Professional Conduct in Tax Practice: A Circular 230 Overview — YouTube video script

Hello and welcome to today's webinar, Professional Conduct in Tax Practice: A Circular 230 Overview. I see it's the top of the hour. We're glad you've joined us today. My name is Jeff Latessa and I'm a Stakeholder Liaison with the Internal Revenue Service. I'll be your moderator for today's webinar, which is slated for approximately 120 minutes. This webinar offers two IRS Continuing Education or CE credits. Participants earn two IRS CE credits and a related certificate of completion by attending the live broadcast of the webinar for at least 100 minutes after the official top of the hour start time and answering at least four polling questions during the live broadcast. The polling question example to test your pop up blocker will count as an attendance check towards the polling question response requirement.

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And again, welcome, we're glad you've joined us for today's webinar. Before we move along with our session, let me make sure you're in the right place. Today's webinar is Professional Conduct in Tax Practice: A Circular 230 Overview. This webinar is scheduled for approximately 120 minutes from the top of the hour. We're pleased to have Thomas Curtin, Acting Director of the IRS Office of Professional Responsibility. Tom was named OPR's Acting Director in October 2025. As Acting Director, he's responsible for the IRS' oversight of tax professionals who practice before the IRS is set out in Treasury Circular 230.

Now, before I turn things over to today's distinguished speaker, Thomas Curtin, I want to take a few minutes to share Tom's background. Tom assumed the role of Acting Director of the IRS Office of Professional Responsibility, or OPR, on October 5, 2025. In this capacity, Tom leads the service’s independent office responsible for interpreting, overseeing, and enforcing Circular 230, which governs tax professionals who practice before the IRS. Prior to joining OPR, Tom had been with the IRS Return Preparer Office, or RPO, since December 2017, serving as the Executive Director of the Joint Board for the Enrollment of Actuaries, and most recently as the Acting Deputy Director of RPO. In these roles, he helped oversee IRS policies and programs related to tax return preparer oversight, compliance, education, and credentialing, and he administered the Federal Enrollment and Renewal Program for Enrolled Actuaries. Tom has extensive experience in OPR, having begun his IRS career in 2008 as an Attorney Advisor in OPR and later serving as a frontline manager. He returned to OPR in 2023 on a leadership detail to serve as Acting Director. He has extensive experience in tax ethics enforcement, practitioner conduct investigations, sanctions recommendations, and administrative litigation support. He's also been a frequent speaker and panelist on behalf of OPR, RPO, Circular 230, and the Joint Board for the Enrollment of Actuaries. Tom holds an undergraduate degree from Villanova University, a Juris Doctor from Syracuse University, and an LLM in Taxation from Georgetown University Law Center.

And with that, let's begin our conversation or our discussion? Tom, I'll turn things over to you now.

Okay, thank you, Jeff, and hello everyone. Thank you for joining us today. It is a pleasure to be here to talk a little bit about Circular 230 and Professional Tax ethics. But before we dive into the specifics, I wanted to just quickly start with a little quick overview of what we'll be covering during this session. So first and foremost, we're going to briefly walk through the laws and regulatory authorities that apply to individuals who practice before the IRS. This is really the foundation for understanding how Circular 230 works, why OPR exists and what our oversight responsibilities look like. Then next we're going to discuss OPR's mission, how the office is organized, how our general investigative process functions. This will give you a clear sense of what happens behind the scenes when a referral comes in or when potential non-compliance is identified. From there, we'll move into the structure of Circular 230 itself. We'll talk a little bit about who qualifies as a practitioner, what practice before the IRS actually means, and what kinds of activities fall under OPR's jurisdiction. This section usually clears up a lot of misconceptions, so we'll definitely take our time. We'll also highlight some of the most common issues OPR encounters, like there's to meet due diligence requirements, which is always a big one, non-compliance with tax obligations and some other conduct that could certainly give rise to a Circular 230 violation. And then finally, at the end of the presentation, we've included several slides for some resources and some guidance links for you. All these are here to help you dig a little bit deeper into today's topics and to give you some materials that you can reference after the webinar.

So with that roadmap in mind, let's get started, shall we? So now that we've laid out what we're going to cover today, let's move into the first -- really first major topic on that list; the statutory and regulatory foundation that underpins Circular 230 and the work of the Office of Professional Responsibility or OPR. Understanding where OPR's authority comes from is essential because everything we do, standards of conduct, investigations and discipline, flows directly from that legal foundation. And to really understand that authority, it helps to -- probably helps a little bit to step back just a bit, kind of look how it developed. So Treasury's ability to regulate who may practice before the IRS or who may practice in general isn't new. And it didn't start with Circular 230 or even with the IRS itself, it actually goes back well over a century. So we're going to do a little bit of a history lesson here during the next slide.

And basically, so Treasury's ability to regulate who may practice before the IRS or who may practice in general isn't new. It didn't start with Circular 230 or even with the IRS itself. It actually goes back well over a century to a period of time just shortly after the Civil War. So for you history buffs, you might enjoy a little bit of this. In the 1880s during the administration of Chester A. Arthur, the federal government was spending a lot of money compensating claims for lost property, mostly lost horses, because that was the probably the most valuable piece of property that individuals had at that time. Many of these claims were unfortunately phony and were filed by agents, or now we call them representatives, who really not coincidentally worked on a contingent fee basis and often unfortunately did not verify the facts with their clients. So to address the problem, Congress enacted the so called Horse Act, which certainly is appropriately named, which made it clear that in order to protect both the government and the citizens on whose behalf these bogus claims were made, the Treasury Department could regulate agents, attorneys and other persons representing claims. Over the ensuing century plus, the statute was really was amended numerous times and now it resides in Section 330 of Title 31 of the United States Code.

Now I must say an improper, inflated or otherwise bogus claim for a horse right is not identical to a tax return or a claim for refund or the representation of taxpayers under examination or before a collection, but the purpose of the legislation, right which to protect taxpayers and the public fisc is pretty much the same. So leading into the statutory authority here to regulate practitioner conduct before the IRS, which is something I referenced in the last slide, it's not found in Title 26 of the internal Revenue Code, right. Instead it appears in Title 31 of the United States Code, which is Section 330 to be precise, which relates to the Treasury Department and other parts of the federal government and deals essentially with money and finance. The placement of Section 330 in Title 31 actually makes OPR independent of Title 26, the internal revenue Code, which is largely enforced, as you might imagine, by other divisions in the IRS. So it provides a little bit of that level of independence that I think is so important with -- so important for OPR.

So as it currently reads, 31 USC 330 does five essential things. It authorizes the treasury to regulate the practice of representatives before the Treasury Department, including the IRS, and specifically to make determinations about fitness to practice. It authorizes certain types of disciplinary actions that the Secretary can take against representatives who are incompetent, disreputable or who violate the regulations. It also authorizes the ability to impose monetary penalties against individuals and in certain circumstances, entities with which the individuals are affiliated who employ those engaged in practice. And it also authorizes the Secretary to regulate certain appraisers. And the final subsection, which was enacted in 2004, authorizes the Secretary to impose standards for giving certain written advice. So our program today focuses on Section 330's authorization to regulate the practice of persons before the Treasury Department, which includes the IRS, otherwise, as many of you know, known as practitioners, and the general determinations about their fitness to practice.

So now that we've established that Section 330 is the foundational authority for regulating those who practice for the Treasury Department, I should note that there are other authorities that come into play. Foremost among these, and hopefully you've heard of it, is Treasury Circular 230. Circular 230 is not as old as the Horse Act, but nevertheless it has been around for some time. I believe it was first issued in 1921. It's been revised periodically over the years, with the most recent revision issued in June 2014, although the IRS has published proposed regulations in just recently in December 2024, although maybe not that recent, which we received subsequent comments and a hearing was conducted to further amend Circular 230. A little bit of a cleanup some other changes to the document, but we are not sure when these will be finalized. But rest assured, though, when they are, OPR and other pieces of the other parts of the IRS will certainly be providing guidance. Now there is also a delegation order and two revenue procedures relating to limited practice for certain unenrolled return preparers, including Revenue Procedure 2014-42, which relates to the IRS Annual Filing Season Program, otherwise known as AFSP. These are also part of the overall legal authority relating to practice before the IRS. And then we got, as you can see on the slide here, Section 10.1(a) of Circular 230 provides for the IRS Commissioner to establish the Office of Professional Responsibility and to appoint a Director of OPR.

