Circular 230 authorizes the Secretary of the Treasury, or a delegate, to discipline practitioners who violate professional standards. Sanctions apply when a practitioner is incompetent, disreputable, willfully violates regulations, or knowingly misleads or threatens a client. (“The Secretary… may censure, suspend, or disbar… if the practitioner is shown to be incompetent or disreputable…”)
Disciplinary actions include:
- Censure — a public reprimand
- Suspension — temporary loss of practice rights
- Disbarment — removal of practice rights for at least five years
The Office of Professional Responsibility (OPR) may also impose monetary penalties on individuals or firms, up to the amount of gross income derived from the misconduct. (“The amount of penalty may be up to the amount of gross income derived…”)
Practitioners receive notice, an opportunity for a conference, and the right to a formal proceeding before sanctions are imposed.
If formal discipline is not appropriate, OPR may issue a private reprimand or a cautionary soft letter. (“The ‘soft letter’… warns against non‑compliance…”)
Incompetence and Disreputable Conduct
Circular 230 §10.50 lists conduct that may result in sanction. Examples include:
Criminal Conduct
- Conviction of a federal tax crime
- Conviction of a crime involving dishonesty or breach of trust
- Conviction of a felony that renders the practitioner unfit (“Conviction of any criminal offense under the Federal tax laws…”)
False or Misleading Information
Providing false information to the IRS or any tribunal, including false statements in returns, affidavits, applications, or testimony. (“Giving false or misleading information… knowing the information to be false or misleading.”)
Improper Solicitation
Using false or misleading representations to obtain clients or implying improper influence with the IRS. (“Solicitation of employment… or intimating that the practitioner is able improperly to obtain special consideration…”)
Tax Compliance Failures
- Willful failure to file a federal tax return
- Willful evasion or attempted evasion of tax
- Counseling or assisting illegal tax evasion (“Willfully failing to make a Federal tax return… or participating in any way in evading…”)
Misuse of Client Funds
Misappropriating or failing to remit funds intended for tax payments. (“Misappropriation of… funds received from a client…”)
Improper Influence
Attempting to influence IRS employees through threats, coercion, or gifts. (“Attempting to influence… by threats… or by the bestowing of any gift…”)
Professional Discipline Elsewhere
Being disbarred or suspended as an attorney, CPA, or actuary by another authority. (“Disbarment or suspension… by any duly constituted authority…”)
Assisting Suspended or Disbarred Persons
Helping someone practice before the IRS during their suspension or disbarment. (“Knowingly aiding and abetting another person to practice… during a period of suspension…”)
Contemptuous Conduct
Abusive language, false accusations, or malicious statements in IRS matters. (“Contemptuous conduct… including the use of abusive language…”)
False Opinions or Gross Incompetence
Issuing knowingly false or reckless tax opinions, or showing gross indifference to professional obligations. (“Giving a false opinion… knowingly, recklessly, or through gross incompetence…”)
PTIN and Filing Violations
- Willfully failing to sign returns
- Willfully failing to e‑file when required
- Preparing returns without a valid PTIN (“Willfully preparing… when the practitioner does not possess a current… PTIN…”)
Unauthorized Representation
Representing taxpayers without authorization under Circular 230. (“Willfully representing a taxpayer… unless the practitioner is authorized…”)
Violations Subject to Sanction
Sanctions apply when a practitioner:
- Willfully violates Circular 230
- Recklessly or through gross incompetence violates standards for returns, documents, written advice, or compliance procedures (“The IRS may sanction a practitioner if the practitioner willfully violates… or recklessly or through gross incompetence violates…”)
Supervisory Responsibility
Individuals with principal authority over a firm’s tax practice must ensure the firm has adequate procedures to comply with Circular 230. They may be disciplined if they:
- Fail to implement adequate procedures
- Fail to ensure procedures are followed
- Fail to correct known violations (“Any individual… must take reasonable steps to make sure the firm has adequate procedures…”)
If a firm does not designate a responsible person, the IRS may identify one.