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Current Circular 230 Requirements
Overview and Authority
Section 330 of title 31 of the United States Code authorizes the Secretary of the Treasury to regulate the practice of representatives of persons before the Treasury Department (Treasury). The Secretary has published regulations governing practice before the IRS in 31 CFR part 10 and reprinted the regulations as Treasury Department Circular No. 230 (Circular 230). 1 Circular 230, which contains current §§10.0 through 10.93 related to governing practice before the IRS, has been amended periodically since it was first published in 1921. 2
Scope of Coverage and Practitioners Subject to Circular 230
Circular 230 include any attorney, certified public accountant, enrolled agent, enrolled retirement plan agent, or enrolled actuary engaged in taxpayer representation or advice-giving activity, as well as any Annual Filing Season Program Record of Completion holder who represents taxpayers and any appraiser engaged in appraising asset values for federal tax purposes. 3 The regulations establish comprehensive standards that govern the conduct of all practitioners who represent taxpayers before the Internal Revenue Service.
The IRS is proposing to require all signing and nonsigning tax return preparers to comply with the standard of conduct in Part 10 of Title 31 of the Code of Federal Regulations and reprinted in Treasury Department Circular 230. 4 This expansion demonstrates the broad reach of Circular 230’s ethical requirements across the tax preparation and representation community.
Standards of Conduct and Professional Duties
Due Diligence Requirements
Individuals subject to Circular 230 must exercise due diligence when performing the following duties. Preparing or assisting in the preparing, approving, and filing of returns, documents, affidavits, and other papers relating to IRS matters. Determining the correctness of oral or written representations made by him or her to the Department of the Treasury. Determining the correctness of oral or written representations made by him or her to clients with reference to any matter administered by the IRS. 3
The due diligence standard extends beyond mere preparation activities to encompass all professional communications and representations made to both the IRS and clients. A presumption that due diligence has been exercised will apply in situations where there has been reliance on the work product of another person if reasonable care was used in engaging, supervising, training, and evaluating the person, taking proper account of the nature of the relationship between the Circular 230 individual and the person. 3
Information Submission and Privilege Considerations
Individuals subject to Circular 230 must promptly submit records or information sought by a proper and lawful request from officers or employees of the IRS, except when the practitioner believes on reasonable grounds and good faith that the information is privileged. 3 This requirement balances the IRS’s need for information with the protection of legitimate privilege claims.
Communications with respect to tax advice between a federally authorized tax practitioner (See Internal Revenue Code (IRC) sec. 7525) and a taxpayer generally are confidential to the same extent that communication would be privileged if it were between a taxpayer and an attorney if the advice relates to: Noncriminal tax matters before the IRS, or Noncriminal tax proceedings brought in federal court by or against the United States. 3
Advisory Duties to Clients
An individual subject to Circular 230 who knows that his or her client has not complied with the revenue laws or has made an error or omission in any return, document, affidavit, or other required paper, has the re ance, error, or omission, and the consequences of the noncompliance, error, or omission. 3 This duty to advise creates an affirmative obligation for practitioners to inform clients of compliance issues and their potential consequences.
Standards for Tax Returns and Client Information
Reliance on Client Information
A practitioner advising a client to take a position on a tax return, document, affidavit or other paper submitted to the Internal Revenue Service, or preparing or signing a tax return as a preparer, generally may rely in good faith without verification upon information furnished by the client. The practitioner may not, however, ignore the implications of information furnished to, or actually known by, the practitioner, and must make reasonable inquiries if the information as furnished appears to be incorrect, inconsistent with an important fact or another factual assumption, or incomplete. 5
This standard establishes a balanced approach that allows practitioners to rely on client-provided information while maintaining professional skepticism and requiring appropriate inquiry when circumstances warrant additional verification.