So now, Jeff, I believe we are going to pause here for a our first polling question.

Yes. Thanks, Tom. So, yeah, now it's time for our first polling question. You're going to select the answer that best completes the statement. So the authority to regulate the practice of representatives of taxpayers before the Department of the Treasury, including the IRS, comes from: A. Internal Revenue Code; B. 31 USC Section 330; C. State Licensing Authorities; or D. Circular 230. So take a moment and click the radio button that answers the question. If you don't receive the polling question, please enter only the letters A, B, C or D that correspond with your response in the Ask Question text box, your response will be time-stamped.

Audience, please remember that you need to answer at least four polling questions and participate in the live broadcast from the official start time for at least 100 minutes to earn two IRS CE credits. The polling question example we did at the beginning of this presentation will count towards that requirement.

I'll give you a few more seconds to make your selection and/or submit your answer in the Ask Question feature. Okay, so we're going to stop the polling now and let's share the correct answer on the next slide. Now, the correct response is B, 31 USC Section 330. And it looks like only 58% of the respondents selected B. So I think, Tom, if possible, could we get a little bit of a little clarification on that? Can you explain why B is the correct answer as opposed to the other options?

Sure, Jeff. As you said, the correct answer is B, which is 31 United States Code Section 330, right. So I guess it can get a little confusing differentiating between statutes and regulations, right. So looking back at that Horse Act, right, that led into Title 31, which is the treasury regulations, right, money and finance. That is where the statute resides. That gives the overall authority, the regulations, which kind of sort of extend out the statute, right, kind of provide a little more context and explain it a little bit more, that's Circular 230. So the Internal Revenue Code, of course, that's Title 26. That has a lot to do with tax preparation for the most part. And then of course, the state licensing authorities could affect some CPAs and attorneys here attending this webinar, but they would be -- that would be completely separate and not something that necessarily would be something that we would be covering here today. So by a I guess by a process of elimination here, right, it would be 31 United States Code Section 330.

Great. Thank you, Tom. I appreciate that. So, Tom, it looks like now you're going to switch gears and talk about OPR's mission, structure and investigatory process. Is that correct?

That is certainly correct. Okay, so as Jeff said, we're going to shift into the next part of the presentation. And that's going to be OPR's mission structure and how the investigatory process works. Okay, so the Office of Professional Responsibility administers the laws and regulations that govern the practice of tax professionals before the IRS. So this includes enrolled agents, CPAs, attorneys, and other individuals who represent taxpayers before the IRS, such as AFSP enrolled actuaries, which is an office that I worked for before, enrolled retirement plan agents. So what OPR does, though, is interpret and apply the standards of practice in Circular 230 and our goal, as I said here at Mission, is to do so in a fair and equitable manner. Now, these standards, when you think about them, right, they protect trust and credibility among taxpayers, the IRS and third parties. They safeguard taxpayers and practitioners from legal and ethical violations. They ensure the confidentiality of sensitive taxpayer information. They also uphold the overall integrity of the tax system.

So as part of its oversight role, OPR we will investigate allegations of misconduct by practitioners who by definition are practicing before the Internal Revenue Service. Now, OPR has the exclusive responsibility to for practitioner discipline under Section 10.50, which authorizes OPR to censure, suspend or disbar practitioners when warranted. Misconduct may involve acts non-compliance, improper or incompetent practice, misconduct and interactions with IRS personnel, external misconduct, which could also include criminal behavior. So when violations occur, OPR may impose some sanctions from censure to suspension or disbarment, and also, depending on the severity and circumstances throughout the process, practitioners are certainly afforded full due process and I'll probably talk about that or make that a theme later.

So OPR's goal is fairness, consistency and maintaining confidence in the system, not punishment for its own sake. And then finally, OPR supports the IRS broader enforcement strategy by ensuring that tax professionals adhere to professional standards, follow the law, and generally serve as trusted intermediaries in the tax system. So as we like to say, success in tax practice requires more than technical expertise. It also requires judgment, ethics and professionalism, because practitioners serve not only their clients, right, but the IRS and the tax system as a whole.

Okay, so now moving on here, in case anyone here in the room is curious about how OPR is structured, we've included our “current organization chart.” OPR has two separate legal analysis branches. That's where the attorneys reside, and they will be the ones who will handle and investigate various referrals. So we have the intake branch, which processes referrals and complaints. Referrals are generally the term of art that we use that are referrals that come from internal sources of the IRS and complaints are more come from external sources. And then as I said, the enforcement branch, which are both legal -- which is the Legal Analysis branch there, team two, these are the attorneys, they investigate and make recommendations for the appropriate disciplinary sanctions. We hope to have a second legal analysis branch as well. However, the Director does make all final determinations on appropriate disciplinary sanction. That's been overall policy of this office since I started with this office back in, well, about 2008. At the Director's office level too, there's also a senior counsel and a special counsel. The difference is special counsel is more embedded from chief counsel, which are the specialized attorneys in the IRS. And they're there to assist both the Director and the Deputy Director in the office as well. So that's a little peek into how OPR is organized right now.

Okay, now the investigatory process. So OPR receives referrals from a wide variety of sources. Many do come directly from IRS employees, right; whether it's revenue agents, revenue officers, settlement officers, appeals personnel. Really any IRS employee who encounters potential misconduct has the ability and in some cases, actually the obligation to make a referral to us. That would be under Section 10.53 of Circular 230. Now, we also receive information from other sources, such as IRS Criminal Investigations, those would be some of, obviously some of your more serious referrals, the Department of Justice, and then from outside licensing bodies such as state bars and accountancy boards.

In addition, referrals can come from clients, former clients, business partners, or really even other practitioners as well. There are, although some mandatory referrals as I referenced, these involve the most serious statutory violations, such as willful understatement, abuse of tax shelters, aiding and abetting, or just general injunction actions. Anytime these occur, IRS functions are required to send the case to Operator, so our case attorneys can take the time that's necessary to review the allegations and take the next appropriate step.

We also receive a lot of discretionary referrals regarding the day to day misconduct of practitioners, such as failure to provide copies of returns or records, improper negotiation of refund checks that could be pretty straightforward, frivolous filings, due diligence failures, which is a big one, fraud, general fraud, or negligent preparation. So a major source of these discretionary referrals, as I said, are IRS employees who observe the concerning behavior in real time.

Okay, so now it's important for practitioners to realize that when OPR receives a referral, we do check the practitioner's personal tax compliance to make sure that the practitioner has filed their personal federal tax returns and returns for any entity for which the practitioner is responsible for filing. And we check whether they both have paid all their taxes or are making an effort to pay any outstanding tax liabilities. So for practitioners who are not tax compliant, OPR, we will afford them time to get compliant if they are being diligent about doing so. But we are not going to wait years for a practitioner to get their missing returns filed, of course. When we do raise a non-compliance matter with a practitioner, it is typically because there are several years of fair to file returns or general pattern. Again, we're not looking for the occasional misstep such as one delinquent return. We understand that sometimes things happen but a pattern of filing delinquent returns, a pattern of not filing returns, pattern of not paying, well, that certainly will get our attention.

Now if a practitioner is unable to pay an outstanding tax liability but is on an installment agreement or some other arrangement to pay with the IRS, on that basis alone, the practitioner is not in violation of Circular 230. In these instances, we do consider the practitioner to be meeting their due diligence and their standard of care under the circular, but they must remain current right. Immediately going into an installment agreement when they hear from OPR, but then say perhaps falling out of it once it looks like maybe we've gone away or that the case might have been closed, that will eventually get back on our radar and rest assured that approach will be noticed and in my opinion suggests a lack of seriousness about getting compliant. So it is the practitioner who's not making any real effort right to pay in the outstanding tax liability or who has that pattern of not filing multiple tax returns that he or she has a filing requirement for that we will focus our efforts on. So for like a little best practices scenario, obviously I think this comes as pretty straightforward, pretty logical, the best suggestion here is for practitioners to file and pay timely and to consider making estimated tax payments to avoid any shortages if necessary.

