Circular 230 & Practitioner Ethics

Circular 230 duties

• Client error or omission → advise the client of consequences; no duty (or right) to tell the Internal Revenue Service (IRS).
• Due diligence; may rely on others if reasonable care used.
• Return client records needed for compliance even if unpaid.
• Conflicts: competent representation + informed written consent of each client (within 30 days; keep 36 months).
• Written advice: reasonable assumptions, all facts; no audit lottery.
• No endorsing refund checks; published fees honored ≥ 30 days.

Contingent fees

Banned for original returns, amended returns, refund claims. Allowed: IRS examination; claim filed within 120 days of an exam notice; interest or penalty-only claims; litigation.

Sanctions (Office of Professional Responsibility)

Censure · suspension · disbarment · monetary penalty. Cannot revoke a certified public accountant (CPA) license.

Statements on Standards for Tax Services (SSTS)

• Positions: substantial authority, or reasonable basis with disclosure.
• Rely on client information in good faith; ask questions if it looks wrong.
• Error: inform client; don't tell authorities without consent.

Preparer basics

Preparer Tax Identification Number (PTIN) · sign · give copy · keep records 3 years.

Exam traps

• A practitioner must promptly provide records the IRS properly requests, unless privileged, and must not unreasonably delay any IRS matter.
• If a client won't correct an error on a prior return, Circular 230 doesn't require withdrawal — but under the SSTS the CPA should consider whether to keep the client.
• In a fee dispute the practitioner must return the client's own records, but may keep their own unpaid work product.