EA Exam Part 3 Study Guide: Representation, Practices and Procedures (2026)

The EA Exam Part 3: Representation, Practices and Procedures is often considered the most "memorizable" section of the Special Enrollment Examination (SEE). Unlike Part 1 (Individuals) and Part 2 (Businesses), which require heavy calculations and deep dives into complex tax law, Part 3 focuses on the rules of the game: how to practice before the IRS, the ethical standards for practitioners, and the procedural steps for collections and appeals.

With a pass rate of approximately 70% (2024-2025), Part 3 is the hurdle many candidates clear first or last. However, don't let the high pass rate fool you into complacency. The exam is dense with technical nuances, particularly regarding Circular 230 and the OBBBA procedural changes implemented in 2025.

Part 3 Exam Format and Domain Breakdown

The Part 3 exam consists of 100 multiple-choice questions (85 scored and 15 experimental). You have 3.5 hours to complete the test. The content is divided into four primary domains:

Domain 1: Practices and Procedures (~31%)

This domain is the heart of the ethics portion of the exam. It covers Circular 230, which governs the conduct of those who "practice before the IRS."

What Constitutes "Practice Before the IRS"?

Practice includes 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. This includes preparing documents, filing documents, corresponding and communicating with the IRS, and representing a taxpayer at conferences, hearings, and meetings.

Who Can Practice?

• Enrolled Agents (EAs): Unlimited representation rights.
• CPAs and Attorneys: Unlimited representation rights.
• Unenrolled Tax Return Preparers: Limited representation rights (only for returns they prepared and signed, and only before examination and customer service levels).

Key Circular 230 Rules to Memorize

• Information to be Furnished (Section 10.20): A practitioner must, on a proper and lawful request by a duly authorized officer or employee of the IRS, promptly submit records or information in any matter before the IRS.
• Knowledge of Client's Omission (Section 10.21): If you know a client has not complied with revenue laws or has made an error/omission, you must advise the client promptly of that noncompliance, error, or omission and the consequences under the code and regulations. Note: You are not required to notify the IRS.
• Due Diligence (Section 10.22): You must exercise due diligence in preparing returns and determining the correctness of oral or written representations made to the IRS or to clients.
• Fees (Section 10.27): You cannot charge an "unconscionable" fee. Contingent fees are generally prohibited except for (1) judicial proceedings, (2) claims for refund of penalties/interest, or (3) examinations of original returns.
• Conflicts of Interest (Section 10.29): Updated in 2025, this requires written informed consent from all affected clients, which must be retained for at least 36 months.
• Advertising and Solicitation (Section 10.30): Practitioners cannot use any form of public communication containing false, fraudulent, or misleading claims. If you advertise a fee schedule, you must stick to it for at least 30 days after the last publication.
• Negotiation of Check (Section 10.31): A practitioner may not endorse or otherwise negotiate any check issued to a client by the government in respect of a Federal tax liability.

Sanctions and Disciplinary Proceedings

The Office of Professional Responsibility (OPR) is responsible for matters related to practitioner misconduct. Sanctions can include:

• Censure: A public reprimand.
• Suspension: Temporary loss of practice rights.
• Disbarment: Permanent loss of practice rights.
• Monetary Penalties: Can be imposed on the practitioner or the firm.

Preparer Penalties (IRC Sections 6694, 6695, 6701)

Beyond Circular 230, the Internal Revenue Code imposes specific penalties on tax return preparers:

• Section 6694(a): Understatement of liability due to unreasonable positions. The penalty is the greater of $1,000 or 50% of the income derived.
• Section 6694(b): Understatement due to willful or reckless conduct. The penalty is the greater of $5,000 or 75% of the income derived.
• Section 6695: Procedural penalties, such as failing to furnish a copy to the taxpayer, failing to sign the return, or failing to keep a list of preparers.
• Section 6701: Aiding and abetting understatement of tax liability. This is a $1,000 penalty ($10,000 for corporate returns).