Okay, now upon receiving the referral, I should note here as well, OPR will first determine whether it has jurisdiction over the tax professional and that is the tax professional practicing before the IRS. So OPR investigations -- I should also note this as well, OPR investigations generally begin after conclusion of the examination or appeal or other enforcement action in the case. OPR does not influence or generally participate in ongoing IRS enforcement activities to try and stay out of them. While during these enforcement activities, IRS personnel may consult with OPR about potential practitioner misconduct but IRS personnel must not threaten an OPR referral during enforcement activity Doing so could really could trigger an agency created conflict of interest between the practitioner and the taxpayer and we want to avoid that at all costs.

Now, in conducting an investigation, OPR will follow relevant leads to determine the facts regarding the issues raising a referral or a complaint, right. This can include collecting documentation, speaking to the reference or the person who made the referral, obtaining various affidavits or other statements, searches of some internal or external databases, review of taxpayer case file documents, perhaps interviews with witnesses with direct knowledge, and just some other requests for information issued to the practitioner and third parties, right; anything that you can think of to try and puts the picture together.

If we conclude that there may be actionable violations of Circular 230, at that point we will issue an allegation letter that recites the relevant facts and identifies the acts or omissions that appear to be violations of these Circular 230 provisions. Now an allegation letter provides a practitioner with an opportunity to address the issues raised in the referral or perhaps some of the issues that might have been uncovered by us at the very early stage in our consideration of the case. So again, here I am talking about how the practitioner will have multiple opportunities to take part in due process, as we like to call it.

Now the practitioner can also can, we don't recommend, it can elect not to respond, but that is generally not a wise choice. A practitioner's response, especially during these early inquiries, really does assist both parties in resolving the cases earlier. In many cases after receiving the allegation letter, the practitioner does acknowledge the accuracy of the facts identified in the letter and that they understand that they violated Circular 230. Many cases here are settled at this point with a mutually agreed upon sanction for the violations. Early participation by a practitioner can also help OPR understand both sides of the matter, right, while the conduct was relatively recent, right, so that's also something that could also be very helpful really for both parties, again involved. And that's something we might sometimes send perhaps before an allegation letter, we call it a kind of a pre allegation letter, which could also be sort of designed to kind of get the discussion going on the earlier part of the investigation.

Okay, next slide here. So if after the con -- so at this point here, after an allegation letter is sent, right, in the letter, a practitioner is afforded an opportunity for a conference, right. So if after there is a conference and any kind of settlement opportunity, practitioners are always afforded that opportunity for a conference and it's written in the letter, it can be virtual or in person. Dating myself a little bit, when I was here last time, it was in person almost all the time or maybe by phone. Now, nowadays you have more, more opportunities to virtually have discussions, but the practitioner and OPR cannot reach an agreement at that point; OPR, we will prepare a complaint which is filed through the IRS Office of Chief Counsel that would initiate a formal proceeding before an administrative law, an ALJ. So it's at this point here where the Office of Chief Counsel sort of takes over and they'll will offer the practitioner another opportunity to settle before starting the hearing process. The ALJ process looks very much like civil litigation. It'll have some pleadings, motions, there'll be discovery, lots of lawyers involved, and then often leading to a hearing before the ALJ, who ultimately, if there is not, if there is no settlement beforehand, will issue a written decision.

Now, the decision can sustain the allegations and impose or modify the discipline requested by OPR in the complaint, or it can dismiss the case entirely as well. Now, after the ALJ's decision, both OPR and the practitioner again have yet another opportunity here to appeal to the Treasury Appellate Authority. And the Treasury Appellate Authority is an attorney in another division of the IRS Office of Chief Counsel and the key here is they have had no previous involvement with the case, right, so they can be completely unbiased reviewer. A practitioner who wishes to appeal that decision may take the matter really outside of the federal, outside of the government and more to federal court. All right. Now, I should note here that the Treasury Appellate Authority decision, that is considered the final agency decision. So once the final agency decision comes through, or if there's an ALJ decision and there has been no appeal after 30 days, that is the final agency decision, at that point, the discipline would kick in. So it's important for any practitioners who are for dealing with this kind of a process to understand that. Now, as I said here as well, the key here is that the process for OPR discipline, it really does give the practitioner multiple opportunities to present their case and really does afford an independent review of OPR's proposed actions.

Now leading into case closings and sanctions and what can OPR do in general? Well, OPR has a range of options for closing a case and the types of sanctions that can be imposed on our part. A case can be closed without action. That's kind of one of the bigger ones. If we have a lot of referrals that really just don't have any kind of allegations that, you know, give rise to anything that really should be reaching out to the practitioner, so that's if we conclude there was no misconduct, or the conduct does not appear to have really any implication for future fitness to practice, we may issue a soft letter in mostly in tax compliance cases, giving the practitioner an opportunity to correct some filing or some payment issues before we decide on whether formal action may be necessary. The timely corrective action generally does result in closure of the case with a warning, right. So if we send a soft letter and they immediately responded like, I'm so sorry about that, I made the corrections already. I'm sorry I didn't get around to it, that generally will -- we're not going to take the time or effort to work any case like that. And most times that warning is certainly enough, we don't see any kind of repeated conduct later. Where something more formal is appropriate, the available actions sort of escalate through the sanction levels.

You can of course, see in Circular 230, and that will be -- that starts at the private reprimand level, then moves on to public censure, suspense and suspension, and then disbarment. A private repmand is really in essence a censure without the public disclosure of it. It's a written letter reprimanding the individual. Censures are essentially public reprimands because what happens is we will publish a list of censures along with suspensions and disbarments, if we have any in the Internal Revenue Bulletin. Now, suspensions and disbarments, if a practitioner agrees to one of them with the office or if an ALJ makes that determination, what that means is it bars a practitioner from practicing before the Internal Revenue Service until that suspension or disbarment period has ended. But the individual must before -- for that to end, the individual must petition for reinstatement, and that reinstatement must be, of course, granted by OPR. Monetary sanctions are also available, but are not applied as often as the general sanctions I was just talking about.

Okay, now we're going to go on to one of OPR's, I would say, stronger authorities here, and that's under Section 10.82, which we call them expedited procedures. OPR has the ability to take expedited action when certain types of misconduct have already been adjudicated elsewhere. So in these situations, the practitioner has already had that opportunity that I was referring to before to be heard in another forum, such as a state bar, a Board of Accountancy or court, and that prior proceeding has established the underlying facts. So examples would include the suspension or revocation of a law license of an attorney who practices before the IRS or the CPA certificate, perhaps lost or suspended for cause, various criminal convictions or violation of conditions that were imposed as part of a prior OPR sanction and other sanctions that are ordered by a court. So because the misconduct has already been formally determined, OPR is able to move more quickly to impose an expedited suspension, really in order to protect the integrity of practice before the IRS, because many of these instances, the conduct is very serious.

So Section 10.82 also allows expedited action when a practitioner is non-compliant with their own individual tax obligations or with tax matters of entities for which they are responsible, right. So I referenced the personal tax compliance earlier of practitioners. In these cases, the non-compliance itself is the underlying fact that supports the expedited action. Now the difference is these are not just one-off tax non-compliance issues, but these are rather over a period of time, suggest a consistent pattern of non-compliance. So overall, these procedures give OPR that streamlined path to address situations where the practitioner's conduct poses an immediate risk to taxpayers or tax administration, really without needing to wait for that full complaint process.

Okay, so now we're going to move into Circular 230, the general structure and scope, okay, so let's just transition into that kind of discussion. This section, I'd say it sets the stage really for understanding how the regulations are organized and how they function practice. So OPR's guiding regulations right in Circular 230 are, they're broken up into four primary subparts. There's also an additional introductory subpart that covers the general provisions. But the main operational sections include subpart A, this section contains foundational provisions identifying who may practice before the IRS and the authority under which the Treasury Department regulates practitioners; subpart B is where you'll find the rules of conduct, ethical behavior, standards of professional responsibility and we're going to definitely spend considerable amount of time on these requirements today because they are core to OPR's oversight mission; subpart C, this section lays out the types of sanctions that can be imposed for violations of the rules, including conduct that is incompetent or disreputable; and then you got subpart D, this final subpart explains really the procedural framework for how a disciplinary case moves forward, ensuring practitioners are afforded the due process at every stage. Certainly one of those -- certainly a subpart, I hope none of you attending here today have to deal with.

