california tax attorney

Circular 230: An Overview

Circular 230[1] is a publication of the U.S. Treasury regulations that include the rules that govern the practice of licensed professionals before the Internal Revenue Service.[2] These rules apply to those qualified and licensed to prepare tax returns and provide legal advice to do certain things within the boundaries of the field, including this San Diego tax attorney. The rules both encourage and prohibit certain conduct. Penalties are assessed when an admitted member is found to be non-compliant. With this in mind, rules of Circular 230 apply to attorneys, certified public accountants, enrolled agents, enrolled actuaries, appraisers, and enrolled retirement plan agents.

Background and Applicability

Circular 230 was first established in 1966. Until the year 2011, it was possible for anyone to prepare a tax return and/or give tax advice without being liable under Circular 230 (rather they could be subject to civil and criminal penalties). However, beginning in January 2011, certain regulations were imposed upon individuals engaging in the business of preparing U.S. tax returns to bring them under the supervision of the IRS. Those regulations are outlined in Circular 230 and further discussed in the sections that follow.

Representation

Only attorneys, CPAs, enrolled agents, enrolled actuaries, and/or enrolled retirement plan agents are allowed to represent their clients in proceedings before the Internal Revenue Service. Representation includes communication with the IRS regarding client matters, even when the client is not present. There are a few exceptions to this rule within the bounds of Circular 230 though. For example, a family member can represent another family member before the IRS (with authorization). In addition, one of the officers of a corporation can represent that corporation before the IRS. For a full listing of the exceptions to the practitioner requirements, please refer to Circular 230 for further details

Required Actions

An individual preparing tax returns or giving tax advice must adhere to certain rules that govern both conduct and disclosure requirements. For example, the professional must disclose non-frivolous tax positions, return records to clients, sign all tax returns they prepare, provide clients with a copy of their tax returns, advise clients of errors and omissions of either the client or the preparer, submit records to the IRS in a timely manner, and exercise due diligence and use best practices governed by the profession.

Prohibited Actions

Circular 230 also provides rules governing professional conduct in preparing tax returns. Any person preparing a tax return must take a position on a tax return. Submitting a frivolous tax return is prohibited. In addition, unreasonable delays are prohibited. Charging a fee for an original return that is predicated on the outcome of any position is prohibited. However, the professional can charge contingent fees, which are allowed for amended returns and those positions under examination relative to judicial proceedings. The professional cannot charge a client an unconscionable fee for representation and represent clients where there is a conflict of interest. Lastly, the professional cannot solicit business by using false statements nor cash a client’s IRS check for which the professional prepared.

Circular 230 is an important document, even for taxpayers, because it sets out the series of rules that govern our practice. Taxpayer’s should be aware of the requirements of Circular 230 and weary of tax professionals that do not follow it. If you have any further questions about Circular 230, or if I can further assist you, please contact me through the contact information on this site.

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[1] Rules for Circular 230 are codified as the following: Title 31 of the Code of Federal Regulations, Subtitle A, Part 10.

[2] A copy of circular 230 can be found here: http://www.irs.gov/pub/irs-utl/pcir230.pdf

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