Client Records and Refund Checks
Learn the decision pattern the exam can test, then apply it to a realistic taxpayer fact pattern.
What changes the answer?
A fee dispute does not create unlimited rights to withhold every client document.
A tax-practice scenario
A former client requests source documents while owing fees and asks the EA to deposit a refund check. Address each request separately.
Identify the taxpayer, entity, transaction, and tax period first. Write the controlling tests in order, apply only the relevant facts, and keep the reporting result separate from any planning recommendation.
Do not take this shortcut.
Using possession of records or funds as leverage without checking Circular 230 boundaries.
Turn the rule into recall.
Define record-return and payment-handling procedures in the engagement letter and staff workflow.
- ExplainState the governing distinction without notes.
- ApplyChange one fact in the scenario and predict the new result.
- RetrieveAnswer an unseen question, then review every option.
Official source and scope
This lesson follows the current PSI content outline and uses the IRS reference below for the underlying tax or practice framework. Always confirm current forms, instructions, thresholds, and effective dates before advising a taxpayer.