Circular 230 establishes the professional standards that govern individuals who practice before the IRS. These rules apply to attorneys, CPAs, enrolled agents, and other federally authorized tax practitioners. They outline required conduct, prohibited actions, and expectations for competence, diligence, and integrity.
Furnishing Information
Practitioners must promptly provide records or information requested by the IRS. They must also provide information requested by the Office of Professional Responsibility (OPR) in matters involving possible violations. A practitioner may decline only when the information is privileged or the request is legally questionable, and only when acting in good faith. (“Practitioners must promptly submit records… IRS may exempt… if the information requested is privileged…”)
Competence
Practitioners must have the knowledge, skill, and preparation necessary for the matter at hand. Competence may be achieved through study, consultation, or other appropriate methods. (“Competent practice requires the appropriate level of knowledge, skill, thoroughness, and preparation…”)
Contingent Fees
Contingent fees are generally prohibited for matters before the IRS. Limited exceptions apply for:
- IRS examinations of original returns
- Amended returns filed within 120 days of a notice of examination
- Claims for refund involving statutory interest or penalties
- Judicial proceedings (“A practitioner may not charge a contingent fee… except…”)
Practitioners must also avoid unconscionable fees.
Confidentiality Privilege
The confidentiality privilege that applies to attorney‑client communications extends to federally authorized tax practitioners, but only for noncriminal tax matters. The privilege does not apply to:
- Return preparation
- Tax shelter communications
- Information available from non‑privileged sources
- Communications involving third‑party disclosures (“The confidentiality privilege does not apply to… information disclosed… for the purpose of preparing a return…”)
Client Omissions — Duty to Advise
Practitioners may rely on client information in good faith but must make reasonable inquiries when information appears incorrect or inconsistent. If aware of an error or omission, the practitioner must promptly advise the client of the issue and the consequences of not correcting it. A practitioner may not sign a return containing known errors or advise frivolous positions. (“The practitioner may not ignore the implications… must promptly advise the client…”)
Advertising and Solicitation
Advertising is permitted but must not be false, misleading, or deceptive. Practitioners may not imply IRS endorsement or use the word “certified” in a misleading way. Fee schedules must be honored for at least 30 days after publication. Copies of advertisements must be retained for 36 months. (“A practitioner may not make any advertising statement that is… misleading…”)
Diligence as to Accuracy
Practitioners must exercise due diligence in preparing returns, documents, and oral or written statements. Reliance on another person’s work is allowed only when the practitioner uses reasonable care in selecting and supervising that person. (“A practitioner must exercise due diligence… will be presumed to have exercised due diligence if…”)
Conflict of Interest
A conflict exists when representation of one client is adverse to another or materially limited by other responsibilities. Representation is allowed only if:
- The practitioner reasonably believes competent representation is possible
- The representation is not prohibited by law
- Each affected client provides written consent within 30 days (“A conflict of interest exists if… each affected client waives the conflict in writing…”)
Refund Check Negotiation
Practitioners may not endorse or negotiate a client’s refund check. Violations may result in penalties under IRC §6695(f). A practitioner may deposit a refund check into a taxpayer’s account only with proper authorization. (“A practitioner may not endorse or otherwise negotiate any check issued to a client…”)
Banks that also prepare returns have limited exceptions for cashing or depositing checks.
Performance as a Notary
A practitioner who is a notary may not notarize documents related to a matter in which they have an interest. (“A practitioner… may not engage in any notary activities related to that matter.”)
Prompt Disposition
Practitioners may not cause unreasonable delays in any IRS matter. (“A practitioner may not cause an unreasonable delay…”)
Requirements for Written Advice
Written advice on federal tax matters must be based on:
- Reasonable assumptions
- Consideration of all relevant facts
- Reasonable efforts to verify information
- Proper application of law to facts
- No assumption that the IRS will not audit (“A practitioner providing written advice… must follow certain requirements.”)
Reliance on others is allowed only when reasonable and in good faith.
Practice of Law
Circular 230 does not authorize non‑attorneys to practice law. (“Nothing… may be construed as authorizing those who are not members of the bar to practice law.”)
Assistance From or To Disbarred Persons
Practitioners may not assist or accept assistance from individuals who are suspended or disbarred from practice before the IRS. (“A practitioner may not… accept assistance from… any person who is under disbarment…”)
Return of Client Records
Upon request, practitioners must promptly return client records needed for tax compliance. Fee disputes do not eliminate this obligation. Practitioners may retain copies. (“A practitioner must promptly return any and all records… fee disputes do not relieve…”)
Best Practices for Tax Advisors
Practitioners should:
- Communicate clearly about engagement terms
- Establish relevant facts
- Apply law to facts accurately
- Advise clients on consequences
- Act fairly and with integrity (“Best practices include… communicating clearly… establishing the facts… acting fairly…”)
Recordkeeping
Practitioners must maintain:
- CPE records for 4 years
- Conflict‑of‑interest consents for 36 months
- Advertising copies for 36 months
- Copies of returns or a client list for 3 years (“Practitioners must keep records… for a period of three years…”)
Supervisory Responsibilities
Individuals responsible for a firm’s tax practice must ensure the firm has adequate procedures to maintain Circular 230 compliance. They must act promptly to correct violations. (“Must take reasonable steps to make sure the firm has adequate procedures…”)