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Office of Professional Responsibility Subgroup Report (2008 IRPAC Report)

Issues Covered in this Section:

A. Allegation Letter

B. Offer to Consent Letter

C. Hypothetical Situations

D. "Soft” Letter or Warning Letter

E. OPR Section of Internal Revenue Manual (“IRM”)

F.  Penalty Grid

G.  Office of Professional Responsibility – Public Relations

H.  Administrative Law Judge Recommendations

I.  Section 10.38 Advisory Committee 

J.  Decline in Enrolled Agents

K.  Look Up Feature

A.  Allegation Letter 

Discussion

OPR requested our comments and recommendations on their current allegation letter.  OPR has an existing letter it uses to inform practitioners that allegations have been made regarding conduct violations under specific sections of Circular 230.  The subgroup members provided suggestions in the form of editorial revisions and comments about the letter.  The most significant changes suggested included: Rename the letter to “Notice of Potential Disciplinary Action” to make its purpose clear and unequivocal; and stress the ramifications for failure to respond.
Recommendation

Revise the Allegation Letter to clarify its intent and to make it more understandable.

Appendix

  1. OPR original Allegation Letter
  2. Subgroup proposed revisions and suggestions

B.  Offer to Consent Letter
 
Discussion

OPR requested the subgroup’s comments and recommendations on their current pro forma settlement letter called “Offer to Consent”.  OPR currently has a single pro forma letter which it uses after a practitioner has agreed to a resolution of his/her case by accepting specific charges, terms and conditions, and discipline.  The letter is intended to be addressed to OPR from the practitioner as an offer to consent to specific charges, terms and conditions, and discipline which OPR can then “accept”.  The subgroup proposed substantial revisions to the existing pro forma to provide clarity and focus for the letter’s purpose.

Recommendation

Clarify the Offer to Consent Letter and consider adding additional letter templates to make the language and format appropriate for the level of sanction being offered. Creating additional templates will make the letters more comprehensible and workable for both staff and the public and just might avoid some of the “boilerplate” errors that a one-size-fits-all letters produce.

Censure should be a one-time reprimand occurrence, not stated as a period of time. This could alleviate problems associated with the same language for all three letters. It also demonstrates the need to treat the three discipline levels differently.

Consider adding private censure to the Letter as a separate and distinct form of sanction to allow OPR to send the equivalent of a “warning” letter to someone whose conduct does not currently justify and public discipline.  The statute does not appear to prevent this approach and OPR already uses this form of “discipline”.

Remove the minimum terms for removal from practice stated in the template.

Appendix

  1. OPR original Offer to Consent Letter
  2. Subgroup’s proposed revisions and additional comments

C.  Hypothetical Situations

Discussion
 
OPR requested our comments and recommendations regarding how to better communicate with practitioners OPR’s interpretation of Circular 230, the related sanctions, and mitigating or aggravating factors .
Recommendation

Develop and publish hypothetical situations describing Circular 230 violations, possible mitigating factors and potential sanction ranges.

Appendix

  1. Examples of Hypotheticals
    a) Appraisal Hypothetical
    b) Bond Counsel Circular 230 Hypotheticals
    c) Non-Compliance Hypothetical
  2. Cover letters
    a) Cover Letter Example 1
    b) Cover Letter Example 2

D.  “Soft” Letter or Warning Letter

Discussion

The subgroup was asked to develop a letter to be used by OPR to communicate to practitioners who were referred to OPR, but whose conduct did not warrant further investigation or discipline.  The subgroup drafted a form of “soft” letter for consideration by OPR. The contents of the letter should refer to specifics of the conduct alleged, the practitioner’s opportunity to provide a defensive response, and OPR’s retention policy which the subgroup recommends OPR adopt. The subgroup further recommends that the “soft” letter, and any defensive response, be maintained in the same file for the requisite statutory retention period. The contents of the “soft” letter make it clear that OPR is not obliged to respond to any defensive response received from the practitioner.

Recommendation

Use the letter to put the practitioner on notice that allegations have been received by OPR, the type of conduct alleged, and corrective measures which should be taken to avoid future referrals, while also advising the practitioner that disciplinary action will not be taken with respect to the current conduct.

