What Is Circular 230? IRS Rules for Tax Professionals

Circular 230 is the Treasury Department regulation, codified at 31 CFR Part 10, that governs who may represent taxpayers before the IRS and how those representatives must behave. It applies to attorneys, certified public accountants, enrolled agents, and other paid tax professionals who deal with the IRS on a client’s behalf. Breaking its rules can lead to public censure, suspension, disbarment, or monetary penalties capped at the gross income the practitioner earned from the offending conduct.

Who the Rules Cover

Three groups hold what the IRS calls unlimited representation rights: attorneys, CPAs, and enrolled agents. They can represent any client on any matter before any IRS office, including audits, collections, and appeals.¹ Attorneys and CPAs qualify through their active state licenses. Enrolled agents earn their status by passing the three-part Special Enrollment Examination and clearing a suitability check covering tax compliance and criminal history.²

Two narrower designations also exist. Enrolled actuaries can represent clients only on qualified retirement plan matters. Enrolled retirement plan agents had similar limited authority, but the IRS stopped accepting new applicants in February 2016; existing holders keep their rights.³

Unenrolled Preparers

Someone who is not an attorney, CPA, or enrolled agent can still prepare returns for pay, but their representation rights are tightly restricted. An unenrolled preparer who signed a return can represent that client only during an examination of that specific return, and only before revenue agents, customer service representatives, and similar IRS employees.⁴ Appeals and collection matters are off limits, as is any representation on returns they did not prepare.

The IRS runs a voluntary Annual Filing Season Program that gives non-credentialed preparers slightly broader limited rights if they complete annual continuing education and earn a Record of Completion. Since January 2016, a preparer without either a professional credential or an AFSP Record of Completion cannot represent clients before the IRS at all, even on returns they signed.¹

An individual may represent a member of their immediate family, or their regular full-time employer, without any credential. Those rights are narrow and do not extend further.⁴

The PTIN Requirement

Everyone who prepares or helps prepare federal tax returns for compensation must hold a valid Preparer Tax Identification Number. Enrolled agents, attorneys, and CPAs need one too. The 2026 fee to obtain or renew a PTIN is $18.75, and renewal is annual.⁵ Preparing returns for pay without a valid PTIN draws penalties under the Internal Revenue Code.

What Counts as Practice Before the IRS

“Practice before the Internal Revenue Service” is defined broadly. It covers all matters connected with representing a client’s rights, privileges, or liabilities under the tax laws: preparing and filing documents, corresponding with the IRS, representing clients at conferences and hearings, and providing written advice on transactions with potential tax consequences.⁴ Preparing a return for compensation is practice, which is why even unenrolled preparers are subject to Circular 230’s conduct rules.

Core Duties Owed to Clients and the IRS

Section 10.22 sets the due diligence standard. A practitioner must exercise due diligence when preparing returns, when making representations to the IRS, and when making representations to clients about IRS-administered matters.⁶ That doesn’t mean auditing every number a client provides. A practitioner can rely on the work of others if reasonable care was used in engaging, supervising, and evaluating them. But when something looks off, ignoring it isn’t an option.

When a practitioner discovers that a client has not complied with tax laws or has made an error on a filed return, the practitioner must promptly tell the client and explain the consequences, including potential penalties and interest. That duty runs to the client. Circular 230 does not require the practitioner to report the error to the IRS, but the practitioner must advise the client on how to correct it.

When the IRS makes a lawful request for records or information, the practitioner must hand them over promptly. The only exception is a good-faith belief that the materials are protected by a recognized privilege such as attorney-client privilege, and the practitioner must clearly identify the privilege being asserted.⁷

Client records must be returned on request, even when the client owes the practitioner money. The practitioner can keep copies, but originals go back immediately. Fee disputes do not override this rule. Practitioners with supervisory authority also have to make sure their employees and associates comply with Circular 230 through reasonable internal procedures. A partner who lets junior staff cut corners can face personal sanctions.

Standards for Return Positions and Written Advice

Section 10.34 trips up many practitioners. A practitioner cannot willfully, recklessly, or through gross incompetence sign a return or advise a client to take a position that lacks a reasonable basis. That phrase has a specific meaning drawn from IRC Section 6694: the position must have a realistic chance of being sustained on its merits, not just a creative argument that might survive if nobody looks closely.⁸ Willfully understating a tax liability, or recklessly disregarding IRS rules, triggers the higher penalty standards under Section 6694(b). A pattern of weak positions counts as evidence of willful or reckless behavior even if each one looked borderline on its own.

