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Don't overlook using an enrolled
agent at tax time
By Cora M. Barnhart •
Bankrate.com
At tax time, possible confrontations
with the Internal Revenue Service haunt many working Americans.
While some level of paranoia during the tax season may seem reasonable,
a few of these concerns are justifiable. Serious personal problems
sometimes prevent a taxpayer from filing a return and this omission
could escalate into several years. Intentions to become tax compliant
weaken as the individual imagines possible retribution for these
missed returns. Can these delinquent offenders safely become tax-compliant
again?
This tax tip discusses a possible
solution for the dilemma described above, the enrolled agent. Enrolled
agents are tax professionals licensed to represent taxpayers before
the IRS. After describing the background and purpose of this profession,
this tip distinguishes enrolled agents from other tax professionals.
You also will learn what you can do if you haven't filed taxes in
a while. This process begins with contacting an enrolled agent in
your area.
History and
responsibilities
Enrolled agents date back to 1884. Many taxpayers claimed losses
from the Civil War that were questionable, and Congress recognized
a need to regulate individuals representing citizens dealing with
the Treasury Department about their taxes. President Chester Arthur
responded by creating enrolled agents.
Today, enrolled agents assist taxpayers
in a number of ways:
- They prepare tax returns
- They answer questions regarding national,
state and local tax laws
- They represent taxpayers in disputes with
the IRS
Enrolled agents prepare millions
of tax returns annually. They also provide tax assistance for estates,
trusts, partnerships, corporations and other entities that are required
to report taxes.
Comparisons
to other tax professionals
What does it mean to say an individual is an enrolled agent?
"Enrolled" refers to the fact that the federal government
licenses these professionals. They are "agents" in that
they are authorized to appear in place of a taxpayer before the
IRS.
Enrolled agents differ from other
tax professionals in a number of ways;
- They are required to demonstrate their competence
in tax matters before they represent a taxpayer before the IRS.
- They all specialize in taxation
- They receive their authority from the federal
government instead of the state government.
Attorneys and Certified Public
Accountants don't always specialize in taxes. They also have state
licenses, which limits where they can practice in the U.S.
Training
and continuing education
So you want to become an enrolled agent? Or do you just want
to understand your tax professional's background? Basically, there
are two ways an individual can earn the designation:
- Pass a rigorous, two-day exam administered
by the IRS before undergoing a detailed background check; or
- Work at the IRS for at least five years,
regularly interpreting IRS codes and regulations.
Enrolled agents must also complete
72 hours of continuing professional education every three years
to maintain their status.
Haven't
filed in a while?
If you haven't filed a required tax return, for any reason,
you should contact an enrolled agent. Once the IRS designates you
as a non-filer and has to search for you, they could:
- Request part of your paycheck
- Place a lien on your property
- Freeze or seize your bank accounts
- Prosecute you
Voluntarily filing your missing
tax returns works in your favor. Refunds are due to three out of
four returns, so there is a possibility you are entitled to a refund.
However, you must request it within two years of the time it is
due or the IRS won't repay you.
Already thinking coming forward
is a waste of time because you know you owe the IRS taxes? Don't
panic: you can still do the right thing. If you owe less than $10,000
and will be able to pay the full amount within three years, you
can set up a monthly installment plan with the IRS.
What if you owe the IRS more money
than you will ever be able to pay? Your enrolled agent may be able
to work out a compromise with the IRS so that the amount is adjusted
to one you will be able to pay.
What happens if the IRS accepts
your Offer-In-Compromise (OIC)? The IRS considers your total
tax liability, including interest and penalties, paid in full. However,
an OIC is a mathematical formula, NOT an amnesty program. The National
Association of Enrolled Agents (NAEA) strongly recommends professional
assistance when compromising a tax liability.
Locating
an enrolled agent
Contact the National Association of Enrolled Agents (NAEA) to
find an enrolled agent in your area. You can do this in one of several
ways:
- Search their Web
site and select "Find a Tax Adviser." You will search
by state and then by ZIP code.
- Call the NAEA 24-hour referral service toll-free
at 1-800-424-4339.
- Write your request to the NAEA at:
National Association of Enrolled Agents
200 Orchard Ridge Drive, Suite 302
Gaithersburg, MD 20878
Many enrolled agents are also listed
in the yellow pages. Look under headings such as "Tax Preparation"
and "Enrolled Agent."
Conclusion
This tax tip introduces a potential solution for delinquent
taxpayers, an enrolled agent. Enrolled agents are tax professionals
licensed to represent taxpayers before the IRS. After describing
the background and purpose of this profession, this tip distinguishes
enrolled agents from other tax professionals. You will also learn
what you should do if you missed filing a return, as well as how
to contact an enrolled agent in your area.
-- Updated: Jan. 4, 2005
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