Simone Lawson
Circular 230, also known as the Regulations Governing Practice before the Internal Revenue Service, outlines the rules and standards that tax professionals must adhere to when practising before the IRS. The Office of Professional Responsibility (OPR) is responsible for interpreting and enforcing these regulations, ensuring that practitioners possess the necessary qualifications, competency, and ethical standards to represent taxpayers effectively. Practice before the IRS encompasses a range of activities, including preparing and filing documents, corresponding with the IRS, providing tax advice, and representing clients in various proceedings. The OPR maintains oversight of practitioner conduct and has the authority to impose sanctions for violations of Circular 230's requirements, including suspension, disbarment, and monetary penalties.
| Characteristics | Values |
|---|---|
| Definition of "practice" | All matters involving a presentation to the IRS relating to a taxpayer's rights, privileges, or liabilities under laws or regulations administered by the IRS |
| Who may practice | Attorneys, certified public accountants (CPAs), enrolled agents, enrolled retirement plan agents, enrolled actuaries, and others |
| Duties and restrictions | Preparing and filing documents, corresponding and communicating with the IRS, giving oral or written tax advice, representing a client at conferences, hearings, and meetings with the IRS |
| Sanctions | Censure, suspension from practice, disbarment from practice, monetary penalties, disqualification as an appraiser |
| Disciplinary proceedings | Instituted by the Office of Professional Responsibility (OPR), which has oversight authority over practitioner conduct and discipline |
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What You'll Learn
Who can practice before the IRS
Circular 230 sets out the rules for who can practice before the IRS. According to the IRS, "practice before the IRS" 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 or filing documents, corresponding and communicating with the IRS, rendering written tax advice, and representing a client at conferences, hearings, and meetings.
Those who can practice before the IRS include attorneys, certified public accountants (CPAs), enrolled agents, enrolled retirement plan agents, and enrolled actuaries. These professionals must be in good standing with their state licensing boards and interact with tax administration.
The Office of Professional Responsibility (OPR) is the governing body that interprets and applies Circular 230 rules and regulations. The OPR ensures that tax professionals adhere to practice standards and follow the relevant laws and regulations. The OPR also has exclusive oversight for practitioner conduct and discipline, including the authority to institute disciplinary proceedings and pursue sanctions.
In addition to the professionals mentioned above, individuals who are unenrolled and unlicensed as attorneys, CPAs, or enrolled agents may represent taxpayers before IRS examination, customer service, and similar personnel, including the Taxpayer Advocate Service, in connection with tax returns they prepared and signed. This is known as the Annual Filing Season Program (AFSP), and these individuals have limited representation rights.
The Return Preparer Office (RPO) is responsible for the policies and administration of the enrolled practitioner program and processes applications for enrollment.
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Duties and restrictions of practitioners
The Office of Professional Responsibility (OPR) is the governing body that interprets and applies Circular 230 rules and regulations. The OPR has exclusive oversight for practitioner conduct and discipline. It ensures that tax professionals adhere to practice standards and follow the Internal Revenue Code, Treasury regulations, and other laws as they apply to an individual's qualifications, competency, and ethical and professional fitness to practice before the IRS.
Practitioners are not to sign a tax return as a preparer if they determine that the tax return contains a position that doesn't have a realistic possibility of being sustained on its merits, unless the position is not frivolous and it is adequately disclosed to the IRS. In addition, the practitioner is not allowed to make inaccurate or unreasonable entries or omissions on tax returns, financial statements, and other documents. They must also exercise due diligence and not willfully attempt to evade the payment or assessment of any federal tax.
If a practitioner engages in misconduct, they may be subject to suspension of practice privileges, disbarment, or monetary penalties. Suspension can be for a fixed term or indefinitely, and disbarment restricts any practice before the IRS for a minimum of five years. Monetary penalties may be imposed on top of censure, suspension, or disbarment, and can be up to the amount of gross income derived from the conduct giving rise to the penalty.
Practitioners who have been suspended or disbarred are not allowed to represent clients before the IRS until they are reinstated by the OPR. A disbarred practitioner may not petition for reinstatement for five years. A suspended or disbarred practitioner may, however, submit a Form 8821, Tax Information Authorization, to authorize them to obtain copies of the taxpayer's tax returns and transcripts of the account from the IRS. They are also allowed to accompany the taxpayer at an IRS conference or meeting but only to respond to questions and provide factual information and documents.
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Sanctions and disciplinary proceedings
The Office of Professional Responsibility (OPR) is responsible for interpreting and applying the Regulations Governing Practice before the Internal Revenue Service (IRS) as outlined in Circular 230. The OPR has the authority to institute disciplinary proceedings and pursue sanctions for non-compliance with the standards and prohibitions set forth in Circular 230.
Circular 230 outlines the duties and restrictions for those practising before the IRS, including attorneys, certified public accountants (CPAs), and enrolled agents. It also establishes ethical standards and conduct provisions that practitioners must adhere to. Willful misconduct, such as the intentional violation of a known legal duty, is prohibited and can result in disciplinary action.
