Circular 230 (Treasury Department Circular No. 230) is the federal regulation that governs the practice of attorneys, certified public accountants, enrolled agents, enrolled actuaries, and other recognized practitioners before the Internal Revenue Service.
Who is subject to Circular 230: - Enrolled agents, CPAs, attorneys, and other individuals who practice before the IRS. - "Practice before the IRS" includes preparing tax returns, representation in audits, appeals, and collection matters.
Key practitioner duties (Subpart B): - Competence: Practitioners must be competent — have the knowledge, skill, thoroughness, and preparation necessary for the matter. - Diligence: Due diligence in preparing returns and advising clients. - Prompt disposition: Cannot unreasonably delay the prompt disposition of any matter before the IRS. - Disclosure of conflicts: Must disclose conflicts of interest to clients and obtain informed consent. - Confidentiality: IRS tax information may not be used or disclosed for purposes other than the matter for which it was obtained.
Tax return advice standards: - Written opinions must not take unreasonable positions. - No "covered opinions" (written tax shelter advice) for unreasonable positions. - Must advise clients of penalties and significant issues.
Practitioner sanctions (Subpart C): - Censure (public reprimand). - Suspension from practice before the IRS. - Disbarment (permanent loss of right to practice). - Monetary penalties.
Practitioner obligations to the IRS: - Must promptly submit requested records. - May not advise clients to obstruct or mislead the IRS. - Must not negotiate a client's refund check.
> Exam tip: Circular 230 is heavily tested on the EA Part 3 exam. Know the competence standard, the sanctions (censure, suspension, disbarment), and that practitioners cannot advise clients to conceal information from the IRS.