Appendix

  1. Subgroup’s proposed text for the “Soft” letter

E.  OPR Section of Internal Revenue Manual (“IRM”)

Discussion

At the time of our report, OPR was in the process of drafting its section of the IRM.  We asked for the opportunity to review it as it becomes available.  Because this is the first effort by OPR to document in the IRM its policies and procedures in connection with the administration of Circular 230, the subgroup believes it is important for interested practitioners to have an opportunity to provide feedback and input before the OPR manual sections are finalized. As a result of the changes to the definition of who is a tax return preparer, what constitutes a return, and increases in the preparer penalties, the subgroup anticipates an increase in disciplinary referrals to OPR. Consequently, we feel that private practitioner input to the IRM provisions will enhance the ultimate product.

Recommendation

Provide draft sections of the IRM to the IRPAC subgroup for review and comment as they become available, and before release to the public.

F.  Penalty Grid

Discussion

OPR developed a penalty grid to indicate the range of sanctions to be applied to non-filing and non-paying conduct by Circular 230 practitioners, and provided a copy to the subgroup for comment.  The proposed penalty grid does not allow for proper consideration of mitigating circumstances. The subgroup is concerned that including minimum sanctions within the grid may interfere with the proper analysis of mitigating factors and result in the mechanical application of sanctions. Any guidelines developed should address mitigating factors, including examples, in greater detail. The weight and effect of mitigating and aggravating factors on sanctions needs to be further developed and clarified. 

Sanctions should be applied based on the specific facts and circumstances of each situation. Therefore, the subgroup believes a grid will be inappropriate guidance in many cases.  The subgroup also believes it is not feasible or desirable to develop grids for other areas of misconduct that are heavily dependent on specific facts and circumstances.  As a result, the subgroup believes the grid should be used, if at all, only for the conduct currently identified in it.

The stacking/compounding of sanctions should occur only as a response to aggravating factors.

The subgroup believes OPR should consider adding a grace period after notification of a non-compliance violation to allow for corrective actions before imposing sanctions. 
OPR should consider emphasizing in the narrative to the grid that the purpose of the criteria for discipline is to encourage compliance and corrective action, rather than punishment. In addition, OPR should define these terms as used in the narrative discussion of the grid: “clear”, “convincing”, and “preponderance”.

Recommendation

Consider eliminating the existing grid in favor of providing guidance in the form of hypotheticals that address different types of conduct potentially subject to Circular 230 sanctions. If the penalty grid is maintained, then consider:

  • Using the penalty grid only for failure to file and failure to pay violations.
  • Eliminating minimum sanctions from the grid.
  • Avoiding stacking sanctions in a mechanical application of the grid.

G.  Office of Professional Responsibility – Public Relations

Discussion

OPR requested our input, comments, and recommendations regarding how to enhance their profile in the practitioner community.   Informal surveys revealed that far too many tax practitioners had limited knowledge of OPR, its responsibilities, and of Circular 230 (other than the Section 10.35 disclaimer). As such, any public relations campaign must first be a grassroots effort focusing on the basics.

Recommendation

We recommend that OPR enhance its profile in the practitioner community through outreach, education, and other public relations type initiatives. See the attached document in the Appendix for a summary of our ideas and comments.

Appendix

  1. OPR Public Relations document

H.  ALJ Recommendations

Discussion

The subgroup was asked by OPR to consider the viability of OPR having its own Administrative Law Judges (“ALJ”) to hear contested disciplinary cases.  Currently OPR uses ALJs that are assigned out of a common pool.  Most recently they have come from the NLRB.  However, the NLRB has advised OPR that its ALJs will not renew their contract to hear OPR disciplinary cases. Treasury is authorized to, but has not established its own ALJ pool.  Whether the anticipated increase in contested disciplinary cases is sufficient to justify a recommendation that Treasury retain one or more ALJs dedicated to hearing Circular 230 cases is something the subgroup needs to study and consider.

Recommendations

This project can be addressed more efficiently and effectively if the subgroup addresses it as a priority item for the 2009 year.

