Circular 230 refers to Treasury Department Circular No. 230. This publication establishes the rules governing those who practice before the U.S. Internal Revenue Service (IRS), including attorneys, certified public accountants (CPAs) and enrolled agents (EAs).
The rules in Circular 230 also prohibit certain conduct. Penalties may be imposed for noncompliance. "Circular 230 is a hybrid document containing the rules, regulations, ethical/conduct provisions, and disciplinary procedures that apply to those who practice before the IRS." [1] The rules in Circular 230 are codified as Title 31 of the Code of Federal Regulations, Subtitle A, Part 10 (31 C.F.R. Part 10). [2] [3]
Circular 230 was first published in 1921. Some of its provisions became better known as a result of amendments made in 2005. [4]
The statutory authority for Circular 230 was 31 U.S.C. § 330. That statute authorizes the IRS to “regulate the practice of representatives of persons before the Department of the Treasury.” 31 U.S.C. § 330(a)(1). The language now codified as Section 330 was originally enacted in 1884 as part of a War Department appropriation for “horses and other property lost in the military service.” [5]
See, e.g., H.R. Rep. No. 82-2518, at 13 (1953); H.R. Rep. No. 89-1141, at 3 (1965) (“In imposing admission requirements on prospective practitioners, the Internal Revenue Service is acting under authority of the Act of July 7, 1884.”).
The Treasury’s practice rules “are designed to protect the Department and the public from persons unfit to practice before the IRS.” [6]
Until the year 2011, anyone in the United States could legally engage in the business of preparing a federal tax return. The rules were changed effective January 1, 2011, and for a time imposed certain requirements on individuals engaging in the business of preparing U.S. federal tax returns. [7] These new rules were struck down, however, by the U.S. District Court for the District of Columbia in the Loving case, a decision upheld by the U.S. Court of Appeals for the District of Columbia [8]
In general, only attorneys, CPAs, enrolled agents, or enrolled actuaries or enrolled retirement plan agents may represent clients in proceedings before the IRS. [9] Representing clients includes all communication with the IRS in regard to client matters without the client present. Exceptions permit unenrolled preparers to represent taxpayers during examination only for returns they prepared themselves. The rules permit family members to represent each other, employees to represent their employer, officers to represent corporations, and certain other types of representation. [10]
Persons preparing returns or giving tax advice must:
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In addition to the above, those giving tax advice must follow certain procedural rules in giving the advice. [13] Written tax advice must not be based on unreasonable factual or legal assumptions or unreasonably rely upon representations of the client or others. It must consider all relevant facts and law.
Circular 230 contains rules of conduct in preparing tax returns. [14] Persons preparing tax returns must not:
Section 10.27 of Circular 230 has traditionally included restrictions on contingent fee arrangements between taxpayers and their representatives. In July 2014, however, those restrictions were struck down by the U.S. District Court for the District of Columbia "with respect to the preparation and filing of Ordinary Refund Claims, where 'preparation and filing' precedes the inception of any examination or adjudication of the refund claim by the IRS and any formal legal representation on the part of the practitioner." The Court ordered that the government was permanently prohibited from enforcing the applicable restrictions in Circular 230. [15]
Section 10.51 lists other types of misconduct including:
According to a 2011 report by the Internal Revenue Service Advisory Council ("IRSAC") Office of Professional Responsibility ("OPR") Subgroup, [17] Circular 230 sets forth ethical standards which are generally meant to apply to "willful" misconduct. Willful misconduct is generally described as "the intentional violation of a known legal duty." Willful misconduct is therefore distinguishable from misconduct which is merely negligent, mistaken or inadvertent. The Internal Revenue Manual recognizes this distinction by requiring that Internal Revenue Code Section 6694(a) ("understatement due to unreasonable positions") referrals to OPR be based upon a "pattern" of misconduct. A "pattern" of misconduct is the legally recognized sign or indicator of willfulness. Thus, according to IRSAC, Circular 230 is not intended to be utilized as an enforcement tool for isolated acts of incompetence or disreputable conduct. Instead, it is intended to more broadly protect the tax system from those practitioners who have demonstrated a clear pattern of failing to meet generally recognized standards of professional conduct.
Any person other than an officer or employee of the Internal Revenue Service having information of a violation of any provision of Circular 230 may make an oral or written report of the alleged violation to OPR or any officer or employee of the Internal Revenue Service. If the report is made to an officer or employee of the Internal Revenue Service, the officer or employee will make a written report of the suspected violation and submit the report to OPR.
