The Overreacting Client

Overview: You, as a practitioner, receive a frantic phone call from a client taxpayer who has just received notice of an IRS audit. Taxpayer seems angry at you, the practitioner responsible for filing the return, as well as the IRS - calling the latter a bully against good, hard-working people.This case study will focus on educating your client on the Service as an Administrative Agency and diffusing a hostile situation.

Objectives: At the end of this quiz you should be able to:

1. Diffuse a difficult situation brought on by a client's reaction to an IRS notice.
2. Complete the proper form(s) to allow for representation before the Service.
3. Educate your client about the structure of the IRS and the protections provided to him or her as a taxpayer.
4. Know and represent your client within the bounds provided by Circular 230.

Case Study: You have just returned from a weekend conference to receive three voicemails from Johnny Taxpayer. Mr. Taxpayer has been a client of yours for the past two years, but now has received a Letter 3572, an Information Document Request, and, as he put it, "a bunch of other junk" from the IRS saying he is in trouble. Mr. Taxpayer has stated on his most recent message,

"You are to blame for this, you have screwed up my return and now I am going to have to pay for this...this is why I paid you to organize and file the return, because I thought you knew what you were doing. I'm probably on their list now. The IRS is a bullish organization that harasses innocent, hard-working people like me and lets the crooks get away with everything. You better fix this."

You must contact the taxpayer to diffuse the situation. Before doing so, you should review what you know about the Internal Revenue Service and think about how you can both put the taxpayer's concerns to rest as well as represent him before the Service. Please address the following as you go through this process.

Questions/Items to Address:

Can you practice before the IRS? To what extent? Review Circular 230 and be prepared to discuss any limitations you may experience in your representing Mr. Taxpayer.

Discuss the differences between Power of Attorney - Form 2848 and Authorization - Form 8821. Why are these forms important?

What do you plan to tell your client about the reason he may have been selected for audit? (Client is out west fly-fishing so has asked you to email him the response to this particular question, type email below:)

Complete Form 2848 (refer to Form Instructions for assistance). When completing this, be sure to put yourself in your client's place and think about what questions/concerns they may have (and you may have to address).