So Circular 230, it's not the only applicable authority for practitioners, right? The Internal Revenue Code certainly imposes additional reporting and disclosure obligations for you all, particularly for individuals who prepare returns, right, or represent taxpayers. And of course there are -- practitioners are accountable to their state licensing authorities and their other professional organizations, such as the AICPA for UCPAs, ABA for you attorneys, and the NAEA for you enrolled agents, where certain violations can also trigger some reciprocal discipline on the part of both OPR and also the licensing authority.

Okay, so now we're going to delve a little more deeply here into Section 10.2(a)(4), which defines practice before the IRS. Now, the definition is very broad. Note that it specifies, you can see it underlined here, all matters administered by the IRS, even if they are not included in Title 26. So for example, taxpayers must report their ownership or signatory authority over foreign bank accounts, right, that contain more than $10,000 at any time during the year on their Schedule B of the 1040 and of course through filing an FBAR, right. The requirement to report in a foreign bank account, however, that's not actually found in the Internal Revenue Code. Rather that's actually in Title 31 of the US Code, but it is partly administered by the IRS. So practice contemplates all matters connected with a presentation to the IRS regarding taxpayers rights, liabilities and privileges under laws and regulations administered by the IRS. So in this instance, filing an FBAR would be considered practice, even absent the traditional representation before the IRS.

Now, practice does not, however, include mere paid tax return preparation, which I'm sure many of you heard of is the holding from [inaudible] IRS Loving versus the IRS, which was a landmark 2014 case that was decided by the United States Court of Appeals for the D.C. circuit. So accordingly, as a result of that, if you are an unenrolled return preparer who merely prepares tax returns, you are not covered by Circular 230, right, because you are not representing before the Internal Revenue Service. However, if you engage in representation authorized through the IRS' annual filing season program, which has been established in Revenue Procedure 2014-42, Circular 230 does apply to you. That's because the AFSP allows for certain limited representation rights with respect to returns prepared and signed and only before examination or taxpayer advocate. And essentially, when individuals do apply for AFSP, they should be aware of this because they actually do have to agree to being covered under Circular 230. So it should not be a surprise for anyone who does take part in that yearly program. So to kind of just break it down relatively simply, too, is, although there are other areas where practice would take place but, in general, if you are filing a 2848, you're practicing before the Internal Revenue Service. That is a hard and fast rule.

Okay, so who are practitioners? So now that we've discussed what it means to practice before the IRS, let's talk about who is actually authorized to do so. So the persons who can generally practice before the IRS and can be authorized on that form 2848 include only practitioners as defined by Section 10.3 of Circular 230. So practitioners include the following, right, attorneys, of course, CPAs, those who are enrolled to practice by the Internal Revenue Service, such as enrolled agents, enrolled retirement plan agents, and enrolled actuaries, although there are some limited code sections that they can represent on. And then as I just mentioned, the preparers who possess an annual filing season program record of completion. So just also a note too, because we do have open appraiser cases. Appraisers who submit appraisals supporting tax positions are also subject to the oversight under Circular 230 and are regulated by OPR, but they aren't considered practitioners and cannot be authorized on a Form 2848, so just a little note there.

So, Jeff, I do think that we have our second polling question, do we not?

That is correct, yes. So we're going to do polling question number two now, which of the following may practice before the IRS? A. Enrolled Agents; B. Attorneys; C. Certified Public Accountants; or D. All of the above. So take a moment and click the radio button that best answers the question. If you do not receive the polling question, enter only the letters A, B, C or D that correspond with your response in the Ask Question text box. As I mentioned earlier, the response is time-stamped and I'll give you a few more seconds to make your selection or submit the answer in the Ask Question feature.

Okay, we're going to stop the polling now and let's share the correct answer on the next slide. And the correct response is D, all of the above attorneys, certified public accountants and enrolled agents may all practice before the IRS. And it looks like we have an excellent correct response rate on this, 98% answered D, so that's great. Tom, looks like the next topic of the next topic of discussion is the foundational provisions of Circular 230.

Excellent and yeah, excellent response rate. Thank you. Thank you, Jeff. And yes, it is. So even though really every provision in Circular 230 plays a role in a larger framework, today, we're going to focus on the sections that -- of course, dealing with time factor, here, we're going to focus on the sections that practitioners most commonly encounter in their everyday work. These are what we often refer to, as Jeff said, the foundational provisions, the rules that you as practitioners tend to rely on regardless of your specific practice area. But first, so before we dive into these specific foundational sections, I do want to take a moment to highlight Section 10.33, best practices. So this section sort of sets the tone for all practitioner conduct before the Internal Revenue Service. So what 10.33 does is it encourages practitioners to provide clients with the highest quality representation concerning federal tax matters, communicate clearly with clients about the importance of accuracy, transparency and compliance and promote integrity in preparing submissions to the IRS.

Now, it is important to remember here that Section 10.33 is merely aspirational, all right. In other words, if a practitioner doesn't meet these best practices, that failure in and of itself doesn't constitute a violation that OPR can use to discipline someone under Circular 230. However, and this is key, best practices provide the roadmap for what quality representation should look like, and they help reinforce the high professional standards that the tax system depends on. So as we review the provisions today, I'll point out where some best practices can come into play and how you hopefully can incorporate them into your everyday interactions with your clients and with the IRS. Okay, so here we have consolidated lists of the foundational provisions in Circular 230, the ones that we're going to, like I said, that you all would probably encounter most frequently and the ones that we're going to talk about today. We're going to do it in order to, starting with 10.20 all the way down to 10.37. So these duties include exercising due diligence, notifying clients of errors, avoiding conflicts of interest, properly advising clients on the implications of their tax positions, ensuring compliance with tax filing and payment obligations, and generally maintaining professional integrity and competence. So we're going to walk through each one, like I said, in order explain what they require, talk about what OPR typically sees in werewolf cases, if possible. So my goal here is to elevate not just your familiarity with these rules, but also your confidence in applying them consistently. So let's jump into the first one here, Section 10.20, which addresses a practitioner's duty to provide information. So a practitioner must not interfere with any IRS attempt to obtain information unless in good faith the practitioner reasonably believes the information is privileged, okay.

So while there are several types of privileges, the most common privilege asserted in a matter before the IRS is, as you might imagine, the attorney client privilege but then also if you're non-attorneys, the analogous federally authorized practitioner privilege. Now if you are unsure whether a privilege applies, I would highly recommend that you consult with an attorney in those instances as well. So, and if moving on to the next part, if neither the client nor the practitioner possesses the information sought under 10.20, a practitioner must promptly inform the IRS of that fact and provide any information regarding who may have possession of the requested information. However, the practitioner is not required to make inquiries of anyone other than the client or to verify information provided by the client regarding the person or persons in possession of request information.

Tom, would you be able to say more about this? I'm wondering about two things specifically. First, practitioners should inform the IRS when they don't have the requested information, when the IRS knows the reason the practitioner didn't supply it is because they don't have it, that's completely different from refusing to comply with the information document request. Is that correct?

Jeff, yeah, absolutely, that is correct. Informing the IRS employee whether the taxpayer has possession of the requested documents is very important, right from the taxpayer, it's relevant to whether the taxpayer was allowed to make reasonable estimates for missing information, whether penalties are appropriate, and even the level of taxpayer cooperation which can be important in a potential criminal referral or an investigation. And for the practitioner responding to the request displays due diligence and efforts to meet the standards under Circular 230. So I'll give you a quick best practices here to follow. So when responding to an Information Document Request or IDR, you may want to write to the best of the taxpayers knowledge, they are not in possession of the documents requested and this is because, as you might imagine, sometimes the taxpayer later out of nowhere finds the requested documents, right and that caveat really does prevent sort of any unintended misstatement.

Okay, thanks for explaining that further. Now for the second part. How about a situation where a document evidences a good faith challenge to the rule or regulation? Can you give an example?

Sure. So typically when new tax laws are enacted, they don't come with a lot of guidance, right. So it's up to the treasury and the IRS to draft regulations and issue other types of guidance like revenue rulings, revenue procedures to sort of flesh out the statute. Sometimes practitioners reasonably believe in good faith that the guidance that has been issued is incorrect or goes beyond what Congress intended, or even that a co-provision is unconstitutional. In these cases, practitioners may advise their client to take a position that the practitioner reasonably believes is correct with the intent to address the disagreement with the IRS, probably during an audit. So some of these matters ultimately do end up in litigation with the courts deciding the issue. So just remember, a practitioner must have that reasonable belief made in good faith that the advice that they are giving is correct.

