Lesson 1- Regulations Governing Practice Before the IRS

Question 1

What is Circular 230?

Answer 1

The IRS’s rules of practice. The government may censure, fine, suspend, or disbar tax advisors from practice before the IRS if they violate Circular 230.

Question 2

When can a tax advisor refuse to provide information to the IRS?

Answer 2

A practitioner must promptly submit to the IRS any records or information that its agents and officers request properly and lawfully, “unless the practitioner believes in good faith and on reasonable grounds that the records or information are privileged.”

Question 3

Who may practice before the IRS?

Answer 3

Attorneys, CPAs, Enrolled agents, Enrolled actuaries(limited), Enrolled retirement plan agents (limited)

Question 4

What is included in Practice before the IRS?

Answer 4

Practice before the IRS includes all matters connected with a presentation to the IRS, which include

1. Preparing documents
2. Filing documents
3. Corresponding and communicating with the IRS
4. Rendering written advice with regard to transactions having a potential for tax avoidance or evasion
5. Representing a client at conferences, hearings, and meetings

Question 5

What if you learn that your client has not complied with the laws or made an error or omission on a tax return?

Answer 5

Notify the client of the error and its potential consequences, but the practitioner need not notify the IRS of the error and may not do so without the client’s permission.

Question 6

A practitioner cannot charge a contingent fee for providing services before the IRS, with 3 exceptions. What are they?

Answer 6

1. For services rendered in connection with an IRS examination or challenge to either (i) an original tax return or (ii) an amended return or claim for refund when they were filed within 120 days
2. Where a claim for refund is filed solely in connection with determination of statutory interest or penalties
3. When the accountant is representing the client in judicial proceedings

Question 7

If a client fires or doesn’t pay the practitioner does he have to return the clients records?

Answer 7

Section 10.28 instructs the practitioner to promptly return any and all records needed for the client to comply with federal tax obligations. The practitioner may keep a copy. The rule specifies that the existence of a fee dispute does not change this obligation but recognizes that if applicable state law permits retention in the case of a fee dispute, the practitioner need return only those records that must be attached to the taxpayer’s return.

Question 8

If a conflict of interest exists under what circumstances can a practitioner represent a client?

Answer 8

1. Reasonably believe that they can provide competent and diligent representation.
2. The representation is not prohibited by law; and
3. The affected client gives informed consent in writing.