When a violation of Circular 230 is suspected, the OPR director will first notify the practitioner of the suspected misconduct and provide an opportunity to respond and present supporting evidence. If the matter cannot be resolved through a proposed resolution or a "soft letter", a formal disciplinary proceeding may be initiated before an administrative law judge (ALJ). The practitioner is entitled to due process throughout the investigation and disciplinary process.
Sanctions for violations of Circular 230 can include censuring, suspending, or disbarring the practitioner from practice before the IRS. Monetary penalties may also be imposed, up to the amount of gross income derived from the conduct leading to the penalty. These sanctions can be appealed to the Secretary of the Treasury and subsequently to the federal courts if either party is dissatisfied with the decision.
In summary, Circular 230 establishes the rules and ethical standards for practitioners before the IRS, and the OPR is responsible for ensuring compliance through disciplinary proceedings and sanctions when necessary. Practitioners have certain rights and protections during the disciplinary process, and sanctions can have significant consequences for their ability to practise before the IRS.
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Qualifications, competency, and fitness to practice
The Office of Professional Responsibility (OPR) is responsible for interpreting and applying Circular 230, which governs practice before the Internal Revenue Service (IRS). The OPR ensures that tax professionals adhere to practice standards and follow the relevant laws and regulations, including those pertaining to qualifications, competency, and fitness to practice.
Circular 230 defines "practice" and outlines who may practice before the IRS. It also describes the duties and restrictions of practitioners while practising before the agency. "Practice before the IRS" encompasses all matters connected with a presentation to the IRS or its officers, relating to a taxpayer's rights, privileges, or liabilities under laws or regulations administered by the IRS. This includes preparing and filing documents, corresponding and communicating with the IRS, rendering written tax advice, and representing clients at conferences, hearings, and meetings.
To ensure qualifications and competency, the OPR oversees the conduct of practitioners and enforces disciplinary proceedings and sanctions when necessary. The OPR also conducts extensive education and outreach to practitioners and tax professionals. The Return Preparer Office (RPO), under the OPR, operates the IRS program for enrolling individuals as agents, retirement plan agents, and actuaries. The RPO processes applications, administers examinations, oversees compliance with continuing education requirements, and approves applications for recognised continuing education providers.
In addition to qualifications and competency, Circular 230 emphasises the importance of character and reputation in providing valuable service to clients. The underlying issue in Circular 230 investigations and proceedings is the individual's ""fitness to practice" before the IRS. Sanctions for violations can include censure, suspension, disbarment, and monetary penalties. These sanctions ensure that practitioners maintain the necessary qualifications, competency, and ethical standards to represent taxpayers before the IRS effectively and responsibly.
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Tax return preparation
Circular 230 provides regulations and guidance on practicing before the IRS. It covers attorneys, certified public accountants, enrolled agents, and other tax professionals subject to the jurisdiction of the Office of Professional Responsibility (OPR). The OPR enforces consistent standards of competence, integrity, and conduct for these professionals.
Practice before the IRS encompasses all matters connected with presentations to the IRS regarding a taxpayer's rights, privileges, or liabilities under laws or regulations administered by the IRS. This includes, but is not limited to, preparing or filing documents, corresponding and communicating with the IRS, rendering written tax advice, and representing a client during conferences, hearings, and meetings.
While tax return preparation itself falls outside the scope of "practice," related activities may still be considered part of the practice. For instance, corresponding and communicating with the IRS on behalf of a taxpayer is included in the definition of practice. Additionally, only certain professionals, such as CPAs, enrolled agents, and attorneys, can represent taxpayers before any department of the IRS.
It is worth noting that individuals authorized to practice before the IRS can grant power of attorney authorizations (Form 2848 authorization) under Circular 230. This allows them to act on behalf of taxpayers in various proceedings and interactions with the IRS.
In summary, while tax return preparation is not specifically mentioned as "practice" in Circular 230, it exists within the broader context of practicing before the IRS. The regulations outlined in Circular 230 help maintain the standards of competence, integrity, and conduct expected of professionals dealing with the IRS.
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Frequently asked questions
The main objective of Circular 230 is to ensure that those practising before the IRS on behalf of taxpayers have the necessary qualifications, competency, and ethical and professional fitness to provide valuable service to their clients.
Circular 230 applies to attorneys, certified public accountants, enrolled agents, enrolled retirement plan agents, enrolled actuaries, and others who are subject to the Office of Professional Responsibility's (OPR) jurisdiction.
"Practice before the IRS" 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 and filing documents, corresponding and communicating with the IRS, rendering written tax advice, and representing a client at conferences, hearings, and meetings.
Practitioners who violate Circular 230 may face sanctions, including censure, suspension from practice, disbarment, monetary penalties, and disqualification as an appraiser. Suspension and disbarment can be for a fixed term or indefinite, with the possibility of reinstatement after a certain period.
