Even if defending your clients in audits is your passion or an area you want to learn more about, it’s important to consider a number of factors before deciding if you should represent your client in an audit.
Questions to consider include whether you’re the right person to represent your client, if there is a built-in conflict of interest, if you have the time and resources to devote to resolving the audit, and if you are protected under attorney-client privilege.
It goes without saying that audits can be more than complex. Deciphering the various types of correspondence from the IRS, determining what type of audit it is, and the strategy with which to approach it can be daunting.
Add in the time and resources it takes to resolve an audit and a client who either doesn’t understand the severity of the correspondence or keeps you out of the loop, and you’ve got a full-blown problem on your desk − and it can easily happen during your busiest time of year.
In 2016, the IRS processed more than 244 million tax returns and engaged in millions of compliance activities. With most tax preparation firms handling between 300 and 500 returns annually, it’s likely that at least one of your clients has been audited in the past or might be audited in the future − especially considering the IRS can audit returns for three years after the year the return was filed and sometimes up to six years for substantial errors.
Representing Your Client
The first factor to consider is if you’re the right person to represent your client before the IRS or in US Tax Court. Representing your client in front of the IRS or in Tax Court requires two separate types of qualifications.
To represent your client before the IRS, you must be an attorney, a CPA, or an enrolled agent (EA). There are others who can represent taxpayers, but with many limitations − including enrolled actuaries, family members, and unenrolled return preparers who prepared the return and are part of the IRS Annual Filing Season Program for the year they prepared the return and the year of the audit/notice.