If an officer or employee of the Internal Revenue Service has reason to believe a practitioner has violated any provision of Circular 230, the officer or employee will promptly make a written report of the suspected violation on Form 8484, Report of Suspected Practitioner Misconduct. The report will explain the facts and reasons upon which the officer’s or employee’s belief rests and must be submitted to OPR. [18] "Such reports are required by section 10.53(a) of the regulations governing practice, which are set out at 31 C.F.R. Part 10, and are published in pamphlet form as Treasury Department Circular No. 230." [19]
Tax preparers and advisers who violate Circular 230 may be subject to penalties. These include monetary penalties as well as potential suspension from practice before the IRS. [20] The rules also provide procedures for disciplinary proceedings.
Periodically, the Internal Revenue Bulletin lists an announcement of disciplinary sanctions for the Office of Professional Responsibility. [21]
In the United States of America, an Enrolled Agent (EA) is a tax advisor, who is a federally authorized tax practitioner which is empowered by the U.S. Department of the Treasury. Enrolled Agents represent taxpayers before the Internal Revenue Service (IRS) for tax issues that include audits, collections, and appeals.
Robert Barnwell Clarkson was an American tax protester in South Carolina.
A tax protester, in the United States, is a person who denies that he or she owes a tax based on the belief that the Constitution of the United States, statutes, or regulations do not empower the government to impose, assess or collect the tax. The tax protester may have no dispute with how the government spends its revenue. This differentiates a tax protester from a tax resister, who seeks to avoid paying a tax because the tax is being used for purposes with which the resister takes issue.
The Internal Revenue Service Restructuring and Reform Act of 1998, also known as Taxpayer Bill of Rights III, resulted from hearings held by the United States Congress in 1996 and 1997. The Act included numerous amendments to the Internal Revenue Code of 1986. The bill was passed in the Senate unanimously, and was seen as a major reform of the Internal Revenue Service.
Tax preparation is the process of preparing tax returns, often income tax returns, often for a person other than the taxpayer, and generally for compensation. Tax preparation may be done by the taxpayer with or without the help of tax preparation software and online services. Tax preparation may also be done by a licensed professional such as an attorney, certified public accountant or enrolled agent, or by an unlicensed tax preparation business. Because United States income tax laws are considered to be complicated, many taxpayers seek outside assistance with taxes.
Tax protesters in the United States have advanced a number of arguments asserting that the assessment and collection of the federal income tax violates statutes enacted by the United States Congress and signed into law by the President. Such arguments generally claim that certain statutes fail to create a duty to pay taxes, that such statutes do not impose the income tax on wages or other types of income claimed by the tax protesters, or that provisions within a given statute exempt the tax protesters from a duty to pay.
Internal Revenue Service, Criminal Investigation (IRS-CI) is the United States federal law enforcement agency responsible for investigating potential criminal violations of the U.S. Internal Revenue Code and related financial crimes, such as money laundering, currency transaction violations, tax-related identity theft fraud and terrorist financing that adversely affect tax administration. While other federal agencies also have investigative jurisdiction for money laundering and some Bank Secrecy Act violations, IRS-CI is the only federal agency that can investigate potential criminal violations of the Internal Revenue Code, in a manner intended to foster confidence in the tax system and deter violations of tax law. Criminal Investigation is a division of the Internal Revenue Service, which in turn is a bureau within the United States Department of the Treasury.
Tommy Keith Cryer, also known as Tom Cryer, was an attorney in Shreveport, Louisiana who was charged with and later acquitted of willful failure to file U.S. Federal income tax returns in a timely fashion. In a case in United States Tax Court, Cryer contested a determination by the U.S. Internal Revenue Service that he owed $1.7 million in taxes and penalties. Before the case could come to trial, Cryer died June 4, 2012. He was 62.
Form 990 is a United States Internal Revenue Service (IRS) form that provides the public with information about a nonprofit organization. It is also used by government agencies to prevent organizations from abusing their tax-exempt status. Some nonprofits, such as hospitals and other healthcare organizations, have more comprehensive reporting requirements.
