Should the Person Who Prepared Your Return Defend It in an Audit?

When an audit letter arrives, most people call the person who prepared the return. That instinct makes sense. They know the numbers, they have the workpapers, and they know you.

Often that is the right call. Sometimes it is not, and the reason has nothing to do with competence. It has to do with whose interests are on the line when the return is questioned.

First question: can they represent you at all?

Before conflicts, check the license. Attorneys, CPAs, and enrolled agents have unlimited representation rights before the IRS. According to the IRS, Annual Filing Season Program participants can represent clients only for returns they prepared and signed, and only before revenue agents, customer service representatives, and similar employees, including the Taxpayer Advocate Service. They cannot handle appeals or collection. Preparers with only a PTIN cannot represent clients for returns prepared after 2015.

So an AFSP preparer may be able to handle the examination of a return they prepared, but cannot follow it to Appeals. A PTIN-only preparer cannot represent you at all. The details are in unenrolled preparers.

What Circular 230 says about conflicts

Section 10.29(a) says a practitioner shall not represent a client before the IRS if the representation involves a conflict of interest. A conflict exists if representing one client will be directly adverse to another client, or if there is a significant risk that the representation will be materially limited by the practitioner's responsibilities to another client, a former client, or a third person, or by a personal interest of the practitioner.

That last phrase, a personal interest of the practitioner, is the one that matters when a preparer defends their own return.

How a preparer's interest can diverge from yours

Section 6694 of the Internal Revenue Code imposes penalties on tax return preparers for understatements of a taxpayer's liability in certain circumstances, including positions the law treats as unreasonable and willful or reckless conduct. Circular 230 section 10.34 cross-references those standards.

Now picture the audit. The examiner questions a deduction. One honest answer is that you gave the preparer accurate information and the preparer made an error. That answer may help you with penalty relief. It hurts the preparer. Another answer is that you gave the preparer bad information. That answer protects the preparer and hurts you.

A preparer in that spot has a personal stake in which story gets told. Most preparers will still do the right thing. The rule exists because "most" is not "all," and because you deserve someone whose only stake is yours.

When it is usually fine

• The audit is about documentation, such as substantiating expenses you actually had, and nobody disputes how the return was prepared.
• The issue arises from information that was not available when the return was filed, like a corrected information return.
• The preparer is credentialed, the amounts are modest, and there is no suggestion the preparer made a mistake.

In those cases, the person who knows the return best is often the most efficient representative. Use them.

When to bring in someone else

• The examiner is questioning how the return was prepared, not just whether you have receipts.
• Penalties are proposed, and reasonable cause may depend on reliance on the preparer.
• You and the preparer remember the facts differently.
• The preparer would be a witness about their own work.
• There is any suggestion of fraud, or the examiner's questions turn toward intent.

In these situations, an independent representative can evaluate the preparer's work objectively, and the preparer can still help as a witness. Circular 230 section 10.8(b) lets any individual appear as a witness for the taxpayer or furnish information at the IRS's request. The audit defense chapter covers the rest.

If you keep the preparer: informed consent in writing

A conflict does not automatically end the relationship. Section 10.29(b) lets a practitioner represent a client despite a conflict if three conditions are met. The practitioner reasonably believes they can provide competent and diligent representation. The representation is not prohibited by law. And each affected client waives the conflict and gives informed consent, confirmed in writing, at the time the practitioner knows of the conflict, with the written confirmation no later than 30 days after consent.

Section 10.29(c) requires the practitioner to keep copies of written consents for at least 36 months after the representation ends and provide them to the IRS on request.

If your preparer has a personal stake in the audit and has not raised it with you, raise it yourself. Ask directly: is there any chance this audit suggests you made an error? How would you handle it if so?

Other conflicts that show up in tax cases

Common conflict situations and the question to ask

The spouse situation is common and important. See the innocent spouse chapter.

What an independent representative adds

An independent representative looks at the return the way the examiner will. They can tell you whether a position is strong, weak, or simply under-documented, without any need to defend their own earlier judgment. If the honest answer is that the return was wrong, they can help you concede what should be conceded and fight what should be fought.

They also think about the next step. If the audit ends with a proposed deficiency, an independent representative is already positioned to evaluate an appeal or a Tax Court petition. A preparer with limited representation rights cannot follow you there, as the IRS's own guidance makes clear.

And when penalties are on the table, an independent representative can present a reasonable cause argument that rests on your reliance on a professional, if the facts support it, without the awkwardness of the professional arguing about their own mistake.

Questions to ask your preparer when the audit letter arrives

Is there anything about how this return was prepared that the examiner is likely to question? Would you be comfortable if I hired a separate representative and you served as a witness on how the return was prepared? Can you send me your workpapers and my source documents for this year? Is there any chance this audit could expose you to a preparer penalty?

These are fair questions. A confident, honest preparer answers them without defensiveness, and many will tell you on their own when a second set of eyes makes sense.

Keep the records straight either way

Whoever represents you, make sure the audit file is complete: the return as filed, the workpapers, the source documents, and every letter from the examiner. If the preparer stays involved as a witness, put their explanations in writing and give copies to your representative.

A clean, shared record prevents the worst outcome, which is two people telling the examiner two different versions of how the return was prepared.

Cost is not the only factor

Keeping the preparer is often cheaper, and for a simple audit that matters. But weigh the cost against what is at stake. If the examiner is questioning thousands of dollars and possible penalties, the price of an independent representative may be small compared to the cost of an advocate whose interests are not fully aligned with yours.

How to raise it without burning a bridge

You can keep a good relationship with your preparer and still bring in independent representation. Frame it plainly: you value their work, you want them involved as the person who knows the return, and you want a separate representative for the audit so nobody is put in an awkward spot. Good preparers understand. Many will suggest it themselves.

Ask the preparer for the workpapers and source documents for the year under audit. Circular 230 section 10.28 requires practitioners to return client records needed for federal tax compliance on request. See getting your file back.