IRS Circular 230: Practitioner Duties, Sanctions, and Reporting

IRS Circular 230 is the set of federal regulations, codified at Title 31 of the Code of Federal Regulations, Part 10, that governs who may represent taxpayers before the Internal Revenue Service and how those representatives must behave.¹ The rules define practitioner duties, standards for tax advice, fee restrictions, and a list of conduct that can end a career. Violations can bring public censure, suspension, disbarment, or a fine equal to 100 percent of the income the practitioner earned from the offending conduct.

Who Circular 230 Covers

Full representation rights before the IRS belong to five groups: attorneys who are active members of a state bar, certified public accountants licensed in any U.S. state or territory, enrolled agents, enrolled actuaries, and enrolled retirement plan agents.² Anyone in one of these categories is bound by Circular 230.

“Practice before the IRS” is broader than filing returns. It covers preparing and submitting documents, communicating with IRS employees about a client’s tax situation, providing written tax advice, and representing clients in audits, appeals, and hearings.³

One boundary worth flagging. Tax return preparers who are not attorneys, CPAs, or enrolled agents are not full practitioners under Circular 230. They can join the IRS’s voluntary Annual Filing Season Program, which grants limited representation rights only for returns they personally prepared and signed, and only before revenue agents, customer service representatives, and the Taxpayer Advocate Service.⁴ If someone at a storefront preparer’s office says they can represent you in an audit, that authority is narrower than a CPA’s or attorney’s.

Core Duties a Practitioner Owes You and the IRS

Due Diligence

A practitioner must exercise due diligence in preparing returns, submitting documents, and making representations to clients about federal tax matters.⁵ Accepting a client’s numbers at face value is not enough when something looks off. Reasonable follow-up questions are part of the job, and blindly relying on false client claims without inquiry is itself a violation.

Responding to IRS Requests

When an IRS employee makes a lawful request for records or information, the practitioner must respond promptly. The only recognized exception is a good-faith belief on reasonable grounds that the material is privileged.⁶ Stonewalling without a valid legal basis invites discipline.

Returning Client Records

A practitioner must promptly return any client records the client needs to meet federal tax obligations, even if fees are unpaid.⁷ Some state laws allow the practitioner to keep certain work products during a billing dispute, but the client must still get reasonable access to review and copy whatever is needed for tax compliance. Holding original documents hostage over a bill is a common trigger for complaints.

Conflicts of Interest

A practitioner cannot represent a client where doing so would be directly adverse to another client, or where duties to a former client or third party would materially limit the representation. The engagement can proceed only if the practitioner reasonably believes competent service is possible for everyone and each affected client gives written informed consent. Those consents must be kept for at least 36 months after the representation ends and produced to the IRS on request.⁸

Firm-Level Compliance

Whoever has principal authority over a firm’s tax practice must take reasonable steps to ensure the firm has adequate compliance procedures for its members, associates, and employees.⁹ If the firm does not identify that person, the IRS can designate someone. The standard for personal discipline is willfulness, recklessness, or gross incompetence, so honest oversight mistakes generally won’t produce sanctions, but ignoring a known problem employee will.

Standards for Return Positions and Written Advice

Return Positions

A practitioner may not sign a return, advise a client to take a position, or prepare part of a return containing a position that lacks a “reasonable basis.”¹⁰ The rule also incorporates the preparer penalty standards under Internal Revenue Code § 6694, which separately prohibit “unreasonable” positions and willful understatements. A pattern of aggressive returns is treated as evidence of willfulness or recklessness, so repeat behavior is more dangerous than a single close call.

Written Advice

Written advice on a federal tax matter, including email, must rest on reasonable factual and legal assumptions, consider all relevant facts the practitioner knows or should know, and apply the law to those facts.¹¹ One rule catches practitioners regularly: you cannot factor in the likelihood that a return won’t be audited when evaluating a position. Telling a client “this is fine because the IRS probably won’t look at it” violates the standard on its face.

A practitioner may rely on another person’s advice only if the reliance is reasonable and in good faith. Reliance stops being reasonable when the practitioner knows or should know the other person lacks competence, has a conflict, or produced an opinion that shouldn’t be trusted.¹¹ The IRS applies a “reasonable practitioner” standard, weighing all circumstances including the scope of the engagement and how specific a question the client asked.

Fees and Advertising

Contingent Fees

Practitioners generally cannot charge contingent fees, meaning fees that depend on the outcome, such as a percentage of a refund, for services before the IRS.¹² The narrow exceptions are:

Services in connection with an IRS examination or challenge of an original return, an amended return, or a refund claim. For amended returns and refund claims, the contingent arrangement is allowed only if the filing occurred within 120 days after the taxpayer received written notice of the examination.
Claims for credit or refund filed solely to contest statutory interest or penalties assessed by the IRS.
Any judicial proceeding arising under the Internal Revenue Code.

The rule targets the setup where a preparer’s pay rides on the size of a refund on an original return, which creates an obvious pull toward inflated deductions or understated income.

Advertising and Solicitation

Practitioners may advertise, but every public communication about IRS matters must be truthful. False, fraudulent, coercive, misleading, or deceptive statements are prohibited.¹³ Enrolled agents and enrolled retirement plan agents cannot use “certified” in their marketing or imply they are IRS employees. Acceptable phrasing includes “enrolled to practice before the Internal Revenue Service.”