Written Advice Standards (Section 10.37)

Section 10.37 of Circular 230 sets the standards for any written advice provided by a practitioner. When providing written advice, a practitioner must:

• Base the advice on reasonable factual and legal assumptions.
• Reasonably consider all relevant facts that the practitioner knows or should know.
• Use reasonable efforts to identify and ascertain the facts relevant to written advice on each Federal tax matter.
• Not rely upon representations, statements, findings, or agreements of the taxpayer or any other person if reliance on them would be unreasonable.
• Relate applicable law and authorities to the relevant facts.
• Not, in evaluating a Federal tax matter, take into account the possibility that a tax return will not be audited or that a matter will not be raised on audit.

Identity Theft and Safeguarding Taxpayer Data

Identity theft is a major concern for the IRS and practitioners. Practitioners must have a written information security plan (WISP) to protect taxpayer data. Key concepts include:

• Identity Protection PIN (IP PIN): A 6-digit number assigned to eligible taxpayers to help prevent the misuse of their SSNs on fraudulent federal income tax returns.
• Data Breach Notification: If a practitioner's data is compromised, they must notify the IRS, state tax agencies, and affected clients.

Domain 2: Representation Before the IRS (~29%)

This domain focuses on the mechanics of representing a taxpayer and the legal framework that supports it.

Authorizations: Form 2848 vs. Form 8821

Understanding the difference between these two forms is critical:

• Form 2848 (Power of Attorney): Authorizes a practitioner to represent the taxpayer and perform acts the taxpayer can perform (signing consents, executing waivers, etc.). Requires the practitioner to be eligible to practice (EA, CPA, Attorney).
• Form 8821 (Tax Information Authorization): Only authorizes the disclosure of tax information to a third party. It does not allow the third party to represent the taxpayer or advocate on their behalf.

The Hierarchy of Legal Authority

When identifying defenses or building a case, you must know which authorities carry the most weight:

1. Internal Revenue Code (IRC): The ultimate statutory authority.
2. Treasury Regulations: The official interpretation of the IRC.
3. Revenue Rulings & Procedures: IRS interpretations applied to specific facts.
4. Private Letter Rulings (PLRs) & Technical Advice Memoranda (TAMs): Only binding for the specific taxpayer they were issued to.

Statute of Limitations

The IRS has specific windows to assess and collect tax:

• General Assessment: 3 years from the later of the due date or the date filed.
• Substantial Omission (25%+ of gross income): 6 years.
• Fraud or No Return: Unlimited.
• Collection: Generally 10 years from the date of assessment (CSED).

Taxpayer Bill of Rights and the Taxpayer Advocate Service

The Taxpayer Bill of Rights (TBOR) outlines 10 fundamental rights that every taxpayer has when dealing with the IRS. These include the right to be informed, the right to quality service, and the right to challenge the IRS's position and be heard.

The Taxpayer Advocate Service (TAS) is an independent organization within the IRS that helps taxpayers resolve problems with the IRS and ensures that taxpayers are treated fairly and know their rights. A taxpayer can seek TAS assistance if they are experiencing significant hardship or if the IRS has not responded to their inquiries within a certain timeframe.

The Appeals Process: 30-Day vs. 90-Day Letters

If a taxpayer disagrees with the findings of an audit, the IRS will issue a 30-day letter (Letter 950 or 915). This letter includes a copy of the examination report and explains the taxpayer's right to appeal. The taxpayer has 30 days to request a conference with the Office of Appeals.

If the taxpayer does not respond to the 30-day letter or if an agreement cannot be reached in Appeals, the IRS will issue a 90-day letter (Statutory Notice of Deficiency). This is the taxpayer's "ticket to Tax Court." The taxpayer has 90 days (150 days if the taxpayer is outside the U.S.) to file a petition with the U.S. Tax Court.

Formal Protest vs. Small Case Request

To request an Appeals conference, a taxpayer must file a written protest. The requirements for the protest depend on the amount of tax, penalties, and interest in dispute:

• Small Case Request: If the total amount for any tax period is $25,000 or less, the taxpayer can use a simplified small case request (Form 12203).
• Formal Protest: If the total amount is more than $25,000, a formal written protest is required. This must include a statement of facts, a statement of law, and a declaration under penalties of perjury.

