SECTION -1 PRACTICES & PROCEDURES

Chapter – 3 Circular -230

1. Who is a Tax Return Preparer?

INCLUDES EXCLUDES
 Any person who prepares for
 Just Furnishing Information
Compensation
 Employs one or more persons to  Prepares a Tax Return for Employer or
prepare for Compensation Officer of the Employer
 Any Tax Return or Substantial
portion of Tax Return showing Due  Charges No Compensation
or Refund
 Prepares Tax Return as Fiduciary for any
person
 Prepares Tax Return as Volunteer
 Prepares Tax Return in response to Wavier
of Restriction or Notice of Deficiency
 Someone who does not have PTIN

2. What is Preparing?
A.
 Someone who makes Factual Inquires relating to Taxpayer on the matters
related to Tax Return Preparation
 He takes a Position on the Tax Return:
o More than 50%
o Substantial Authority (one in three)
 He Takes Ordinary and Necessary steps to comply with the Tax Laws

3. What are Conflicting Interest?

A.
 It is a situation wherein Representing a client may be directly adverse to
another client.
 The tax practitioner can always represent the another client as long as there are
No Significant Risks to the current client/former client/third party.
 The current client should give written confirmation within 30 days of the
practitioner notifying this matter
 The representation must not be prohibited by law.
 SECTION -1 PRACTICES & PROCEDURES

4. Should a Practitioner return the records to the Taxpayer or Client?

A.
 A practitioner must promptly return Any and All Client Records to the Client.
 However, he may Retain copies of records based on which he prepared former
Tax Returns.
 Records include all documents related to Tax Preparation.
 The practitioner Cannot Withhold Records if it is pending Clients performance
of Contractual obligations.
Eg:- Payment of Fees, Performing of Service etc.

5. How should a Practitioner charge the Fees?

A.
 A Practitioner may not charge Contingent Fees/Unconscionable Fees unless
it is:
o In Connection with a Judicial Proceeding (or)
o It’s a claim for Refund (or)
o An examination by IRS
 Contingent Fees include Fees based on:
o Percentage of Refund
o Taxes Saved/Planning Benefit
o Specific Result
o Fees based on whether or not a position on Tax Return is challenged by
IRS.

6. Can a practitioner act as notary?

A.
 A Practitioner may not take acknowledgements or act as notary if:
o The matter is with IRS
o The Practitioner is engaged with the client

7. Can a practitioner rely upon the work of another person?

A.
 YES, If the Practitioner used reasonable care in:
o Engaging or Evaluating
o Supervising
o Training
 SECTION -1 PRACTICES & PROCEDURES
8. Should Practitioner rely only on the information given by the
taxpayer?
A.
 The General rule is that the practitioner must rely on the information given by
the Taxpayer and not Investigate.
 The Practitioner must consider all relevant facts and Circumstances they can
think of and not simply rely on Client Representations
 The Practitioner may also consult other experts who have knowledge or skill or
thoroughness or preparation in this area.

9. What Best Practices must a Preparer follow?

A.
 The Preparer must not Sign a Tax Return or Advice the Client to take a
position that:
o Lacks Reasonable Basis
o Contains Unreasonable Position
o Makes a willful attempt to Understate the Tax Liability
 The preparer must advice client of Potential Penalties in case of Non-
Compliance of Tax Laws
 The preparer must rely upon information provided by the client but Not
Investigate
 The preparer must have best practices in place:
o Provide highest quality of representation
o Communicate clearly with the client
o Establish relevant facts
o Make reasonable assumptions
o Act fairly
o Practice Integrity

10. How can a Practitioner Solicit Business or Clients?

A.
 The Preparer must not use False or Fraudulent or Coercive Statement with
respect to IRS matter and Solicit business.
 The preparer Must publish fees and abide by the fees for at least 30 days
 The preparer must retain Communication with the clients including records for
at least 36 months, Including Advertising information.
 SECTION -1 PRACTICES & PROCEDURES
11. When can a Practitioner charge Contingent Fees?
A.
 For services related to IRS Examination or Challenge of:
o Original Tax Return
o Amended Tax Return (filed within 120 days of Taxpayer receiving notice
of examination)
 For Services related to:
o Claim for Credit or Refund on original Tax Return
o In determination of Statutory Interest or Penalties Levied by the IRS
o In Connection with a Judicial Proceeding.

Additional Points/ Updations to be included:-

12) Explain about the Rules for Circular 230: -

A)

I. Reliance on others: -

 Except as provided in Sections 10.34 and 10.37, a practitioner will be

presumed to have exercised due diligence for purposes of this section if
the practitioner relies on the work product of another person and the
practitioner used reasonable care in

 engaging,
 supervising,
 training, and
 evaluating the person,
 Taking proper account of the nature of the relationship between
the practitioner and the person.

