Circular 230 Webinar
December 19, 2023
In recent years, there have been significant changes to the traditional landscape of working as a tax professional. Examples include remote work such as full-time or hybrid schedules. Expectation of competency in technology and cybersecurity by non-traditional professionals fields such as tax professionals. Tax professionals must assess and adjust their professional responsibility obligations under Circular 230 to encompass these new changes. Circular 230 is a set of interrelated provisions intended to ensure that practitioners are fit to practice before the Treasury Department by having the requisite character, reputation, qualifications and competency. The IRS Office of Professional Responsibility is charged with enforcing Circular 230.
Statutory Authority- Section 220 of Title 31 of the US Code authorizes the regulation of the practice of representatives of persons before the Treasury Department and determinations of practitioner fitness to practice. It regulates the types of disciplinary action, including monetary penalties and the specific regulations of appraisers.
Office of Professional Responsibility (OPR) - administers the laws and regulations governing the practice of certain tax professionals before the IRS. It interprets and applies the standards of practice for tax professionals in Circular 230 fairly and equitably. OPR investigates allegations of misconduct by tax practitioners in their practice before the IRS and imposes disciplinary sanctions if warranted. OPR supports the IRS's strategy to enhance enforcement of the Internal Revenue Code by ensuring tax practitioners are in compliance.
OPR's fitness to practice statute
1. Good character
2. Good reputation
3. Necessary qualifications to provide valuable service to the client
4. Competency to advise and assist persons in presenting their cases before the IRS.
"Practice before the IRS"
All matters under laws or regulations administered by the IRS relating to a taxpayer's rights, privileges, or liabilities. Some examples are as follows:
1. Representing a client in an audit, before IRS Collections
2. Preparing documents for submissions to the IRS.
3. Advising clients regarding tax positions.
4. Providing written opinions
Who is fit to practice in front of the IRS?
Attorneys
CPAs
Enrolled Agents
Enrolled Actuaries
Enrolled Retirement Plan Agents
Annual Filing Season Program Record of Completion Holders
Violating provisions could subject tax practitioners to disciplinary action under Circular 230 as disreputable and penalties. Some of the best practices are to provide clients with the highest quality representation by adhering to provide advice on Federal tax issues and preparing/assisting in the preparation of a submission to the IRS.
How can a practitioner incorporate bet practices under Circular 230, Section 10.33?
1. Clearly communicate with your client on engagement terms
2. Establish the relevant facts, evaluate the reasonableness of any assumptions or representations, relate applicable law to relevant facts, and reach a conclusion supported by the law and the facts
3. Advise clients regarding the import of conclusions reached
4. Act fairly and with integrity in practice before the IRS
Remote Work- Remote of hybrid tax professional positions exited within some firms, but they were not prevalent compared with today. Firms identified offering flexible working arrangements as a top tip for a successful recruitment strategy. There are several Circular 230 standards as well as IRC statutes that can be triggered when a firm uses non-traditional work arrangements. A firm must have in place "adequate procedures" to ensure compliance by its members, associates, employees and contractors with Circular 230.0. This section requires reasonable steps to be taken to ensure a firm is in compliance.
1. Safely secure client files, records, and workpapers in home office areas
2. Establishing a system of securing and safely transferring client information
3. Policy on shared workspaces to ensure confidentiality and avoid confusion
4. Expectation of technological competence by tax practitioners, support staff, and contractors.
Use the IRS's Tax Pro Account to create and sign authorization forms such as POA, TIA.
Risks exist in the real world. Don't collect more PII than is necessary for business. Restrict access to PII only to individuals who have a business need to access such information. Don't retain PII longer than necessary or legally required for business purposes and dispose of PII appropriately.
What is the main responsibility of a tax professional?
Due Diligence - A practitioner must exercise due diligence in preparing, approving or filing tax returns, documents, affidavits relating to IRS matters.
Determining the correctness of oral/written representations made to the client or Treasury personnel. Willful blindness violates a practitioner's due diligence responsibilities under Circular 230.0 What does it mean to exercise Due Diligence? Due diligence is the exercise of care that a reasonable business or person is normally expected to act with to satisfy a legal requirement, for example: practitioners are to ask questions of their clients and third parties not "turn a blind eye" to what a reasonable person would see or ask about. A practitioner may rely in good faith without verification upon information furnished by the client. A practitioner cannot ignore the implications of information furnished to or known by the practitioner. Another safe harbor is relying on another’s work product. A practitioner may rely on other professionals' work product with reasonable care. They may not ignore other information furnished to you or known by you. Duty to make reasonable inquiries if the information furnished appears incorrect, incomplete, or inconsistent with other facts or assumptions. For more information pertaining to the responsibilities of a tax professional and Circular 230, please visit the IRS website at Office of Professional Responsibility and Circular 230 | Internal Revenue Service (irs.gov).
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