Domain 3: Specific Areas of Representation (~24%)

This domain covers the "heavy lifting" of representation: collections, audits, and appeals.

The Collection Process: Liens and Levies

A Notice of Federal Tax Lien (NFTL) is a public notice that the government has a legal claim against your property. A Levy is the actual legal seizure of property to satisfy a debt.

Collection Due Process (CDP) vs. Collection Appeals Program (CAP)

Offer in Compromise (OIC)

An OIC allows a taxpayer to settle their tax debt for less than the full amount. There are three grounds:

1. Doubt as to Liability: A legitimate dispute exists as to the amount of the tax debt.
2. Doubt as to Collectibility: The taxpayer's assets and income are less than the full amount of the tax liability (Reasonable Collection Potential).
3. Effective Tax Administration: The tax is correct and could be collected, but doing so would create an economic hardship or be unfair/inequitable.

The Examination Process: Audit Types

The IRS uses several methods to select returns for audit, including the Discriminant Function (DIF) score, which measures the potential for tax change. There are three main types of audits:

• Correspondence Audit: Conducted entirely by mail. Usually involves simple issues like missing documentation for a specific deduction.
• Office Audit: Conducted at an IRS office. The taxpayer or their representative must bring specific records to the meeting.
• Field Audit: Conducted at the taxpayer's home, place of business, or representative's office. These are the most comprehensive audits.

Penalty Abatement and First-Time Abate (FTA)

Taxpayers can request that penalties be removed (abated) if they have "reasonable cause" for failing to comply. Reasonable cause includes things like death, serious illness, or natural disasters.

The First-Time Abate (FTA) is an administrative waiver that allows a taxpayer to remove certain penalties (failure to file, failure to pay, or failure to deposit) if they have a clean compliance history for the previous three years.

Installment Agreements (IA)

If a taxpayer cannot pay their tax debt in full, they can request an installment agreement. There are several types:

• Guaranteed Installment Agreement: If the tax debt is $10,000 or less (excluding interest and penalties), the IRS must accept the agreement if the taxpayer has not failed to file or pay in the last 5 years and can pay the debt within 3 years.
• Streamlined Installment Agreement: For individual tax debts up to $50,000 (including interest and penalties), the IRS will generally accept an agreement that pays the debt within 72 months (or before the CSED). No financial statement (Form 433-A) is required.
• Partial Payment Installment Agreement (PPIA): Allows a taxpayer to pay less than the full amount of the tax debt over the remaining collection period. This requires a full financial disclosure (Form 433-A or 433-B).

Currently Not Collectible (CNC)

If the IRS determines that a taxpayer cannot pay their tax debt and their basic living expenses, they may place the account in Currently Not Collectible (CNC) status. This does not mean the debt is forgiven; interest and penalties continue to accrue, and the IRS will review the taxpayer's financial situation periodically.

Preparer Due Diligence for Refundable Credits (Form 8867)

Preparers who prepare returns claiming the Earned Income Tax Credit (EITC), Child Tax Credit (CTC), Additional Child Tax Credit (ACTC), American Opportunity Tax Credit (AOTC), or Head of Household filing status must meet four due diligence requirements:

1. Complete and submit Form 8867.
2. Complete the applicable worksheets (or equivalent).
3. Meet the knowledge requirement (ask the right questions).
4. Keep records for 3 years.

IRS Structure and the Commissioner

The IRS is a bureau of the Department of the Treasury. The Commissioner of Internal Revenue is appointed by the President for a 5-year term. The IRS is organized into four main operating divisions:

• Wage and Investment (W&I)
• Small Business/Self-Employed (SB/SE)
• Large Business and International (LB&I)
• Tax Exempt and Government Entities (TE/GE)

Summons and Information Requests

The IRS has the authority to issue a Summons to compel a taxpayer or a third party to provide testimony or produce records. A summons must be served in person or left at the last known address. If a taxpayer fails to comply, the IRS can seek enforcement in U.S. District Court.

