Tax Representation
Tax representation involves the settling of tax controversies of a professional for or in behalf of the taxpayer. Such representation may be made before IRS proceedings, court litigation and out-of-court settlements.
When Necessary
Simple tax problems such as minor errors in computation in tax returns may be personally dealt with by the taxpayer. However, when the issues involved are complex in nature, the taxpayer may be compelled to seek tax representation. The same course of action is also recommended when the taxpayer has insufficient time to personally follow-up a tax problem, when the taxpayer is engaged in business or when the IRS has undertaken extreme collection actions.
Benefits of Tax Representation
Tax representation can bring about convenience to a taxpayer. The latter, after executing a power of attorney, may be represented by a tax representative before the IRS and tax courts. The taxpayer then would not longer be required to be personally present in proceedings and transactions. Compared to an inexperienced person, a tax representative is not likely to be intimidated by aggressive IRS agents. With his or her experience in IRS representation and knowledge of IRS procedures, a tax representative may well-guard a taxpayer's rights, thus, increasing the chances of a successful litigation.
Kinds of Tax Representatives
There are many kinds of professionals who can engage in tax representation. There are tax attorneys, certified public accountants (CPAs) and enrolled agents. A taxpayer may engage one or a combination of them to help solve tax problems.
- Tax attorneys - Lawyers specializing in taxation are skilled in substantive and procedural tax laws. They are essential when the tax issue involved is novel and complex because only they have legal expertise deal with it. A tax matter already brought before the court must also be rested in the proper hands of a lawyer. However, attorneys who have no legal background in finance may find it difficult to prepare documents like income tax returns and financial reports, and compute taxable income and tax due all the more.
- Certified Public Accountants - Accountants are skilled in accounting profits and losses, income and deductions, and assets and liabilities. They are experts in preparing financial records and tax returns. They are also skilled in tax audits, tax planning and tax computations. Unlike lawyers, however, they lack sufficient knowledge about tax laws including legal reliefs from IRS collection actions.
- Enrolled Agents - These are agents enrolled to make tax representations before the IRS. These professionals are required to have worked in the IRS for at least 5 years in a position requiring the interpretation and enforcement of tax laws. Their advantage is that they specialize in IRS tax resolution because they do it on a daily basis and compared to lawyers and CPAs, they require a fixed fee instead of a costlier hourly rate.
Purpose of Tax Representation
Seeking professional tax representatives may be made for different purposes. It may include pre-tax return filing such as preparation of tax return, auditing and tax planning. Tax representatives may also be empowered to represent a taxpayer before IRS proceedings and undertake remedies against IRS collection actions. Representatives, especially lawyers, can also defend a taxpayer facing administrative, civil and criminal suits.