modify                              31 USC § 330 (a) by adding new subparagraph (E) to read    “(1)Notwithstanding anything else contained in this Title, the                Commissioner is directed to modify Circular 230 to expressly require                    that the grant of full representation rights to an Enrolled Agent shall                        require that the Enrolled Agent meet the minimum education                  requirements [specifically inclusive of accounting course hours] to be                  not less than the current requirements for IRS Revenue Agent, Grade                      GS­5, Series 0512.  (2) Effective as of the date of enactment, any Enrolled Agent that does                          not meet the education requirement in (1) above shall be required to be                          supervised by an attorney, certified public accountant, or Enrolled                  Agent that does meet the requirement of (1) above.   (3) For purposes of classification under (2) above each Enrolled Agent                      shall be classified based upon a review of the educational background                      and reclassified as though they had become an Enrolled Agent upon                      the date of the enactment of this legislation”    [Additional to come]                           31 USC § 330 (a)      Loving v. IRS, 742 F.3d 1013 (D.C. Cir. 2014).