I.  Section 10.38 Advisory Committee 

Discussion

Currently, OPR’s advisory committee functions as an IRPAC subgroup.
 
Pursuant to Circular 230, Section 10.38, in order to promote and maintain the public’s confidence in tax advisors, the Director of the Office of Professional Responsibility has been authorized to establish one or more advisory committees composed of at least five individuals authorized to practice before the Internal Revenue Service. The Director is to ensure that membership of an advisory committee is balanced among those who practice as attorneys, accountants, and enrolled agents. Under procedures prescribed by the Director, an advisory committee may review and make general recommendations regarding professional standards or best practices for tax advisors, including whether hypothetical conduct would give rise to a violation of Sections 10.35 or 10.36.

The nature and context of the Circular 230 issues and the relationship between OPR and tax practitioners is more conducive to a separate group rather than the current IRPAC subgroup arrangement.

Recommendation

We recommend OPR establish its own advisory group as provided by Circular 230, Section 10.38.  

J.  Decline in Enrolled Agents

Discussion

OPR expressed concern over the drop in special enrollment exams registrations.  They asked us to make inquiries regarding this decline and other related issues.
The format of the Special Enrollment Exam (SEE) was changed in 2007 when the Office of Professional Responsibility (OPR) chose an outside firm, Prometric, to administer the new three-part online examination.

Under the new format, it has been difficult to determine if the rate of SEE passers has increased, decreased or remained the same.  Further complicating the issue, OPR was not able to maintain statistics on the passing rate for the SEE prior to 2007.
The subgroup plans to solicit information from organizations and companies offering SEE preparation courses to determine if a trend is evident to them.

Recommendation

No recommendation at this time.  This project can be addressed more thoroughly after obtaining available statistics on the Special Enrollment Exam (“SEE”) passers and feedback from organizations and companies offering SEE preparation courses.

K.  Look Up Feature

Discussion

Our subgroup was asked to solicit reactions and ideas from our respective organizations regarding the addition of a look up or listing feature on the OPR website for the benefit of the IRS and for public access to the status of enrolled agents licensed by OPR. 

OPR explained their employees need to have quick access to information
on EAs as well as all Circular 230 practitioners.   The public also makes regular inquiries as to whether a preparer is an EA, and is in good standing with OPR.
Since EAs are the only Circular 230 preparers who are not licensed or regulated by the states, at the present time the only way for taxpayers and IRS employees to check on an EA practitioner is to call OPR. Our  Committee’s suggestion is to establish a “look up” feature on the OPR portion of the IRS website where everyone may easily obtain information without using OPR personnel time.

The committee solicited anecdotal responses from their respective professional organization regarding the pros and cons of establishing such a resource which has resulted in the current recommendation.  

Recommendation

The subgroup received the following feedback:

  1. Any website look-up feature should contain minimal practice information and should include all enrolled agents’ (“EA”) names and their status, i.e., good standing or discipline.
  2. The look-up feature should contain a statement that OPR does not endorse any tax preparer, and that the listing is designed to assist the public in determining the status of practitioners licensed by OPR.
  3. Attorneys and CPAs have federal and state bar associations and the State Boards of Accountancy who maintain an updated listing of their respective licensed members.   EAs are not licensed by the states; they are authorized to practice before the IRS pursuant to Circular 230, Section 10.40.  Thus, the public does not have the same access to status or listing of EAs.

Any website for OPR should contain the following:

  1. Description of the purpose of the look up listing.
  2. Description of all types of practitioners regulated by OPR.
  3. Public access to choose the practitioner best suited for their needs.
  4. A statement that IRS does not endorse any professional group or practitioner.

The solicitation process was conducted within the Subgroup and with various associations the members were affiliated with.  We are an eleven-member committee representing eleven different professional organizations.

The following questions were used to solicit responses from the various professional organizations:

  1. Should IRS make a listing of enrolled agents available to the public?
  2. List the pros to making an EA listing public.
  3. List the cons to making an EA listing public.
  4. Suggestions for type of information IRS should make public.

 

Page Last Reviewed or Updated: 28-May-2014