II. Diligence as to accuracy:- [Circular 230, Section 10.22(b) Revised June 12, 2014]

 A practitioner is required to advise the taxpayer of the error.

 The practitioner is not required to "advise the taxpayer to correct the
error."
 Ultimately, it is the client's responsibility to decide whether to correct
the error or not.
 SECTION -1 PRACTICES & PROCEDURES
III. Duty to advise:-

 A practitioner who, having been retained by a client with respect to a

matter administered by the IRS, knows that the client has not complied
with the revenue laws of the United States or has made an error in or
an omission from any return, document, affidavit, or other papers which
the client is required by the revenue laws of the United States to execute,
must ADVISE the client promptly of the fact of such noncompliance,
error, or omission.
 The practitioner must also advise the client of the CONSEQUENCES as
provided under the Code and regulations of the:-

 Noncompliance,
 Error, or
 Omission.

13) What are the Rights of a Practitioner?

A) A practitioner must not knowingly, directly or indirectly do any of the following: -

 Employ or accept assistance from any person who is under disbarment or

suspension from practice before the IRS if the assistance relates to a matter or
matters constituting practice before the IRS.

 Accept employment as:-

 associate,
 partner,
 correspondent, or
 subagent from, or
 share fees with any such person.

 Accept assistance from any former government employment where provisions of

Treasury Department Circular 230 or any federal law would be violated.

14) Write about Circular 230, Section 10.30 Solicitation?

A)

 Circular 230, Section 10.30 states that a practitioner may not make,
directly or indirectly, an uninvited solicitation of employment in
matters related to the IRS if the solicitation violates federal or state law
or other applicable rule
 (e.g., attorneys are precluded from making a solicitation that is
prohibited by conduct rules applicable to all attorneys in their state(s) of
 SECTION -1 PRACTICES & PROCEDURES
licensure).

 Solicitation includes, but is not limited to, in-person contacts and telephone
communications.

These restrictions DO NOT APPLY TO the following:-

1. Seeking new business from an existing or former client in a related matter

2. Communications with family members

3. Making the availability of professional services known to other practitioners, so long

as the person or firm contacted is not a potential client

4. Solicitation by mailings

5. Non-coercive in-person solicitation by those eligible to practice before the IRS while
acting as an employee, member, or officer of an exempt organization listed in Sections
501(c)(3) or (4) of the IRC of 1954 (26 U.S.C.)

15) What are the Fees that an Enrolled agent is Permitted to Publish?

A)

 Individuals eligible to practice before the IRS may publish the availability of a
written schedule of fees.
 They may disseminate the following fee information:

i. Fixed fees for specific routine services

ii. Hourly rates
iii. Range of fees for particular services
iv. Fee charged for an initial consultation
 SECTION -1 PRACTICES & PROCEDURES
16) What establishes the Competency of a Practitioner to engage in practice
before the IRS?
A)

A practitioner must possess the necessary competence to engage in practice before the
IRS:-

 Competent Practice requires the

 appropriate level of knowledge,

 skill,
 thoroughness, and
 preparation necessary for the matter for which the practitioner is engaged.

 A practitioner may become competent for the matter for which the practitioner has
been engaged through various methods,

 such as consulting with experts in the relevant area or

 studying the relevant law.

17) Can a Practitioner be imposed with Monetary Penalty?

A)

 The American Jobs Creation Act of 2004 introduced Monetary Practitioner

Penalties on conduct occurring after October 22, 2004.

 In general, the Secretary of the Treasury, after notice and an opportunity for a
proceeding, may impose a monetary penalty on any practitioner who engages in
conduct subject to sanction Under the rules in Circular 230.

a) The amount of the penalty cannot exceed the gross income derived (or to be derived)
from the conduct giving rise to the penalty.

b) Any monetary penalty imposed on a practitioner may be in addition to or in lieu of

any suspension, disbarment or censure and may be in addition to a penalty imposed
on an employer, firm or other entity. This applies to prohibited conduct that occurs
after October 22, 2004.

c) Prior to 2004, practitioners who violated the Circular 230 rules were subject to

 censure,
 suspension or
 disbarment,
 but not monetary penalties.
 SECTION -1 PRACTICES & PROCEDURES

18) Can a practitioner sign a tax return as a preparer even if the

practitioner determines that the tax return contains a position that does
not have a realistic possibility of being sustained on its merits?