Taxpayer Confidentiality Privilege (IRC Section 7525)

The same common-law privilege of confidentiality that applies to communications between a taxpayer and an attorney also applies to communications between a taxpayer and a federally authorized tax practitioner (EA or CPA). However, this privilege is limited:

• It only applies to non-criminal tax matters before the IRS or in federal court.
• It does not apply to communications regarding tax shelters.
• It does not apply to the preparation of tax returns.

FOIA and the Centralized Authorization File (CAF)

The Freedom of Information Act (FOIA) allows taxpayers to request copies of their IRS records. The Centralized Authorization File (CAF) is a computerized system that contains information on the authorizations (POAs and TIAs) submitted by taxpayers. When you submit a Form 2848 or 8821, the IRS records the information in the CAF system.

Third-Party Contacts

The IRS must provide taxpayers with advance notice before contacting third parties (such as neighbors, banks, or employers) regarding the determination or collection of the taxpayer's tax liability. The IRS must also provide the taxpayer with a list of third parties contacted upon request.

Bankruptcy and Tax Debt

While most tax debts are not dischargeable in bankruptcy, some income taxes can be discharged if they meet specific criteria (the "3-2-240" rule):

• The return was due at least 3 years before the bankruptcy filing.
• The return was filed at least 2 years before the bankruptcy filing.
• The tax was assessed at least 240 days before the bankruptcy filing.

The IRS E-File Program

The IRS e-file program is the standard for filing tax returns. Key roles and requirements include:

• Electronic Return Originator (ERO): The person or entity that originates the electronic submission of a return.
• Electronic Filing Identification Number (EFIN): A unique number assigned to EROs after a background check.
• Electronic Signatures: Taxpayers can sign their returns electronically using a Personal Identification Number (PIN). Form 8879 is used to authorize the ERO to sign the return on the taxpayer's behalf.

Rejected Return Procedures

If an e-filed return is rejected, the ERO must notify the taxpayer within 24 hours. If the error cannot be corrected and the return cannot be e-filed, the taxpayer must file a paper return. The paper return must be filed by the later of the due date or 10 days after the rejection notice.

Identity Theft and IP PIN

Identity theft is a major concern for the IRS and practitioners. Practitioners must have a written information security plan (WISP) to protect taxpayer data. Key concepts include:

• Identity Protection PIN (IP PIN): A 6-digit number assigned to eligible taxpayers to help prevent the misuse of their SSNs on fraudulent federal income tax returns.
• Data Breach Notification: If a practitioner's data is compromised, they must notify the IRS, state tax agencies, and affected clients.

Practitioner Misconduct and the OPR

The Office of Professional Responsibility (OPR) is responsible for matters related to practitioner misconduct. The OPR can initiate disciplinary proceedings against a practitioner for violations of Circular 230.

Disciplinary Sanctions

Sanctions can include:

• Censure: A public reprimand.
• Suspension: Temporary loss of practice rights.
• Disbarment: Permanent loss of practice rights.
• Monetary Penalties: Can be imposed on the practitioner or the firm.

Refund Check Negotiation

A practitioner may not endorse or otherwise negotiate any check issued to a client by the government in respect of a Federal tax liability. This is a strict rule under Circular 230 Section 10.31.

Practitioner Standards and Tax Advice

Practitioners must adhere to specific standards when providing tax advice and taking positions on tax returns.

Tax Position Standards

A practitioner should not sign a tax return or advise a taxpayer to take a position on a tax return unless:

• The position has a reasonable basis and is adequately disclosed.
• The position has substantial authority.
• The position is more likely than not to be sustained on its merits.

Tax Shelter Reporting

Practitioners must disclose any involvement in "reportable transactions" (tax shelters). Failure to disclose can result in significant penalties for both the taxpayer and the practitioner.

Due Diligence for Refundable Credits (Form 8867)

Preparers who prepare returns claiming the Earned Income Tax Credit (EITC), Child Tax Credit (CTC), Additional Child Tax Credit (ACTC), American Opportunity Tax Credit (AOTC), or Head of Household filing status must meet four due diligence requirements:

1. Complete and submit Form 8867.
2. Complete the applicable worksheets (or equivalent).
3. Meet the knowledge requirement (ask the right questions).
4. Keep records for 3 years.