Okay. So in a nutshell, for practitioners to meet this standard, their efforts must demonstrate reasonable steps were taken to ensure their actions were appropriate and information provided to the IRS is correct. And if challenging a rule or regulation, practitioners must have a reasonable belief made in good faith, the advice they're giving is accurate. A practitioner can be wrong, but still have conducted the due diligence required under Circular 230. Did I get that right?

That's correct, yep. And we're going to go into a little bit more in detail later on in section 10.22 and 10.34 as well.

Great, thank you, Tom. Do you want to introduce the next provision that you're going to be discussing?

Short after 10.20, let's see, 10.21, there's another common section, other potential pitfall that we like to talk about here, which deals with really a sensitive topic and that's your duty regarding a client's error or omission. This section is really, it's often misunderstood and it can present a number of ethical challenges for many reasons. It can be very challenging. Essentially, if you learn that a client has not complied with the Internal Revenue Code or made an error in or omission from any return or other document that was submitted to the IRS, you have a duty to do two things; you must promptly inform the client of the non-compliance the error or the omission and then you also must advise the client about the consequences under the code or regulations of that non-compliance error or omission. So a best practice required under the rules governing CPAs and attorneys would also include advising the client about what to do about the non-compliance error or omission. So CPAs, for example, are required under the AICPA rules to recommend correction of the error. Circular 230 does not have a duty to go that far or to file an amended return or other corrected document with the IRS.

And fact this is an interesting point here is if you did so without the client's permission and we've come across a lot of practitioners who just if they see that error. They want to doing so without the client's permission, even if it is incorrect, it could expose you to malpractice issue and even potential discipline from your state bar or accountancy board for violating your duty of confidentiality. So I know it doesn't seem fair, but that is the rule. So I'll use an example here. Let's say you have a new client that asks you to prepare their 2024 tax return. And as part of your regular due diligence right, you review the new client's previously filed returns. And in your review, you discover an error in the calculation of this new client's net operating loss in 2022. So this error would affect the client's NOL carry-forward right to 2023 and then 2024. Under Section 10.21, you have a duty to promptly inform your new client of the error and advise the client about the consequences of such error. For example, audit exposure penalties and interest on potential liabilities. So, as a best practice, you should advise your new client on how to fix this error, right. In this case, filing an amended 2022 and 2023 tax return, right and then reporting the correct NOL on the following 2024 tax return.

But what happens if your new client wants you to use the incorrect NOL carry forward amount right, for the 2024 return? Well, your due diligence responsibilities under Circular 230 prevent you from preparing a return that you know is incorrect, right. So, stated quite clearly, you cannot knowingly perpetuate the non-compliance error or omission and one would be doing that in this situation.

Okay, Jeff, looks like we have our third polling question.

Yes, we do. So here we go. Polling question number three. In exercising your due diligence responsibilities, you discover your new client has omitted income on a prior year’s Form 1040. Under Circular 230, you are required to: A, report the unreported income to the IRS; B, tell the client about the error, but only if the IRS sends an audit letter; C, promptly inform your client of the unreported income and advise the client of the consequences under the Code and regulations for that error, D, do nothing so as not to upset a new client.

So take a moment and click on the radio button that best answers the question. If you don't get the polling question, you can enter A, B, C or D only that best corresponds with your response in the Ask Question text box, which will be time-stamped. I'll give you a few seconds to make your selection. Okay, so we're going to stop the polling now and let's share the correct answer on the next slide and the correct response is C. Promptly inform your client of the unreported income and advise the client of the consequences under the code and regulations for that error. Let's see how we did with this question and I see that 96% of you responded correctly, so that's a great response rate. Tom, looks like you're going to address Section 10.22 next.

That is correct. And again, good job, everyone. We're on a little bit of a roll here. All right, so, as Jeff, as you said, we're going to jump into 10.22, which is a biggie. It's definitely a big one, both sort of in terms of what we come across in the office, but also just in terms of the general breadth of the practitioner's obligations, okay. So Section 10.22 provides that in practicing before the IRS, a practitioner has a dual responsibility to exercise due diligence to ensure the accuracy of representations, oral or written, made to the client or the IRS. So this includes preparing or approving for submission to the IRS or filing anything that relates to IRS matters, whether it's returns, tax forms, documents, affidavits, protests, etc. So note that I said you have a dual responsibility, right. You have obligations to both your client to make sure that you're giving them the correct and accurate information, but also to the IRS to make sure that the representations that you're making on behalf of your client are accurate, accurate, and complete. So due diligence under Section 10.22 means that you must determine the correctness of the matter and make sure you're expressing it correctly to your clients and to the IRS or the Treasury Department.

So breaking it down, then, what does it truly mean to exercise due diligence, right? Well, the first part is you should know the facts by asking questions, right. You cannot let the client determine which facts are pertinent or significant, right and which you know and which are not significant, right. It's your job, right. You're the tax expert. For example, a client lists on the tax organizer that they had a $20,000 capital gain. Well, is it really a capital gain? Maybe the income subject to depreciation, right, something that your client might not know about, so that's making some or all of the income ordinary, right. You're the tax expert, right. They might have their recommendations, but you are ultimately the one with the training and the knowledge necessary. Should frame your questions to solicit the relevant facts, right, any information from the client. Don't frame them where there's just a simple yes or no answer. Frame that to get information out from them. Make reasonable inquiries. If the information that you're being given appears to be incorrect, inconsistent or incomplete, you don't have to audit your client, right, but you can't ignore the implications of other information that you know or may have been given, whether by the client or by someone else. And then you must determine which facts relate to and are material to the tax matter.

And then sort of going to the next section there, know the applicable legal authorities to the tax matter and this will go into a general competence review that we'll discuss later. So if you aren't familiar with the applicable law, right, it's important to educate yourself on it or find an expert upon whom you can reasonably rely or work with and then apply the material facts to the applicable legal authorities, right, very much sounding like one of my law school classes. Sometimes the application of the law to your client's facts unfortunately result in a conclusion that your client will not like, right; something's not deductible, certain income is taxable. Your due diligence obligation, it's not to be friends with your client, right. It's to give the client the plain truth of the matter. And then applying the relevant fact of the applicable law, it comes into play really at two times in a tax matter too. It comes up both pre-transaction where the client has come in to you in advance and ask you for advice, in which case you may be able to offer some more favorable options, right, because things have not been done yet. But then also the post transaction where the client comes to you after the fact, in which case you may have to tell the client that the tax treatment that they're expecting is not going to work and then it's up to you as the tax practitioner to explain why.

Now, there is a safe harbor provision as well. It's found in Section 10.34. It still applies to Section 10.22. And this allows practitioners to rely in good faith and without verification on client information. Now, despite this safe harbor, though, you are still required to make reasonable inquiries if the information your client gives you appears to be incorrect or inconsistent, or perhaps incomplete, or consider the implications of other information you received or that what you personally know. So basically, you cannot be willfully blind or to use a term that I used to use when I was first with OPR, to bury your head in the sand, essentially. Sometimes your client may not give you all the relevant information, right, maybe it's by accident, maybe they're just not organized, maybe it's on purpose. And the information you've gathered from your client does not appear to be incorrect, right, or inconsistent or incomplete, in which case then you've met your due diligence duties under Circular 230.

So I'll give you a quick example here. So say you have a taxpayer US citizen and receives an inheritance upon the death of their mother, who is also a US citizen. The inheritance includes over $10,000 that's been held in a foreign bank account. Now, that same year, the taxpayer meets with their CPA to have their federal return prepared and as part of their due diligence, the CPA reviewed the client's completed tax organizer and asked about any changes occurring during that year. Client informed the CPA about the inheritance and asked if the inheritance needs to be reported on their return. Client does not, however, mention that the cash is held in a foreign bank account, not being tax savvy, the client does not know that this is an important fact. So the CPA, being knowledgeable on inheritances, informs the client that the inheritance from their mother, who's a US Citizen, does not need to be reported on the client's return. So in giving this advice, the CPA did not know that and had really no reason to know that the inherited cash was held in a foreign bank account, which triggers that reporting obligation on the client's Schedule B. So although there's been an error in the preparation of the client's federal return, there was no willful blindness on the part of the CPA. The CPA had exercised their due diligence in asking questions of the client and the client was not being deceitful. So there would technically not be a Circular 230 violation in this case.