A)

Circular 230, Sec. 10.34 Standards for advising with respect to tax return positions and
for preparing or signing tax returns states:-

 A practitioner may not sign a tax return as a preparer if the practitioner

determines that the tax return contains a position that does not have a realistic
possibility of being sustained on its merits (the realistic possibility standard)
UNLESS the position is not frivolous and is adequately disclosed to the IRS.

 A practitioner advising a client to take a position on a tax return, or preparing

or signing a tax return as a preparer, must inform the client of the penalties
reasonably likely to apply to the client with respect to the position advised,
prepared, or reported.

 The practitioner also must inform the client of any opportunity to avoid any such
penalty by disclosure, if relevant, and of the requirements for adequate
disclosure.

 A practitioner advising a client to take a position on a tax return, or

preparing or signing a tax return as a preparer, generally may rely in good
faith without verification upon information furnished by the client.

 The practitioner may NOT, however, ignore the implications of information

furnished to, or actually known by, the practitioner, and must make
reasonable inquiries if the information as furnished appears to be
incorrect, inconsistent with an important fact or another factual
assumption, or information.
 SECTION -1 PRACTICES & PROCEDURES
19) A practitioner may be sanctioned under Section 10.50 for
incompetence and disreputable conduct. What are the reason for sanction
under this section?

A)

Incompetence and disreputable conduct for which a practitioner may be sanctioned

under Sec. 10.50 includes, but is not limited to:-

1. Conviction of any criminal offense under the federal tax laws

2. Conviction of any criminal offense involving dishonesty or breach of trust

3. Conviction of any Felony under federal or state law for which the conduct
involved renders the practitioner unfit to practice before the IRS

4. Contemptuous conduct in connection with practice before the IRS, including the
use of abusive language, knowing them to be false, or circulating or publishing
malicious or libelous matter

5. Willfully failing to sign a tax return prepared by the practitioner when the
practitioner's signature is required by federal tax laws unless the failure is due
to reasonable cause and not due to willful neglect.

20) The Office of Professional Responsibility can censure, suspend or

disbar a practitioner from practice before the Internal Revenue Service for
incompetence and/or disreputable conduct. What are considered as
disreputable conduct?

A)

Incompetence and disreputable conduct for which a practitioner may be censured,

suspended or disbarred from practice before the IRS includes, but is not limited to:
 Conviction of any criminal offense under the revenue laws of the United States
 Conviction of any criminal offense involving dishonesty or breach of trust

 Giving false or misleading information, or participating in any way in the

giving of false or misleading information to the Department of the Treasury or
any officer or employee thereof, or to any tribunal authorized to Pass upon
Federal tax matters, in connection with any matter pending or likely to be
pending before them, knowing such information to be false or misleading.
 SECTION -1 PRACTICES & PROCEDURES
21) A proceeding for censure, suspension, or disbarment of a practitioner
is instituted by the filing of a complaint by the Director of the Office of
Professional Responsibility. What must be included in the contents of the
complaint?

A)

The complaint would NOT include the date of the hearing. It may not get to this point.
Failure to file an answer within the time prescribed constitutes an admission of the
allegations of the complaint and a WAIVER of hearing, and the Administrative Law
Judge may make the decision by default WITHOUT a hearing or further procedure.

The following are rules under Section 10.62 CONTENTS OF COMPLAINT: -

 CHARGES:-

 A compliant must name the respondent, provide a clear and concise

description of the facts and law that constitute the basis for the
proceeding, and be signed by the Director of the Office of Professional
Responsibility or a person representing the Director.

 A complaint is sufficient if it fairly informs the respondent of the charges

brought so that he is able to prepare a defense.

 SPECIFICATION OF SANCTION:-

 The complaint must specify the sanction sought by the Director of the
Office of Professional Responsibility against the practitioner or
appraiser.

 DEMAND FOR ANSWER:-

 The Director of the Office of Professional Responsibility must, in the

complaint OR in a SEPARATE paper attached to the complaint, notify the
respondent of the time for answering the complaint, the time for which
may NOT be less than 30 DAYS from the date of service of the complaint,
the name and address of the Administrative Law Judge with whom the
answer must be filed, the name and address of the person representing
the Director to whom a copy of the answer must be served, and a decision
by default may be rendered against the respondent in the event an answer
is not filed as required.

22) An Enrolled Agent, received a complaint from the Office of Professional

Responsibility for disreputable conduct. What are NOT required to be listed
in the complaint?
 SECTION -1 PRACTICES & PROCEDURES
A)

(Circular 230, Section 10.62).

