Who is subject to circular 230

OPR's follow-up with the firm in Example 1 shows that the firm's only safeguard to ensure compliance with Circular is to conduct multitiered reviews of returns.

However, this function falls far short of helping to comply with Circular First, the firm should require ethics education each year. Second, while a multitiered review is appropriate, in this example it failed to address the preparers' due-diligence issues. A better structure to avoid liability under Circular would include written policies to question large, unusual, or questionable items on the organizer and to document and retain in records the answers.

In addition to the other policies, the firm should also have safeguards on its billing procedures to ensure it does not use contingent fees. The firm should also have a policy of when and how to return documents to clients. Had the firm owner and tax managers taken reasonable steps for the firm to comply with Circular , then they could make that an affirmative defense against the sanction.

Some firms comply with this section by undergoing a compliance audit of their Circular procedures. These audits review the firm's internal procedures and document where the firm is strong and where it needs to improve in regard to Circular By supplying this type of audit compliance letter to OPR and showing they have taken steps to improve their weaknesses, firms may avoid monetary sanctions.

Although everyone in the firm in Example 1 has committed one or more violations of Circular , can OPR do anything about it? Attorneys, CPAs, or enrolled agents are subject to Circular Thus, they fall under the scope of Circular and can be sanctioned. While the recent decision in Loving 11 struck down the IRS's return preparer registration initiative requirements, this does not necessarily mean that non-CPA preparers in the firm in Example 1 will not be subject to sanctions for violating Circular OPR may take the position that Circular , Section However, this jurisdictional premise has yet to be tested in court.

In addition, non-CPA preparers should remember that as paid tax return preparers, they are still subject to the provisions of Sec.

Example 2: A person who is not an attorney, CPA, or enrolled agent runs a tax debt resolution company with two branches. One branch is an advertising center that handles all client intake calls from all the firm's television advertisements and direct mailings. The other branch handles all tax debt resolution work. The tax debt resolution company is using its advertising branch to make outrageous claims such as settling tax debts for pennies on the dollar to entice clients to sign with the firm.

The people on the advertising side do not fall under Circular jurisdiction, as they are not attorneys, CPAs, or enrolled agents, and they are not preparing any tax documents. They are simply handling the phone calls for the firm's client intake. In addition, if the owner simply runs the firm's day-to-day operations, then he, too, would not be subject to Circular jurisdiction if he is not an attorney, CPA, or enrolled agent.

In fact, the only way for OPR to bring an allegation for false or misleading advertisements against such a firm would be if someone in the tax debt resolution branch knew of the advertising scheme. Then OPR could bring an allegation against a person in that branch, which would then allow OPR to pursue monetary sanctions against the firm under Circular Now that there are violations against each person in the firm in Example 1 and OPR has established jurisdiction over the firm, the next step for OPR is to check the tax compliance of the firm and each person who has violated Circular If the firm or any of the practitioners are late in filing their personal tax returns or have a large balance due on their account, they may face additional sanctions under Circular , Section This includes all types of federal taxes, including tax returns for flowthrough companies, even if no tax is due, and for employment taxes.

The statute of limitation for OPR cases is five years. The statute of limitation for conduct cases has never been tested in court, and, therefore, from an agency perspective, no statute of limitation currently exists for the conduct of tax practitioners.

In Example 1, then, everyone in the firm subject to Circular could be open to sanction for any conduct ever committed. Practically, however, OPR would not likely challenge the five-year statute of limitation for tax conduct and would limit the sanctions to actions in the past five years. OPR can use several types of sanctions against practitioners and firms, including reprimands, censures, deferred disciplinary agreements, suspensions, disbarments, and monetary sanctions.

A reprimand is a private letter to a tax practitioner discussing his or her inappropriate conduct. The reprimand is not shared with any inside or outside parties. It remains part of the practitioner's file in case of future Circular malfeasance. A censure is a public reprimand that discloses in the Internal Revenue Bulletin the practitioner's name, location, and section of Circular the practitioner violated. In a deferred disciplinary agreement, the practitioner promises OPR that he or she will remain compliant with Circular for a set time.

If the practitioner remains compliant, the case is closed. If the practitioner again violates Circular within the time provided under the agreement, he or she will be suspended automatically. These agreements are more common in tax compliance cases to allow practitioners a chance to become and remain compliant. Suspensions stop practitioners from practicing before the IRS for the suspension period.

After the suspension period, the practitioner's practice before the IRS may be subject to conditions. Typically, in tax compliance cases, for each year practitioners fail to file a tax return, they can expect a one-year suspension, absent mitigating factors. However, a practitioner with five or more years of unfiled tax returns is almost always automatically disbarred.

If a practitioner is disbarred, he or she will not be allowed to practice before the IRS unless and until authorized by the IRS. Disbarred practitioners may petition for reinstatement after five years.

OPR's policy is to not allow practitioners to buy their way out of trouble by satisfying a monetary sanction to avoid one of the nonmonetary sanctions. In Example 2, if OPR suspends a tax practitioner employed by the firm for knowing of the false advertising, the firm will most likely simply fire the practitioner, hire a new one, and continue to operate as it always had. One would hope that with the IRS suspending enough practitioners, people would get the hint not to work there. However, taxpayers are being hurt until that happens or the firm changes.

This means the tax debt resolution firm's actions perhaps could be changed only by a monetary sanction. Monetary sanctions can be imposed up to an amount equal to the gross receipts derived from the sanctioned conduct. In Example 1, sanctions likely apply against the preparers if they are subject to Circular , the tax managers, and the firm owner. The preparers have violated Sections Due diligence is the biggest concern for the preparers, as they did not have much say in the firm's advertising or its procedures.

As such, the preparers would probably be censured, as theirs is easily correctable conduct that may not have affected the tax system much, unless OPR has prior similar behavior on file. Under Circular , power of attorney authorizations Form authorization are reserved for individuals authorized to practice before the IRS. These professionals mainly fall into these categories:.

The AFSP designation has limited representation rights. If your tax preparer has the AFSP designation he or she can represent you during an audit of a return he or she prepared and signed. However, he or she cannot represent you for issues regarding an unpaid balance or before the IRS Office of Appeals. Learn about the benefits of obtaining a tax professional. Requesting your tax transcripts is the best way to research your IRS tax account. You can also authorize your tax pro to communicate with the IRS for you.

Title 31 United State Code section was first published as the Horse Act of which granted the Secretary of the Treasury the authority to regulate agents representing claimants before the Treasury Department. Guidance was provided to these agents by the Treasury in the form of circulars. Today, Circular , Regulations Governing Practice Before the Internal Revenue Service, contains rules governing the recognition of attorneys, certified public accountants, enrolled agents, enrolled retirement plan agents, registered tax return preparers, and other persons representing taxpayers before the Internal Revenue Service.

It is divided into several parts:. The Office of Professional Responsibility OPR is responsible for matters related to practitioner conduct and is responsible for discipline, including disciplinary proceedings and sanctions. Circular governs federal tax practice standards, which are administered by OPR.