Although a best practice here too is, because of this SBAR reporting and not necessarily trusting exactly trusting everything that your client is saying, it might be worthwhile to just have that as a routine question, right. Maybe 90% of the time their answer would be that the money is in an account in the United States versus the foreign bank account, but perhaps that is something that can be worked in just as a general question to ask regardless of whether or not, you have anyone who has any perceived connections to anyone outside the United States.

So reliance on another's work product also is something that occurs routinely in practice, right? Such as reliance on a colleague, subordinates an expert's work product. And here along those same lines, you'll be deemed to have exercised due diligence if you have used reasonable care in selecting, engaging, supervising, training, or evaluating that individual's work. So reasonable care is a fact and circumstances test that takes into consideration your reliance on the other person's work and who that person is. Now to rely -- to be able to rely on your employee's work product, you really do need to use care in selecting and hiring them and making sure that they're properly trained so they know what they're supposed to be doing and making sure they know about their obligations under Circular 230. So, I guess you can call this a best practice, but at a minimum, at least a periodic basis, you need to evaluate their performance, right, to ensure that they continue to correctly understand what they're doing and that they're not making any mistakes. They could get your entire firm sort of sideways with Circular 230. And like I said, along the line here, we will discuss Section 10.36, which relates to procedures to ensure compliance.

Now, to rely on the work product of another tax professional or other third party, the basic rule is that you may rely on that unless you have reason to question it, right. So again, relying on another tax professional or other third party, you can rely on it, but only if you have reason to question it, you need to ask any of those additional questions. So like if you have information that suggests that the third-party document may be unreliable for whatever reason, then you do need to ask some questions before you can truly satisfy your due diligence obligation. So while there is no Circular 230 requirement regarding documenting the information you receive from clients and others or the advice you provide to your client, it is in general good practice to maintain a written record of such communications. Such documentation really could assist yourself as a practitioner during an IRS examination or hopefully not any alleged malpractice claims as well.

Thank you, Tom. Would you be able to go over another provision now?

Absolutely. We're going to go right into 10.23. So this provides that a practitioner may not unreasonably delay the prompt disposition of any matter before the IRS. And this includes situations such as ignoring IRS requests for documents or additional information, failing to respond to IRS notices within reasonable timeframes, raising questionable privilege claims simply to delay responding, or allowing a matter to sit unresolved without the client's knowledge or consent. So what is considered unreasonable, it really is highly fact dependent. A practitioner should always, and this goes into the whole communication with your Internal Revenue Service and documenting things to protect yourself. So practitioner should always document reasons for any delay, such as, so perhaps -- such as a client's medical emergency or the appearance of missing records or the need to obtain expertise that demonstrates general good faith justification for any kind of delay, right. That would in a sense create reasonable delay. So failure to comply with 10.23, it can be viewed as obstructive conduct and may give rise to discipline even absent that intent to mislead. So this is where the proper communication, the proper documentation for the client and with the IRS really is essential to avoid any unnecessary sanctions under this section here.

Okay, now we're going to move on to 10.27 which addresses the fees that a practitioner may charge. Now, most practitioners, as you might imagine, want to be paid for their work, right, but the rules establish important limits and you'll see the reasons -- you'll understand the reasons as we kind of get into this a little bit. Under Section 10.27(a), a practitioner may charge a fee that considers the complexity of the return for the matter. However, the fee cannot be structured on a sliding scale tied to the client's refund amount. Examples of impermissible fee arrangements include charging a higher fee based on the size of the refund, making the fee contingent on whether the client receives a refund, or adjusting the fee proportionally to refund dollars recovered. These restrictions essentially protect clients from being steered towards overly aggressive positions simply to increase practitioner’s financial incentive, right. A fee structure should reflect the complexity, the skill, the time and the expertise involved, not the outcome that the taxpayer receives.

Now, as to contingency fees, Circular 230 provides that they can be charged, but only in limited situations. Situations in which a contingency fee can be charged are in connection with an IRS examination or challenged to an original return, amended return, or a refund claim for services rendered in connection with the determination of certain statutory interests or penalties assessed by the IRS, or for services in connection with any judiciary proceeding arising under the code. Contingency fees are limited as such because in some instances a contingency fee might prompt a practitioner to recommend again, like I said in the last slide, an over aggressive position to the client, right. And this can have an effect on a practitioner's self interest in the final result and can be an issue too under the conflict of interest rules that we will discuss in a couple of slides.

Now there's a couple best practices here that I just want to add and I think they would fall clearly in an engagement letter such as, it's important, you're clearly defining fee arrangements in writing up front, right, including whether a fee is fixed hourly or contingent, right. You don't want any surprises for your client. And if a contingency fee is permissible and applied, document the basis for the arrangement, right, in case of a later review or inquiry. Leave room to reassess fee arrangements. If the scope or representation changes, right, such as moving from perhaps general return prep to a more complex representation or litigation for your attorneys here. Be mindful of the conflict of interest rules and consider whether the fee structure could actually reasonably appear to impair objectivity and then adjust appropriately. Okay, so that would be -- that's Section 10.27 in a nutshell.

Now we're going to go to 10.28, the return of returning clients records. So this one is important too, because it is a common referral subject that we come across. So at its most basic level, Section 10.28 requires that a practitioner must promptly return all records of the client that the client needs to comply with their federal tax obligations. So what does this mean in practice? Well, it means that the client must have reasonable access to the documents necessary to file an accurate return to respond to an IRS inquiry or meet any other tax requirement. If the records are something the client would need in order to stay compliant, you have to give them back. All right, so -- and kind of this is where the rule sort of trips people up, especially during business transitions. You still have an obligation to safeguard and properly return your client records if you're closing your practice, if you're selling your practice, if you're retiring, or if a practitioner in your firm becomes incompetent or passes away and the key principle here is stewardship. Now, these records aren't yours, they belong to the client. So no dumping of boxes of files that contain PII into the hands of another preparer without written permission from the client. No leaving files in a storage unit with the hope that someone else will eventually sort them. And definitely no handing off sensitive information just because someone's taking over your book of business.

So now 10.28 also recognizes something right. That practitioners often do encounter, and that is fee disputes, right, and this is where we come across this issue a lot at OPR. So under certain state law restrictions, a practitioner is allowed to withhold some of their own work product things like claims refund, a schedule, an affidavit, or other documents that you prepared if the withholding is specifically because of non-payment of fees. This is really important but even if you choose to withhold your own prepared documents, you still must return any records that are necessary for the client to prepare or file their return, that's is the key right there. In other words, you can withhold your work, but you cannot withhold their records or your client's records. And nothing you withhold can prevent the taxpayer from filing a complete return. If it does, you must give it back. And that's where we do see practitioners, unfortunately, getting referred to this office. And it usually does arise from a fee dispute. So some best practices here would be to maintain organized accessible recordkeeping systems, plan ahead for transitions, and communicate clearly and document what was returned to the client, including when and in what format. Most 10.28 issues really don't arise from bad intent, they arise during transitions, fee disputes, or some other disruptions. So planning ahead really can prevent, both client harm and possible disciplinary referrals on the part of the practitioner.

Okay, now we're going on to 10.29. As I said, I was going to refer to this one later. That's conflict in interest conflicts. I do find this section to be very interesting. Conflicts can occur often when representing related taxpayers. The general ones that you would imagine, for example, married taxpayers, a partnership, and the partners or corporation and shareholders or officers, those are the obvious ones, right. But to drill down more into the rule, conflicts can also arise when there is a significant risk that your representation of one client will be materially limited by your representation of another client or former client, your responsibilities to a third party, such as a fiduciary beneficiary, someone whom you owe a contractual or other obligation, or your own personal interests, okay. So, for example, a conflict of interest can arise when your practitioner promotes a transaction, prepares a return, reporting that transaction, and then defends the taxpayer during an IRS examination of that transaction. In this situation, the practitioner's interest may be opposed to the client and that the practitioner may continue to dispute the transaction to avoid a penalty or malpractice lawsuit, right. So all of a sudden, there might be a point where you realize that you, as the practitioner, you're no longer seen to be representing your client. You might actually be saying certain things to the IRS that are more designed to protect yourself rather than to represent the client and, at that point, that is where there is a conflict of interest.