 A complaint MUST notify the respondent of the time for answering the
complaint, the time for which may not be less than 30 days from the date of
service of the complaint, the name and address of the Administrative Law
Judge with whom the answer must be filed, the name and address of the
person representing the Internal Revenue Service to whom a copy of the answer
must be served, and that a decision by default may be rendered against the
respondent in the event an answer is not filed as required.

 The complaint must specify the sanction sought against the practitioner or
appraiser.

 If the sanction sought is a suspension, the duration of the suspension sought

must be specified.

 A complaint must name the respondent, provide a clear and concise

description of the facts and law that constitute the basis for the proceeding,
and be signed by an authorized representative of the Internal Revenue
Service.

 A complaint is sufficient if it fairly informs the respondent of the charges

brought so that the respondent is able to prepare a defense.

23) After a decision has been made on a complaint filed by the Office of
Professional Responsibility, the Practitioner or Office of Professional
Responsibility may appeal the decision. Which Decisions are correct with respect
to filing an appeal of the decision?

A)

 Circular 230, Section 10.77 Appeal of decision of Administrative Law Judge.

 Within 30 days from the date of the Administrative Law Judge's decision, either
party may appeal to the Secretary of the Treasury, or his delegate.

 The respondent must file his appeal with the Director of the Office of
Professional Responsibility in duplicate and a notice of appeal must include
exceptions to the decision of the Administrative Law Judge and supporting
reasons for such exceptions.
 SECTION -1 PRACTICES & PROCEDURES

 A copy of the appeal for review must be sent to any non-appealing party.

 If the Director of the Office of Professional Responsibility files an appeal, he will

provide a copy of the appeal and certify to the respondent that the appeal has
been filed.

24) To whom all is a notice of disbarment or suspension of a practitioner

from practice before the Internal Revenue Service is issued?

A)

Circular 230 Section 10.80--Notice of Disbarment or Suspension:-

 Upon issuance of final order disbarring or suspending a practitioner, the Director of

the Office of Professional Responsibility shall give notice to appropriate officers and
employees of the IRS and to interested departments and agencies of the federal
government.

 Notice in such manner as the Director of the Office of Professional Responsibility may
be given to the proper authorities of the state by which the disbarred or suspended
person was licensed to practice as an attorney or accountant.

25) The Secretary of the Treasury, or delegate, may censure, suspend, or disbar
an enrolled agent from practice before the IRS for incompetence and/or
disreputable conduct. What is considered as Disreputable Conduct?

A)

Disreputable conduct (as described in section 10.51 of Circular 230) for which an
enrolled agent may be suspended or disbarred from practice before the IRS includes,
but not limited to, the following:-

1. Conviction of any criminal offense under the revenue laws of the U.S., or of any
offense involving dishonesty, or breach of trust.

2. Giving false or misleading information or participating in any way in the giving of

false or misleading information to the Department of the Treasury or any officer or
employee thereof.

3. Solicitation of employment as prohibited under section 10.30, the use of false or

misleading representation with intent to deceive a client in order to procure
employment.
 SECTION -1 PRACTICES & PROCEDURES
4. Willfully failing to make Federal tax return in violation of the revenue laws.

5. Misappropriation of fund received from clients for the purpose of payment of taxes
or other obligations due the U.S.

6. Directly or indirectly attempting to influence an officer or employee of the IRS

 by use of threats,
 false accusations,
 duress or
 coercion, or
 by the bestowing of any gift or favour.

7. Disbarment or suspension from practice by

 any State,
 possession,
 territory,
 Commonwealth,
 the District of Columbia or
 Federal agency,
 body or board.

8. Knowingly aiding and abetting another person to practice before the IRS during a
period of suspension or disbarment.

9. Contemptuous conduct in connection with practice before the IRS.

10. Giving a false opinion, knowingly, recklessly, or through gross incompetence.

26) What are the ways a complaint may be served against an Enrolled
Agent or Practitioner?

The complaint or a copy of the complaint must be served on the respondent by

any of the following manner: -

1. Service by Certified or First-Class Mail:-

 Service of the complaint may be made on the respondent by mailing the

complaint by certified mail to the last known address (as determined
under section 6212 of the Internal Revenue Code and the regulations
thereunder) of the respondent.
 SECTION -1 PRACTICES & PROCEDURES
 Where service is by certified mail, the returned post office receipt duly
signed by the respondent will be proof of service.
 If the certified mail is not claimed or accepted by the respondent, or is
returned undelivered, service may be made on the respondent, by mailing
the complaint to the respondent by first class mail.

2. Service by a private delivery service:-

 Service of the complaint may be made on the respondent by delivery by a

private delivery service to the last known address of the respondent.

3. Service in person:-

 Service of the complaint may be made in person on, or by leaving the complaint
at the office or place of business of, the respondent.