Solicitation and Fee Communication Requirements
Fee Information Communication Standards
Fee information may be communicated in professional lists, telephone directories, print media, mailings, and electronic mail, facsimile, hand delivered flyers, radio, television, and any other method. The method chosen, however, must not cause the communication to become untruthful, deceptive, or otherwise in violation of this part. 6
A practitioner may not persist in attempting to contact a prospective client if the prospective client has made it known to the practitioner that he or she does not desire to be solicited. 6 This requirement respects potential clients’ wishes regarding unwanted solicitation.
Record Retention Requirements
In the case of radio and television broadcasting, the broadcast must be recorded and the practitioner must retain a recording of the actual transmission. In the case of direct mail and e-commerce communications, the practitioner must retain a copy of the actual communication, along ith li t th d i ti f t h th —– The copy must be retained by the practitioner for a period of at least 36 months from the date of the last transmission or use. 6
Disciplinary Procedures and Sanctions
Grounds for Disciplinary Action
The Secretary of the Treasury, or delegate, after notice and an opportunity for a proceeding, may censure, suspend, or disbar an individual subject to Circular 230 from practice before the IRS if the individual is shown to be incompetent or disreputable, fails to comply with the regulations in Subpart B; or with intent to defraud, willfully and knowingly misleads or threatens a client or prospective client. 3
Procedural Requirements
Under §10.62(c) of the proposed regulations, the Director of the Office of Professional Responsibility must notify the practitioner or appraiser of the time for answering the complaint, which cannot be less than 30 days. When determining the time for answering the complaint, the Director will take into account the amount of the evidence in support of the complaint and the complexity of the charges to allow the practitioner or appraiser time to prepare an adequate answer in defense to the complaint. 7
Section 10.72 of the regulations sets forth the procedures for an administrative hearing pursuant to Circular 230. The Administrative Law Judge should conduct the hearing within 180 days of the time for filing of the answer, absent circumstances requiring that, in the interest of justice, the hearing be held at a later date. 7
Reporting and Compliance Obligations
Violation Reporting Requirements
If the report is made to an officer or employee of the Internal Revenue Service, the officer or employee will make a written report of the suspected violation and submit the report to the office(s) of the Internal Revenue Service responsible for administering or enforcing this part. 8
Record Destruction and Retention
No report made under paragraph (a) or (b) of this section shall be maintained unless retention of the report is permissible under the applicable records control schedule as approved by the National Archives and Records Administration and designated in the Internal Revenue Manual. Reports must be destroyed as soon as permissible under the applicable records control schedule. 8
Continuing Education and Registration Requirements
The proposed Circular 230 regulations require registered tax return preparers to complete fifteen hours of continuing education each registration year. As an interim rule, there is no continuing education requirement for registered tax return preparers or tax return preparers who obtain a provisional PTIN during the first year of registration, which commenced on September 30, 2010. 9
Enforcement and Sanctions Mechanism
Circular 230 is a mechanism to allow sanctions for violating the regulations governing practice before the IRS; it is not a mechanism —– # -24 [*24] to determine whether a power of attorney is valid and confers authority to sign Forms 872. 10 This clarification establishes that Circular 230 serves as an enforcement tool for professional conduct standards rather than as a determinant of representational authority.
The current Circular 230 requirements represent a comprehensive regulatory framework that governs all aspects of practice before the IRS, from initial qualification and ongoing education requirements to detailed standards of professional conduct and disciplinary procedures. These requirements ensure that taxpayers receive competent representation while maintaining the integrity of the federal tax system through rigorous professional standards and accountability mechanisms.
Sources
1 T.D. 9668
2 REG-116610-20
3 IRS – Publication 947 Practice Before the IRS and Power of Attorney
4 IRS – Publication 4832 Internal Revenue Service Return Preparer Review
5 Treas. Circular 230 § 10.34 Standards with respect to tax returns and
6 Treas. Circular 230 § 10.30 Solicitation.
7 REG-122380-02
8 Treas. Circular 230 § 10.52 Violations subject to sanction.
9 Notice 2011-6
10 Dawson U.S. Tax Court Opinions FAB Holdings, LLC
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