Key Takeaways
- Practice before the IRS includes all matters connected with presenting to the IRS.
- This includes preparing and filing documents, corresponding with the IRS, and representing clients.
- Practice is governed by Treasury Department Circular 230.
- Only authorized practitioners may represent taxpayers before the IRS.
- Preparing tax returns alone is NOT practice before the IRS (but requires a PTIN).
- Practice includes rendering written advice on federal tax matters.
What is Practice Before the IRS?
Why This Matters for the Exam
Understanding what constitutes "practice before the IRS" is fundamental to Part 3. The exam tests whether you can distinguish between activities that require authorization (representation) and those that don't (return preparation).
Exam Note: For the May 2025 - February 2026 testing window, you are tested on practice rules as of December 31, 2024 (Tax Year 2024).
Expect at least 3-4 questions on the definition and scope of practice.
The Official Definition
Practice before the IRS encompasses all matters connected with a presentation to the IRS relating to a taxpayer's rights, privileges, or liabilities under laws or regulations administered by the IRS.
What Constitutes "Practice"?
| Activity | Practice? | Notes |
|---|---|---|
| Representing clients at audits | ✅ Yes | Requires authorization |
| Representing at Appeals | ✅ Yes | Requires authorization |
| Representing in collections | ✅ Yes | Requires authorization |
| Corresponding with IRS on client's behalf | ✅ Yes | Requires authorization |
| Preparing/filing documents for clients | ✅ Yes | When on behalf of client |
| Rendering written tax advice | ✅ Yes | Subject to Circular 230 |
| Signing consents or waivers | ✅ Yes | Requires POA |
| Preparing tax returns | ❌ No | Requires PTIN only |
| Filing extensions | ❌ No | Administrative act |
| Entering data into software | ❌ No | Clerical support |
The Key Distinction: Preparation vs. Representation
| Activity | Requirement |
|---|---|
| Preparing returns | PTIN required |
| Representing clients | Must be authorized practitioner |
Important Case Law: A federal court ruled that merely preparing returns does not constitute "practice before the IRS." This is why the IRS cannot regulate return preparers as strictly as representatives.
Governing Authority: Circular 230
Treasury Department Circular 230 (31 CFR Part 10) sets forth the regulations governing practice before the IRS.
| Circular 230 Covers | Description |
|---|---|
| Who can practice | Categories of authorized practitioners |
| Duties and restrictions | Ethical and professional standards |
| Sanctions | Penalties for violations |
| OPR | The enforcement office |
Where Practice Occurs
Practice before the IRS occurs at various IRS offices:
| IRS Office | Description |
|---|---|
| Examination | Audits of returns |
| Appeals | Administrative appeals of audit findings |
| Collection | Enforcing collection of taxes owed |
| Customer Service | Answering taxpayer inquiries |
| Taxpayer Advocate | Resolving systemic issues |
Real-World Scenario
Scenario: A client brings their 2023 tax return to you for preparation. Later, they receive an audit notice.
- Preparing the return: Requires only a PTIN. Not "practice before the IRS."
- Representing the client in the audit: Requires authorized practitioner status (EA, CPA, or attorney). This IS "practice before the IRS."
- If you're not authorized: You can prepare the return but cannot represent the client in the audit.
On the Exam
Expect 3-4 questions on practice, typically:
- Definition Questions: "Which activity constitutes practice before the IRS?"
- Distinction Questions: "Does preparing returns constitute practice before the IRS?"
- Authority Questions: "What governs practice before the IRS?"
The key is to remember: Representation = practice (requires authorization). Preparation = not practice (requires PTIN only). Circular 230 governs practice.
Which of the following is considered practice before the IRS?
What governs practice before the IRS?
Is preparing a tax return considered "practice before the IRS"?