EITC/CTC/AOTC Common Errors

Common errors include claiming a child who does not meet the residency or relationship tests, or failing to report all income. Practitioners must be vigilant in verifying the information provided by the taxpayer.

Preparer Penalties

Failure to meet the due diligence requirements can result in a penalty of $635 (for 2026) per credit per return.

Recordkeeping Requirements

Practitioners must maintain records of the returns they prepare and the advice they provide.

Record Retention

Under Circular 230, if you return original records to a client, you must retain copies for 3 years. For e-file purposes, certain forms (like Form 8453) must also be retained.

Statute of Limitations

The IRS has specific windows to assess and collect tax:

• General Assessment: 3 years from the later of the due date or the date filed.
• Substantial Omission (25%+ of gross income): 6 years.
• Fraud or No Return: Unlimited.
• Collection: Generally 10 years from the date of assessment (CSED).

Signature Requirements

All tax returns must be signed by the taxpayer and the preparer. For e-filed returns, the taxpayer signs Form 8879, and the preparer signs using their PIN.

Return of Client Records

A practitioner must, at the request of a client, promptly return any and all records of the client that are necessary for the client to comply with their Federal tax obligations. The practitioner may retain copies of the records.

Practitioner Misconduct

Practitioner misconduct can lead to disciplinary action by the OPR.

OPR

The Office of Professional Responsibility (OPR) is responsible for matters related to practitioner misconduct.

Disciplinary Sanctions

Sanctions can include:

• Censure: A public reprimand.
• Suspension: Temporary loss of practice rights.
• Disbarment: Permanent loss of practice rights.
• Monetary Penalties: Can be imposed on the practitioner or the firm.

Preparer Penalties

Beyond Circular 230, the Internal Revenue Code imposes specific penalties on tax return preparers.

Refund Check Negotiation

A practitioner may not endorse or otherwise negotiate any check issued to a client by the government in respect of a Federal tax liability.

Tax Payments and IRS Collections

The IRS has broad powers to collect unpaid taxes.

Installment Agreements

If a taxpayer cannot pay their tax debt in full, they can request an installment agreement.

OIC

An OIC allows a taxpayer to settle their tax debt for less than the full amount.

Liens/Levies

A Notice of Federal Tax Lien (NFTL) is a public notice that the government has a legal claim against your property. A Levy is the actual legal seizure of property to satisfy a debt.

CSED

The Collection Statute Expiration Date (CSED) is generally 10 years from the date of assessment.

Innocent Spouse

Innocent spouse relief seeks relief from a joint liability due to a spouse's errors.

Bankruptcy

While most tax debts are not dischargeable in bankruptcy, some income taxes can be discharged if they meet specific criteria.

Penalties

The IRS imposes various penalties for failure to file, failure to pay, and other violations.

The IRS Examination Process

The IRS uses several methods to select returns for audit.

Audit Selection (DIF)

The Discriminant Function (DIF) score measures the potential for tax change.

Audit Types

There are three main types of audits: correspondence, office, and field.

Information Requests

The IRS can issue information document requests (IDRs) to obtain records from the taxpayer.

Statute of Limitations

The IRS has specific windows to assess and collect tax.

IRS Appeals and the US Tax Court

If a taxpayer disagrees with the IRS's findings, they can appeal.

Appeals Process

The Office of Appeals is an independent organization within the IRS.

90-day Letter

The Statutory Notice of Deficiency is the taxpayer's ticket to Tax Court.

Tax Court

The U.S. Tax Court is the only court where a taxpayer can challenge a tax deficiency without first paying the tax.

Small Case Procedure

The Tax Court has a simplified procedure for cases involving $50,000 or less.

The IRS E-File Program

The IRS e-file program is the standard for filing tax returns.

E-file Requirements

Practitioners who expect to file 11 or more individual income tax returns must e-file.

ERO

The Electronic Return Originator (ERO) is the person or entity that originates the electronic submission of a return.

EFIN

The Electronic Filing Identification Number (EFIN) is required for all EROs.

E-signatures

Taxpayers can sign their returns electronically using a PIN.