Tom. So what you're saying in a case like this, the practitioner would be trying to get the IRS to agree with their position, not because it was a valid tax position, but because they're afraid that if they lose the case, the IRS might assess a penalty against the tax pro or that the taxpayer might sue the tax professional?

Correct. So in this situation, the practitioner may be looking after their own interests, right, more than the clients, right. The practitioner might be maybe extending the dispute to avoid losing the case for as long as possible, sort of put off having to return the transaction fee or being subject to a malpractice claim. All of this could be to the detriment of the client who's also paying it, that the practitioner to dispute the transaction with the IRS and could be incurring accrued interest and possibly penalties for an invalid tax position that they could have been resolved a long time ago or settled as well.

Okay, thank you. So, at the root of it, practitioners must have their client’s best interest at heart and avoid conflicts of interest or potential conflicts of interest at all costs. Thank you for the clarification, Tom.

So once a practitioner has concluded that a conflict exists, you must determine whether you reasonably believe that you can provide competent, diligent representation to each affected client and if you cannot or the conflict is legally prohibited, you must withdraw from representation. Now, if you believe that despite the conflict, you can provide competence diligent representation to each affected client, you must obtain in writing a conflict waiver from each affected client at the time the conflict is known. So this documentation must occur within 30 days of when the conflict arises to ensure that the clients are immediately informed of a potential conflict and also that their informed consent is received before the representation really proceeds much further. Getting the written conflict waivers after the tax matter you know, concludes or when the IRS or the client raises the issue of a conflict would really not be considered timely, really, or effective at all either. So get those conflict waivers in within 30 days that is a specific, important rule.

Retain the written conflict waivers for three, three years after the engagement that you are involved in has ended and waivers must be produced to the IRS when requested. Recognizing whether a conflict of interest exists or really -- or whether you can provide competent, diligent representation for each client can be tricky, definitely can be tricky. So I would say don't be afraid to seek help from various sources such as your state licensing authority, malpractice carrier, or an objective and knowledgeable third party.

Okay, now we're getting new client solicitation. So following conflict of interest, we're going to go under here a little bit on Section 10.30, which sets clear standards for how practitioners may communicate with the public or solicit clients relating to federal tax matters. So since the last time the Circular 230 on solicitation was updated in 2014, I must say there has been a proliferation of new and effective ways for tax professionals to solicit clients, right. This can include social media, email, YouTube videos, I would imagine, even texting, and of course, somewhat famously, as you might imagine, TikTok videos as well. And these new ways offer, they do offer attractive opportunities for client outreach and engagement but regardless of the method used, it is important to adhere very closely to Circular 230 on solicitation for your services.

So Section 10.30 states that practitioners may not use any form of communication, public advertising, or private outreach that includes false, fraudulent or misleading statements. This applies to everything from print ads, websites, emails, social media, direct messages. So, for example, a practitioner cannot advertise that they can get better results for clients based on their previous IRS employment or because the practitioner knows people in the IRS or that they know some secret way to get larger refunds, right, that would violate this section pretty clearly. Section 10.30 also addresses uninvited solicitation. So if a practitioner reaches out to someone unsolicited about a federal tax matter, they must clearly identify that communication as a solicitation and it must disclose how they obtain the recipient's information, meaning what was the source. So these rules are designed, as you might imagine, to ensure the taxpayers are not misled or pressured or confused by communications that appear, that may appear official or imply insider knowledge of IRS activity. So these standards protect both taxpayers and the integrity of the tax system, right, by ensuring that practitioners compete fairly and communicate honestly when seeking clients.

Now, continuing along here on Section 10.30 with respect to this section that mentioned fees, 10.30 states that a practitioner may communicate fee information in professional lists, telephone Directories, print media, mailings, email, fax, hand delivered flyers, you name it, right, radio, television, any other method. However, any statement of fee information must include a statement disclosing whether the client will be responsible for cost, such as phone charges, copy charges, filing fees, right, anything that makes sure that the client is not surprised by any additional fees. In addition, if a practitioner changes their rates, they must charge no more than the published rates for at least 30 days after the last publication of the fee schedule. Now, I think this is really interesting here. Adhere to this time frame can be tricky right now when we are using social media, right. So for example, you have maybe you posted something on TikTok or Instagram or X/Twitter that included fees, right and the same was over 30 days ago. But as you know how social media works, someone may have shared it, right, or reposted it or re-tweeted it. Now there's an argument that we have a new time frame, right. So certainly something to keep a mind on there.

Some best practices here to consider would be avoid making promises you cannot keep, right. Avoid offering specific tax advice or endorsing products or services that you have an interest in without having those appropriate qualifications in discussion disclosures. Clients need to know if you have a vested financial interest in the product or service that you're promoting to them. This process not only builds trust, but it also ensures that clients have the information they need to make an informed decision as well and ensure your online activities comply with ethical and legal standards that are set by your professional organization and other regulatory authorities.

Okay, so moving on to Taxpayer Checks here, Section 10.31. So practitioners are not allowed to negotiate taxpayer checks. You just cannot do it. You may not endorse cash deposit into an account that you control, split an electronic transfer, or do anything comparable with a check in your client's name as a taxpayer written from the US Trust Treasury, doesn't matter whether your client says it's okay for you to do or not, okay. Pretty simple, don't really feel like it's even necessary to go into much else here as well.

Moving on to Section 10.34, this is another -- certainly another biggie here. Call them biggies because they are involved in an outside number of referrals that we receive. So the Section 10.34(a), which covers the standards of tax preparation, return advice, and the submission of other documents. So this section applies when you assist or advise clients on reporting items on their tax return. So Section 10.34(a) state that you may not sign a tax return or advise taking a position on a tax return that lacks a reasonable basis, okay. So what is a reasonable basis? According to 10.34, it's tied to the same concept of reasonable basis in Section 6662. It means that there is generally a greater than 25% possibility of success that the position on the return would be sustained if challenged, but there must be disclosure as well. Section 10.34(a) also provides you may not sign or advise a position to a tax return position that is willful attempt to understate liability either by you or your client. That's a reckless or intentional disregard of the rules and regulations, okay.

Now moving on to the slide here. This kind of explains sort of the four main bases here, right; reasonable basis is 25%, followed by realistic possibility of success, substantial authority, which is more between 40% and 50%, and then more likely than not, which is what we want to see which is 51%, okay. And this next section here on tax positions, right. This is what you put together that establishes what those four levels that I just explained are, right. So, revenue rulings, legislative history, treasury regulations, those are some of the primary authorities, right. Secondary authorities would be more like IRS pronouncements and the like.

Okay, now moving here to 10.34 to tax returns on Subsection B of 10.34 sets forth some due diligence standards for documents and other papers. And here, in a sense, you may not advise a frivolous position, you also may not advise making a submission that would be frivolous or whether submission is intended to delay or impede tax administration, okay. You also may not advise making a submission that either contains or omits information that demonstrates an intentional disregard of the rules and regulations. So we'll see that in collection matters, where submitting financial statements that, omit some of your client's assets, and then also it's your obligation under 10.34 to advise your client of penalty exposure and the opportunity to avoid the penalty by making a disclosure on the tax return.

Thanks, Tom. Would we be able to cover section 10.35 now?

Yes, and real quick, because I know we are surprisingly getting short on time here. 10.35 competence, right, this is a section that should really be at the forefront of every tax practitioner at the outset of any engagement or pre-engagement, right and that is, competent practice really requires the appropriate level of knowledge, skill, thoroughness, and preparation necessary for the matter for which the practitioner is engaged, right. So it's important to recognize when you do not have the knowledge or understanding to advise a client and cannot readily become competent in a matter to meet that client's needs, all right. So there's a bit of a retro -- kind of an introspective approach, right, understanding can I get competent in this; if not, can I find someone who can assist me. Also, you have to take into account the time that would be required of it, and if not, then you would have to walk away from the engagement, unfortunately. So moving on to the next polling question.

Yes, we'll do the fourth polling question now. In which way can a practitioner meet the competence requirement under Section 10.35? A. Research and education; B, Having the requisite tax knowledge and experience; C, Consulting with another tax professional who is an expert on the tax matter; or D, All of the above. Please click on the radio button that best answers your question. You can also put letters A, B, C or D in the Ask Question text box.