Paid preparers also have to sign the returns they prepare. Failure to sign is a separate penalty under IRC Section 6695, currently $50 per unsigned return, capped at $25,000 per preparer per year.⁹

Section 10.37 governs written tax advice, including email. The practitioner must base the advice on reasonable factual and legal assumptions, consider all relevant facts they know or should know, avoid relying on client or third-party representations the practitioner knows or should know are wrong, and relate applicable law to the specific facts.¹⁰ The rule also bars audit-lottery reasoning. Telling a client “this is aggressive, but audit odds are low” violates Section 10.37. The analysis has to stand on the merits of the legal position.⁴

Prohibited Conduct

Fees

Circular 230 bars unconscionable fees. There is no dollar threshold; reasonableness depends on complexity, time required, experience, and local market rates. Contingent fees are allowed only in narrow situations: work related to an IRS examination of an original return, a refund claim filed solely to recover statutory interest or penalties, or a judicial proceeding under the Internal Revenue Code. A contingent fee is also permitted for an amended return or refund claim, but only if filed within 120 days of the taxpayer receiving written notice of an examination or challenge to the original return.⁴ Contingent fees for preparing an original return are not allowed.

Conflicts of Interest

A practitioner cannot represent a client if doing so would be directly adverse to another client, or if there is a significant risk the representation would be materially limited by duties to another client, a former client, or the practitioner’s own interests.¹¹ Conflicted representation is permitted only if the practitioner reasonably believes competent representation is still possible for each client, the representation isn’t prohibited by law, and each affected client gives informed written consent. That consent has to be obtained within 30 days of the practitioner becoming aware of the conflict, and copies must be kept for at least 36 months after the representation ends.

Advertising and Refund Checks

Advertising cannot be false or misleading, and published fee schedules must be honored for at least 30 calendar days after the schedule’s last publication.¹² A practitioner is flatly prohibited from endorsing or negotiating a client’s federal tax refund check. That rule exists to prevent fraud, and violations are taken seriously in disciplinary proceedings.

How Violations Are Punished

The Office of Professional Responsibility is the enforcement arm for Circular 230. OPR investigates potential violations based on referrals from IRS personnel, state licensing boards, or public complaints, and it has exclusive authority over practitioner discipline.¹³ Sanctions escalate in severity.

Censure is a public reprimand. The practitioner keeps the right to practice but receives a formal warning published in the Internal Revenue Bulletin.¹⁴
Suspension temporarily removes the right to practice before the IRS. During that period, the practitioner cannot represent any clients.
Disbarment is permanent, though a disbarred practitioner may petition for reinstatement after five years.¹⁵
Monetary penalties can hit the individual, and separately the employer or firm if it knew or should have known about the misconduct. In either case the penalty cannot exceed the gross income derived from the conduct that triggered the violation.⁴

OPR publishes all censures, suspensions, and disbarments in the Internal Revenue Bulletin, so the consequences are visible to the public and to prospective clients.¹⁶ If OPR and the practitioner cannot settle, the case is referred to the Office of Chief Counsel’s General Legal Services division, which files a formal complaint and litigates the matter before an Administrative Law Judge under the Administrative Procedure Act. Either side can appeal the ALJ’s initial decision to a Treasury Appellate Authority within 30 days; otherwise the decision becomes final.¹⁷

Changes on the Horizon

Treasury published a notice of proposed rulemaking in December 2024 that would significantly revise Circular 230. As of early 2026, the changes remain proposals. The most notable would reclassify certain contingent fee arrangements as disreputable conduct subject to sanctions, set new standards for appraisers and appraisal submissions, add a duty of technological competence, and remove references to the registered tax return preparer designation that courts invalidated in 2014.¹⁵ If finalized, the contingent fee changes in particular would alter longstanding practice.

1
Internal Revenue Service. Annual Filing Season Program
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Internal Revenue Service. Enrolled Agents Frequently Asked Questions
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Internal Revenue Service. Enrolled Retirement Plan Agent (ERPA) Program Changes
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Internal Revenue Service. Treasury Department Circular No. 230 (Rev. 6-2014)
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Internal Revenue Service. IRS Reminds Tax Pros to Renew PTINs for the 2026 Tax Season
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eCFR. 31 CFR 10.22 – Diligence as to Accuracy
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eCFR. 31 CFR Part 10 Subpart B – Duties and Restrictions Relating to Practice Before the Internal Revenue Service
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eCFR. 31 CFR 10.34 – Standards With Respect to Tax Returns and Documents, Affidavits and Other Papers
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Office of the Law Revision Counsel. 26 USC 6695 – Other Assessable Penalties With Respect to the Preparation of Tax Returns for Other Persons
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eCFR. 31 CFR 10.37 – Requirements for Written Advice
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eCFR. 31 CFR 10.29 – Conflicting Interests
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eCFR. 31 CFR 10.30 – Solicitation
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Internal Revenue Service. Office of Professional Responsibility and Circular 230
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eCFR. 31 CFR 10.50 – Sanctions
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Federal Register. Regulations Governing Practice Before the Internal Revenue Service
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Internal Revenue Service. Announcement of Disciplinary Sanctions
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Internal Revenue Service. Due Process Procedures in Circular 230 Matters