Form 8453

Form 8453 is used to transmit paper documents that cannot be e-filed.

Rejection Procedures

If an e-filed return is rejected, the ERO must notify the taxpayer within 24 hours.

Identity Theft and Safeguard Taxpayer Data

Identity theft is a major concern for the IRS and practitioners.

Identity Theft

Identity theft occurs when someone uses a taxpayer's SSN to file a fraudulent return.

Data Safeguarding

Practitioners must have a written information security plan (WISP) to protect taxpayer data.

IP PIN

The Identity Protection PIN (IP PIN) is a 6-digit number assigned to eligible taxpayers.

Cross-Reference: 2026 OBBBA Tax Law Changes

The One Big Beautiful Bill Act (OBBBA) of 2025 introduced several changes that affect the 2026 EA exam.

OBBBA 2026 Changes

Key changes include:

• Personal exemption permanently $0.
• Standard deduction permanently extended.
• SALT cap raised to $40,000 (2025-2029).
• CTC increased to $2,200.
• QBI deduction made permanent.
• Section 179 raised to $2.5M / $4M phase-out.
• Bonus depreciation restored to 100% permanently.
• Energy credits (§25C, §25D, §30D, §45E) terminated.
• 1099-K threshold restored to $20,000/200 transactions.
• Business meals 100% deductible (2025-2026).
• Estate/gift exemption ~$15M.
• Corporate charitable contribution 1% floor.

Domain 4: Filing Process (~16%)

This domain covers the technical requirements for filing returns and maintaining a practice.

E-file Mandate and EROs

Practitioners who expect to file 11 or more individual income tax returns must e-file. An Electronic Return Originator (ERO) is the person or entity that originates the electronic submission of a return.

The Electronic Filing Identification Number (EFIN) is required for all EROs. It is issued by the IRS after a background check and suitability test.

Rejected Returns and Procedures

If an e-filed return is rejected, the ERO must notify the taxpayer within 24 hours. If the error cannot be corrected and the return cannot be e-filed, the taxpayer must file a paper return. The paper return must be filed by the later of the due date or 10 days after the rejection notice.

Record Retention

Under Circular 230, if you return original records to a client, you must retain copies for 3 years. For e-file purposes, certain forms (like Form 8453) must also be retained.

Common Difficulty Areas

Based on candidate feedback, these are the areas where most people lose points:

• Innocent Spouse vs. Injured Spouse: Innocent spouse (Form 8857) seeks relief from a joint liability due to a spouse's errors. Injured spouse (Form 8379) seeks to recover their share of a joint refund that was seized to pay a spouse's separate debt (e.g., child support).
• Written Advice Standards: Circular 230 Section 10.37 sets high standards for written advice. You cannot base advice on the possibility that a return will not be audited.
• Appeals Process: Knowing when a "formal protest" is required (debts over $25,000) versus a "small case request" is a common test point.

Study Strategy for Part 3

To pass Part 3 on your first attempt, follow this roadmap:

1. Read Circular 230: It's only about 50 pages. Read it twice. Focus on Subpart B (Duties and Restrictions) and Subpart C (Sanctions).
2. Master the Forms: Know the purpose of Form 2848, 8821, 433-A, 433-B, 656, 9465, and 12153.
3. Understand the Timeline: Memorize the 30-day letter (preliminary audit findings) vs. the 90-day letter (Notice of Deficiency). Know that you have 90 days to petition the Tax Court.
4. Practice Questions: Because Part 3 is conceptual, you need to see how the IRS phrases "except for" and "which of the following is NOT" questions.

Conclusion

The EA Exam Part 3 is a test of your knowledge of the rules and procedures that govern tax practice. By mastering Circular 230, understanding the collection and appeals processes, and staying up-to-date on the latest legislative changes, you can pass this part of the exam with confidence.

Final Thoughts

Remember to read Circular 230 directly and practice as many questions as possible. Good luck with your studies!

Ready to tackle the other parts? Check out our Part 1 Study Guide and Part 2 Study Guide. For more on recent legislative updates, see our breakdown of the 2026 OBBBA Tax Law Changes.