I'll give you a few seconds to make your selection, and then we will go over the answer. As Tom mentioned, we are short on time, so we'll try to get through this polling question pretty quickly. All right, and we're going to move on to the answer now, which is D all of the above. Practitioner meets the competence requirement under 10.35 through research and education, already possessing the requisite tax knowledge and experience, and consulting with another tax pro who is an expert. 97% correct response rate, so that's great. So, Tom, I'll hand things over to you.

Excellent. Thank you, Jeff. And then the next section here is 10.36, which is procedures to ensure compliance. So I'm just going to quickly jump into, a real, just general here is that, under 10.36, anybody in a firm or a business who has or shares the principal authority responsibility for overseeing the firm's federal tax practice that involves Circular 230 matters must take reasonable steps to ensure that everyone who is engaged in that firm is aware of their duties and responsibilities under Circular 230 and is sufficiently qualified to satisfy them. So that is 10.36 in a nutshell.

We're going to move on to section 10.36 here real quick as well and this is the last section before I get into disreputable conduct. And this states that when you're giving written advice, you must make reasonable effort to determine the relevant facts, reasonably consider those relevant facts, and then make reasonable factual and legal assumptions in situations where the facts are unknown. So just in general, again, while we're taking written advice here, it sort of is that same reasonableness approach that I discussed in Section 10.22, and that safe harbor that Section 10.34(a) applies, right. Okay, now, finishing up with 10.37, like I said, may rely on advice of others if the advice is reasonable and your reliance is in good faith, considering all the facts and circumstances.

Now, we're going to move on here to incompetence and disreputable conduct. And so this is a section that lists 18 types of disreputable conduct that bear on a practitioner's fitness to practice. We do spend a lot of time on this one. They're all listed there in Section 10.51(a). And then just going quickly into Section 10.51(a)(4), which is one popular one that we see, and this is where practitioners cannot participate in any manner in giving false or misleading information to the IRS or any officer or employee thereof. A lot of these things happen during the practice portion of a practitioner's engagement as well. So this would cover anything from, submit to the IRS testimony, affidavits, tax returns, protests, the like; and then of course, the non-compliance by a practitioner willfully failure to make a tax return on the part of the practitioner or assisting counseling, encouraging a client to violate any federal tax law or evade the payment of taxes as well.

Now, we're going to go to our last poll question here.

Jeff Frank, yes, polling question number five. Which of the following would be considered disreputable conduct under Section 10.51 of Circular 230? A, State conviction for a crime involving dishonesty; B, Giving false or misleading information to the IRS; C, Advising a client on how to evade the collection of a federal tax liability; or D, All of the above. Please input your answer using the radio button or into the Ask feature if you don't have access to the polling feature.

We'll give everyone a few seconds and then we will move on to the next slide. Okay, we're going to move on to the next slide and the correct response again is D all the above. So let's see how we did with this. And again we have a 98% correct response rate. That's great. Tom, I'll hand things back over to you.

Excellent, Jeff. Thank you very much. So now, as we kind of lead into some of the resources slides here. As I said earlier in the presentation, we've provided some links here for you all to be able to kind of take some of the documentation there that supports what we discussed here today. And I apologize for having to kind of jump through some of these final slides here. But they're all here for you as you can see in these next three slides. And then also there are -- many of these OPR materials are also available in Spanish. And then the last slide here is the contact information. Should anyone wish to contact us, you can obviously Google us, you can find us on IRS.gov and then you can also write to us at the address here as well.

I believe now we're going to get into some questions if we have some time.

Jeff yeah. Thanks, Tom. So we're at the end of the presentation now and we are going to do our live Q&A. I'll be moderating the session. Before we start, I want to thank everyone for attending today to the presentation on Professional Conduct in Tax Practice. We're not going to have time to get through a lot of questions today because Tom went into a lot of detail on many of the questions that I've seen coming through, so that's great, Tom, we appreciate the presentation today, but we will have time for a view -- we will have time for a few questions and Tom's going to be staying on with us to answer those questions.

So question one, what ethical and compliance obligations under Circular 230 apply when tax practitioners use artificial intelligence or AI tools in their tax preparation, advisory or representation services?

Yeah, I'm glad you referenced this one, Jeff. This is highly topical. So, while Circular 230 does not specifically reference AI, right, practitioners really do need to remain fully responsible for the accuracy and integrity of any work that AI assists with, right. So key expectations would be, Sections 10.35 with draws to competence, due diligence under Section 10.22, supervision under 10.36. Kind of treat it like almost like an employee, right, like you are responsible that employees. The AI is spitting out information, but it's still your obligation to ensure that it's correct because I'm sure anyone who's used, ChatGPT, hopefully for personal use, realizes that it's not -- while it's pretty amazing tool, it's not exactly always accurate, right. So that actually led me into saying here too that I want to put out there that entering confidential or sensitive taxpayer information into some kind of or data into some kind of open source AI system which does not guarantee data privacy would certainly raise confidentiality concerns and some potential Circular 230 violations. So we have heard that there are some firms that have kind of closed source AI that continues to learn that is something that's probably more appropriate. But practitioners should never just be dumping taxpayer data into any kind of open source AI system. That would be a serious, serious disclosure issue here. Any more, Jeff?

Yes, sorry about that. We do. We have another question. How does OPR determine whether it has jurisdiction to investigate a tax practice practitioner?

How does it determine whether it has jurisdictional. So as I mentioned, OPR administers, right, and enforces Circular 230, the regulations that govern practice before the IRS, right. So when an individual is referred to OPR, the office looks for -- we look for evidence of representation before the IRS, right. And usually that is through the Form 2848, which is the power of attorney and declaration, I believe, declaration of representation that's submitted to the agency. That's often what we rely upon to show that an individual has practiced before the IRS and is subject to OPR's jurisdiction. So. And what we do internally too is we want to make sure that it's recent representation as well. If someone submitted the 2848, 15 years ago, that person, in our view, is not really practicing before the IRS as much as someone who is regularly submitting 2848s on behalf of their clients as well. Those are going to be the individuals that really truly embody a practitioner and those are the individuals that we, as you know, the Office of Professional Responsibility, have that vested interest in working with here.

Thanks, Tom. Now, we're going to do one more question before we go over the key points. Final question is, with regard to taxpayer data security and protecting sensitive information, does Circular 230 impose any professional obligations on tax pros to protect client information?

Yeah, you're going to see a theme here; 10.35, competent; 10.36, supervision, right. This is another issue too, during the tax forms this past year, when I was speaking on behalf of the return Preparer Office, I also helped moderate a presentation on taxpayer data with the office, Rick's Office, Return Integrity Compliance Systems, I think it's called the Questions from Tax Practitioners. It was very -- it's a hot button issue. And what I can say is that, safeguarding confidential taxpayer information is very, very important and the IRS takes it very seriously. They have tables, there at the tax forms, they prepared a document, Publication 5708, which provides guidance on how to establish and maintain up to date, what we call, Written Information Security Plans as well, or WISP. This includes like a sample template specifically designed to help you all as tax professionals, especially those in the smaller practices, to make data security planning easier. So I would encourage everyone listening to review what's in that publication as well. And then there's also one other publication, 4557, safeguarding taxpayer data, which is a guide for your business that also could be very helpful for you all as well as tax practitioners.

Great. Thank you, Tom. Now, audience, that's all the time we have for questions. I want to thank Tom for answering the questions that we did have time to get through and for sharing his knowledge and expertise throughout the presentation. Before we close the Q&A, Tom, what key points do you want the attendees to remember from today's webinar?

Sure. Yeah. I mean, sort of as we wrap up, it's important to remember that Circular 230 provides the regulatory foundation for practice for the IRS, right and it sets the standards that practitioners meet, right. It outlines prohibited conduct and establishes the disciplinary process for violations. Our mission supports effective tax administration by ensuring that practitioners and other third parties who interact with the tax system, follow professional standards and comply with the law. So at its core, OPR's work is about protecting taxpayers and preserving trust in the system, both from an enforcement standpoint, but also from an educational standpoint and an outreach standpoint as well. And that's all I have, Jeff, for you. I think that would -- that's probably enough in terms of, kind of what to pull away from this presentation.

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