Key Takeaways
- IRS conducts tax compliance check (all returns filed, no outstanding liabilities).
- Criminal background check is required.
- Failure to file returns can result in denial of enrollment.
- Outstanding tax debts must be resolved or in a payment plan.
- Character and fitness review evaluates suitability.
- Prior OPR sanctions or professional discipline are considered.
Background & Compliance Checks
Why This Matters for the Exam
The IRS conducts thorough background checks before granting EA status. The exam tests whether you understand what can cause denial of enrollment and the importance of tax compliance.
Expect at least 2-3 questions on background checks and compliance.
Overview of the Vetting Process
Submitting Form 23 initiates a comprehensive review:
| Check | What IRS Reviews |
|---|---|
| Tax compliance | All required returns filed, debts resolved |
| Criminal background | Criminal history review |
| Character and fitness | Professional conduct, prior sanctions |
| Suitability determination | Overall fitness to practice |
Tax Compliance Check
The IRS verifies that you are in full tax compliance:
| Requirement | Consequence of Non-Compliance |
|---|---|
| All returns filed | Unfiled returns = likely denial |
| No outstanding balance | Unresolved debt = possible denial |
| Payment plan in place | Acceptable (shows good faith) |
| Currently compliant | Required for approval |
Key Point: Before applying, ensure all returns are filed and any tax debts are resolved or in a formal payment arrangement.
What Causes Denial?
| Issue | Likely Result |
|---|---|
| Unfiled tax returns | Denial |
| Outstanding tax debt (no payment plan) | Denial or delay |
| Recent criminal conviction | Denial (depending on nature) |
| Fraud or dishonesty conviction | Strong grounds for denial |
| Prior OPR sanction | May cause denial |
| False statements on Form 23 | Denial + potential criminal charges |
Criminal Background Check
The IRS reviews your criminal history as part of the suitability determination:
| Factor | Consideration |
|---|---|
| Type of offense | Crimes of dishonesty more serious |
| Recency | Recent offenses weighted more heavily |
| Frequency | Pattern of misconduct more serious |
| Relevance | Tax-related crimes very serious |
| Rehabilitation | Evidence of rehabilitation considered |
Not Automatic Denial: Having a criminal history doesn't automatically disqualify you, but crimes involving dishonesty, fraud, or tax violations are especially problematic.
Character and Fitness Evaluation
The IRS evaluates your overall suitability to practice:
| Factor | What IRS Considers |
|---|---|
| Professional history | Prior disciplinary actions |
| OPR sanctions | Prior Circular 230 violations |
| State licensing issues | CPA/attorney suspensions |
| Integrity | Honesty in application and practice |
What To Do Before Applying
| Action | Purpose |
|---|---|
| File all returns | Clear compliance flag |
| Pay or arrange debt | Show good faith |
| Resolve outstanding issues | Remove barriers |
| Gather documentation | Prepare for questions |
| Be honest on Form 23 | False statements = denial |
Real-World Scenario
Scenario: You passed the SEE but have an unfiled 2021 tax return and owe $5,000 from 2020.
- Before applying: File the 2021 return and enter into an Installment Agreement for the $5,000.
- On Form 23: Disclose the debt honestly and indicate you're on a payment plan.
- Likely result: With returns filed and payment plan in place, approval is likely (but may take longer).
On the Exam
Expect 2-3 questions on background checks, typically:
- Denial Questions: "What can cause denial of EA enrollment?"
- Compliance Questions: "What type of check does the IRS conduct?"
- Remedy Questions: "What should you do before applying if you have unfiled returns?"
The key is to remember: Tax compliance required (all returns filed), criminal background checked, resolve issues before applying, be honest on Form 23.
What can cause denial of EA enrollment?
What type of check does the IRS conduct on EA applicants?
What should you do if you have outstanding tax debt before applying for EA status?