A tax protester is someone who refuses to pay a tax claiming that the tax laws are unconstitutional or otherwise invalid. Tax protesters are different from tax resisters, who refuse to pay taxes as a protest against a government or its policies, or a moral opposition to taxation in general, not out of a belief that the tax law itself is invalid. The United States has a large and organized culture of people who espouse such theories. Tax protesters also exist in other countries.
Tax protester arguments are arguments made by people, primarily in the United States, who contend that tax laws are unconstitutional or otherwise invalid.
The Internal Revenue Service (IRS) is the revenue service for the United States federal government, which is responsible for collecting U.S. federal taxes and administering the Internal Revenue Code, the main body of the federal statutory tax law. It is an agency of the Department of the Treasury and led by the Commissioner of Internal Revenue, who is appointed to a five-year term by the President of the United States. The duties of the IRS include providing tax assistance to taxpayers; pursuing and resolving instances of erroneous or fraudulent tax filings; and overseeing various benefits programs, including the Affordable Care Act.
The Treasury Inspector General for Tax Administration (TIGTA) is an office in the United States Federal government. It was established in January 1999 in accordance with the Internal Revenue Service Restructuring and Reform Act of 1998 (RRA 98) to provide independent oversight of Internal Revenue Service (IRS) activities. As mandated by RRA 98, TIGTA assumed most of the responsibilities of the IRS' former Inspection Service.
Tax protesters in the United States advance a number of administrative arguments asserting that the assessment and collection of the federal income tax violates regulations enacted by responsible agencies –primarily the Internal Revenue Service (IRS)– tasked with carrying out the statutes enacted by the United States Congress and signed into law by the President. Such arguments generally include claims that the administrative agency fails to create a duty to pay taxes, or that its operation conflicts with some other law, or that the agency is not authorized by statute to assess or collect income taxes, to seize assets to satisfy tax claims, or to penalize persons who fail to file a return or pay the tax.
The IRS Return Preparer Initiative was an effort by the Internal Revenue Service (IRS) to regulate the tax return preparation industry in the United States. The purpose of the initiative is to improve taxpayer compliance and service by setting professional standards for and providing support to the tax preparation industry. Starting January 1, 2011 and, until the program was suspended in January 2013, the initiative required all paid federal tax return preparers to register with the IRS and to obtain an identification number, called a Preparer Tax Identification Number (PTIN). The multi-year phase-in effort called for certain paid tax return preparers to pass a competency test and to take annual continuing education courses. The ethics provisions found in Treasury Department's Circular 230 were extended to all paid tax return preparers. Preparers who have their PTINs, pass the test and complete education credits were to have a new designation: Registered Tax Return Preparer.
A Registered Tax Return Preparer is a former category of federal tax return preparers created by the U.S. Internal Revenue Service (IRS).
The Registered Tax Return Preparer Test was a test produced by the U.S. Internal Revenue Service (IRS). Until the program was suspended in January 2013, the IRS had implemented rules requiring that certain individuals who wanted to work as tax return preparers pass this test to demonstrate their ability to understand U.S. tax law, tax form preparation and ethical requirements. The competency test was part of an agency effort to better regulate the tax return preparation industry, to improve the accuracy of tax return preparation and to improve service to taxpayers. Candidates who passed the test, a tax compliance check, and met certain other requirements had a new designation: Registered Tax Return Preparer.
Under the federal law of the United States of America, tax evasion or tax fraud is the purposeful illegal attempt of a taxpayer to evade assessment or payment of a tax imposed by Federal law. Conviction of tax evasion may result in fines and imprisonment. Compared to other countries, Americans are more likely to pay their taxes on time and law-abidingly.
Michael J. Desmond is an American tax attorney and former federal government official. He previously served as the 48th Chief Counsel of the U.S. Internal Revenue Service (IRS) and Assistant General Counsel in the Department of the Treasury. He was confirmed by the Senate on February 27, 2019 and began serving as Chief Counsel on March 4, 2019. Shortly before the Inauguration of Joe Biden, Desmond resigned from his position as Chief Counsel effective January 20, 2021, succeeded by Acting Chief Counsel William M. Paul.
The Office of Professional Responsibility (OPR) at the U.S. Internal Revenue Service (IRS) is responsible for all matters related to "tax practitioner" misconduct, discipline and practice before the IRS under 31 CFR Subtitle A, Part 10. A tax practitioner, sometimes referred to as a tax professional, is generally an attorney, CPA or enrolled agent.