Fee information can be published freely, including fixed fees, hourly rates, and fee ranges, but a practitioner must honor published rates for at least 30 calendar days after the last date the schedule was published. Uninvited solicitations are allowed if they comply with federal and state law, clearly identify themselves as solicitations, and stop when a prospective client asks not to be contacted. Records of broadcast advertisements and direct mail campaigns must be kept for at least 36 months.¹³

Conduct That Can Get a Practitioner Sanctioned

Circular 230 lists specific behaviors that qualify as incompetent or disreputable, any one of which can trigger discipline:¹⁴

Conviction of a federal tax crime, a crime involving dishonesty or breach of trust, or any felony rendering the practitioner unfit to practice.
Knowingly giving false or misleading information, oral or written, to the IRS or any tribunal handling federal tax matters.
Willfully failing to file a federal tax return or willfully evading federal tax.
Counseling a client to violate federal tax law or suggesting an illegal evasion plan.
Failing to promptly remit money a client provided for tax payments.
Trying to influence an IRS employee through threats, bribes, gifts, false accusations, or promises of special treatment.
Using abusive language, making knowingly false accusations, or publishing defamatory material in connection with IRS practice.
Being disbarred or suspended as an attorney, CPA, or actuary by any state authority or federal court.
Knowingly helping a suspended or disbarred person practice before the IRS.

The list is not exhaustive. The IRS can also sanction practitioners who willfully violate any Circular 230 rule, or who recklessly or through gross incompetence violate the standards for returns, written advice, or firm procedures.¹⁵

Penalties

Three sanctions are available: censure, suspension, and disbarment.¹⁶ Censure is a public reprimand that goes on the practitioner’s record and is published in the Internal Revenue Bulletin; the practitioner keeps the right to practice. Suspension is a temporary loss of that right, lasting months to years depending on the conduct. Disbarment is permanent and effectively ends the practitioner’s federal tax representation career.

On top of any of these, the IRS can impose a monetary penalty equal to the gross income the practitioner earned or expected to earn from the offending conduct. A practitioner who pocketed $80,000 from a scheme can be fined $80,000. The firm or employer faces the same exposure if firm leadership knew or reasonably should have known.¹⁶

How Discipline Actually Happens

The Office of Professional Responsibility, or OPR, is the IRS division that enforces Circular 230. It investigates allegations, interprets the rules, and initiates proceedings.¹⁷ Referrals come from IRS agents, other agencies, courts, and the public.

Before filing a formal complaint, OPR must give the practitioner written notice of the law, facts, and conduct at issue, plus a chance to dispute the facts, supply additional information, and explain mitigating circumstances.¹⁸ Many cases resolve at this stage. If they don’t, OPR files a formal complaint and the matter goes to an Administrative Law Judge who hears evidence and issues a decision. Either side has 30 days to appeal to the Treasury Appellate Authority, an attorney in another division of the Office of Chief Counsel with no prior involvement. If no one appeals, the ALJ decision becomes final.¹⁹

OPR can bypass the normal process and move for expedited suspension when a practitioner, within the preceding five years, has:²⁰

Had a professional license suspended or revoked for cause by a state authority or federal body.
Been convicted of a federal tax crime, a crime of dishonesty, or a felony that renders them unfit to practice.
Been sanctioned by a court for frivolous arguments, delaying proceedings, or failing to pursue administrative remedies in a tax case.
Shown a pattern of willful failure to file federal returns: four out of five years for annual returns, or five out of seven periods for more frequent filings.

All censures, suspensions, and disbarments are published in the Internal Revenue Bulletin and posted in a searchable spreadsheet on the OPR’s website.²¹ Before hiring a professional for representation work, that list is worth two minutes.

How to Report a Tax Professional

If you believe your preparer committed fraud or misconduct, file IRS Form 14157 (Complaint: Tax Return Preparer) and, where applicable, Form 14157-A (Tax Return Preparer Fraud or Misconduct Affidavit). They can be submitted online, by fax to 855-889-7957, or by mail to the IRS Return Preparer Office in Atlanta. If you received an IRS notice about the issue, include a copy and mail everything to the address on that notice.²²

Three limits are worth knowing. The IRS generally does not act on complaints about federal tax matters more than three years old. Fee disputes are outside IRS jurisdiction and belong in state courts or before state licensing boards. If your concern is identity theft rather than preparer misconduct, use Form 14039 instead.²²

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eCFR. 31 CFR Part 10 – Practice Before the Internal Revenue Service
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Internal Revenue Service. 31 CFR Part 10 – Regulations Governing Practice Before the Internal Revenue Service
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Internal Revenue Service. 31 CFR Part 10 – Regulations Governing Practice Before the Internal Revenue Service – Section: 10.2 Definitions
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Internal Revenue Service. Annual Filing Season Program
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eCFR. 31 CFR 10.22 – Diligence as to Accuracy
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eCFR. 31 CFR 10.20 – Information to Be Furnished
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eCFR. 31 CFR 10.28 – Return of Client’s Records
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eCFR. 31 CFR 10.29 – Conflicting Interests
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eCFR. 31 CFR 10.36 – Procedures to Ensure Compliance
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eCFR. 31 CFR 10.34 – Standards With Respect to Tax Returns
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eCFR. 31 CFR 10.37 – Requirements for Written Advice
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eCFR. 31 CFR 10.27 – Fees
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eCFR. 31 CFR 10.30 – Solicitation
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eCFR. 31 CFR 10.51 – Incompetence and Disreputable Conduct
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eCFR. 31 CFR 10.52 – Violations Subject to Sanction
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eCFR. 31 CFR 10.50 – Sanctions
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Internal Revenue Service. The Office of Professional Responsibility (OPR) at a Glance
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eCFR. 31 CFR 10.60 – Institution of Proceeding
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Internal Revenue Service. Due Process Procedures in Circular 230 Matters
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eCFR. 31 CFR 10.82 – Expedited Suspension
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Internal Revenue Service. Search for Disciplined Tax Professionals
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Internal Revenue Service. Make a Complaint About a Tax Return Preparer