Circular 230 & Practitioner Ethics
Internal Revenue Service (IRS) rules for practitioners under Circular 230, professional tax standards, fees, and conflicts of interest.
By SimplyCPA · Updated 27 September 2026
Medium 50 minArea I: Ethics, Professional Responsibilities & Federal Tax Procedures
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Why this topic matters
Area I of Taxation and Regulation (REG) — Ethics, Professional Responsibilities and Federal Tax Procedures — is 10–20% of the section. A large part covers the rules for practice before the Internal Revenue Service (IRS): Treasury Department Circular No. 230, the American Institute of Certified Public Accountants (AICPA) Statements on Standards for Tax Services (SSTSs), and the Internal Revenue Code (IRC) preparer rules. Questions ask what a practitioner must, may, or may not do in a given situation.
Who is covered by Circular 230
- Practitioners: attorneys, certified public accountants (CPAs), enrolled agents, enrolled retirement plan agents, and enrolled actuaries.
- Practice before the IRS includes preparing and filing documents, communicating with the IRS for a client, representing clients at conferences and hearings, and giving written advice with potential for tax avoidance or evasion.
- Unenrolled return preparers may represent clients only in limited circumstances (for example, under the Annual Filing Season Program for returns they prepared).
- The Office of Professional Responsibility (OPR) administers and enforces Circular 230.
Duties and restrictions
| Section | Rule |
|---|---|
| Information to the IRS (§10.20) | Promptly provide records and information requested by the IRS unless the practitioner believes in good faith the information is privileged |
| Knowledge of client's omission (§10.21) | If the practitioner knows a client has not complied with the law or made an error or omission on a return, the practitioner must promptly advise the client of the noncompliance and its consequences. There is no duty to notify the IRS — and doing so without consent would breach confidentiality. |
| Due diligence (§10.22) | Exercise due diligence in preparing returns and in representations to the IRS and clients. A practitioner may rely in good faith on the work of others if reasonable care was used in engaging, supervising, training, and evaluating them. |
| Prompt disposition (§10.23) | No unreasonable delay in matters before the IRS |
| Assistance from disbarred persons (§10.24) | May not knowingly accept assistance from disbarred or suspended persons |
| Former government employees (§10.25) | Restrictions on representing clients in matters they worked on at the government |
| Return of client records (§10.28) | Must return client records necessary for the client to comply with federal tax obligations on request, even if fees are unpaid. The practitioner may keep copies. Returns and other documents the practitioner prepared may be withheld pending payment if state law allows. |
| Conflicting interests (§10.29) | Allowed only if the practitioner reasonably believes they can provide competent and diligent representation to each client, it isn't prohibited by law, and each affected client gives informed consent, confirmed in writing within 30 days. Keep the consents for 36 months. |
| Solicitation and advertising (§10.30) | No false, fraudulent, coercive, misleading, or deceptive statements. Fee schedules may be published and must be honored for at least 30 days. Enrolled agents may not use the term "certified" or imply IRS employment. |
| Negotiation of taxpayer checks (§10.31) | May not endorse or negotiate a client's federal tax refund check |
| Fees (§10.27) | No unconscionable fees. Contingent fees are prohibited for preparing an original return, an amended return, or a refund claim, except: services in connection with an IRS examination of an original return; an amended return or refund claim filed within 120 days after receiving a written notice of examination; a claim solely for statutory interest or penalties; and judicial proceedings. |
Standards for returns and advice
- Tax return positions (§10.34): a practitioner may not sign a return with a position that lacks a reasonable basis, is an unreasonable position under the preparer penalty rules, or is a willful or reckless understatement. The practitioner must advise the client of potential penalties and how disclosure can avoid them.
- Competence (§10.35): the knowledge, skill, thoroughness, and preparation needed for the matter — which may be gained by consulting experts.
- Written advice (§10.37): base it on reasonable factual and legal assumptions; consider all relevant facts the practitioner knows or should know; use reasonable efforts to identify facts; don't rely unreasonably on representations of the client or others; relate the law to the facts; and never consider the likelihood that a return will not be audited or an issue not raised (the "audit lottery").
- Firms must have procedures to ensure compliance (§10.36).
Sanctions
- For incompetence, disreputable conduct, or willful violations, the OPR may censure (public reprimand), suspend, or disbar a practitioner from practice before the IRS, and impose monetary penalties (up to the gross income derived from the conduct) on the practitioner and the firm.
- Disreputable conduct includes conviction of tax crimes or felonies involving dishonesty, giving false information to the IRS, willful failure to file one's own returns, misappropriating client funds, and disclosing return information without authorization.
- Circular 230 cannot revoke a CPA license — only a state board can.
AICPA Statements on Standards for Tax Services
| SSTS topic | Key rule |
|---|---|
| Tax return positions | Recommend a position only with substantial authority (or a reasonable basis if disclosed), consistent with the standards of the applicable taxing authority |
| Answers to questions on returns | Make a reasonable effort to get answers; a missing answer may be acceptable if explained |
| Procedural aspects | May rely in good faith on client information without verification, but make reasonable inquiries if it appears incorrect or incomplete |
| Use of estimates | Allowed when records are unavailable and estimates are reasonable; presentation should not imply greater accuracy |
| Prior-year position departures | An administrative settlement in a prior year does not bind the member for later years |
| Knowledge of error | Inform the client promptly and recommend corrective action; do not notify the taxing authority without permission; consider whether to continue the relationship |
| Form and content of advice | Use professional judgment; no obligation to update advice for later law changes unless agreed |
Preparer rules under the Internal Revenue Code
- A tax return preparer must have a Preparer Tax Identification Number (PTIN), sign the return, give the taxpayer a copy, and keep copies or a list of returns for 3 years.
- Preparers must not disclose or use taxpayer information except for preparing returns (penalties and criminal sanctions apply); exceptions include peer review, court orders, and quality reviews.
- Penalty rules for understatements are covered in the Federal Tax Procedures & Penalties topic.
How it is tested
- Decide whether a fee arrangement is permitted.
- Apply the duties when a client's error is discovered.
- Identify when conflicting interests can be represented.
- Recognize sanctions and disreputable conduct.
EXAM TIP: When a practitioner discovers a client's error, the duty is to advise the client — never to tell the IRS. The practitioner may withdraw if the client refuses to correct it, but must not continue to prepare returns that repeat the error.