Circular 230

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Circular 230 is a publication of certain U.S. Treasury regulations which include the rules governing practice before the U.S. Internal Revenue Service (IRS). These rules require attorneys, those qualified to practice as Certified Public Accountants (CPAs), Enrolled Agents (EAs), and other persons who prepare tax returns and provide tax advice to do certain things. The rules in Circular 230 also prohibit certain conduct. Penalties may be imposed for noncompliance. The rules in Circular 230 are codified as Title 31 of the Code of Federal Regulations, Subtitle A, Part 10.[1][2]


Circular 230 was first published in 1921, and some of its provision became more well known as a result of amendments made in 2005.[3]


Main article: Tax preparation

Until the year 2011, anyone in the United States could legally engage in the business of preparing a federal tax return. The rules were changed effective January 1, 2011, and for a time imposed certain requirements on individuals engaging in the business of preparing U.S. federal tax returns.[4] These new rules were struck down, however, by the U.S. District Court for the District of Columbia in the Loving case, a decision upheld by the U.S. Court of Appeals for the District of Columbia [5]

Representing clients[edit]

In general, only attorneys, CPAs, enrolled agents, or enrolled actuaries or enrolled retirement plan agents may represent clients in proceedings before the IRS.[6] Representing clients includes all communication with the IRS in regard to client matters without the client present. Exceptions permit unenrolled preparers to represent taxpayers during examination only for returns they prepared themselves. The rules permit family members to represent each other, employees to represent their employer, officers to represent corporations, and certain other types of representation.[7]

Key prohibited actions[edit]

Circular 230 contains rules of conduct in preparing tax returns.[8] Persons preparing tax returns must not:

  • Take a position on a tax return unless there is a realistic possibility of the position being sustained on its merits. Frivolous tax return positions are prohibited.
  • Unreasonably delay prompt disposition of any matter before the IRS.
  • Charge the client an "unconscionable fee" for representation.
  • Represent clients with conflicting interests.
  • Solicit business using false statements.
  • Cash checks issued by the U.S. Treasury to a client for whom the return was prepared.

Section 10.27 of Circular 230 has traditionally included restrictions on contingent fee arrangements between taxpayers and their representatives. In July 2014, however, those restrictions were struck down by the U.S. District Court for the District of Columbia "with respect to the preparation and filing of Ordinary Refund Claims, where 'preparation and filing' precedes the inception of any examination or adjudication of the refund claim by the IRS and any formal legal representation on the part of the practitioner." The Court ordered that the government was permanently prohibited from enforcing the applicable restrictions in Circular 230.[9]

Key required actions for preparers[edit]

Persons preparing returns or giving tax advice must:

  • Disclose on returns all nonfrivolous tax positions whose disclosure is required to avoid penalties.[10]
  • Return records to clients.
  • Sign all tax returns they prepare.
  • Provide clients a copy of tax returns.
  • Advise clients promptly of errors or omissions of the preparer or client in any tax matter with respect to which the preparer is retained.
  • Submit records, etc., requested by the IRS in a timely manner.
  • Exercise due diligence and use best practices of the profession.[11]

Requirements for tax advice[edit]

In addition to the above, those giving tax advice must follow certain procedural rules in giving the advice.[12] Tax advice may consist of a "covered opinion," other written tax advice, or oral advice. No standards are provided for oral advice. Written tax advice must not be based on unreasonable factual or legal assumptions or unreasonably rely upon representations of the client or others. It must consider all relevant facts and law.

Covered opinion[edit]

A taxpayer may rely on a covered opinion by a licensed or enrolled tax adviser to avoid certain penalties. A covered opinion includes any written tax advice not otherwise disclaimed in the advice, with certain exceptions. The disclaimer must prominently state that the advice was not "intended or written by the practitioner to be used, and that it cannot be used by the taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer."[13]

Specific standards apply to a covered opinion. These standards include:

  • the extent to which a practitioner must gather facts and to which facts and assumptions may be relied upon, and
  • the depth of legal analysis required,
  • a requirement to apply the law to the facts,
  • a requirement to consider all applicable law,
  • a requirement to conclude as to each significant Federal tax issue, and
  • required disclosures.


Tax preparers and advisers who violate Circular 230 may be subject to penalties. These include monetary penalties as well as potential suspension from practice before the IRS.[14] The rules also provide procedures for disciplinary proceedings.

Periodically, the Internal Revenue Bulletin lists an announcement of disciplinary sanctions for the Office of Professional Responsibility.[15]


  1. ^ "Regulations Governing Practice before the Internal Revenue Service" (PDF). Internal Revenue Service. Retrieved 2012-06-27. 
  2. ^ "Internal Revenue Bulletin: 2012-23". Internal Revenue Service. 4 June 2012. Retrieved 27 June 2012. 
  3. ^ Camp, Bryan T., "'Loving' Return Preparer Regulation, Tax Notes, July 29, 2013 pp. 457, 458. Vasqez, Jr JF, Vasqez J. (2007). Section 10.35(B)(4)(Ii) of Circular 230 is Invalid (But Just in Case It is Valid Please Note That You Cannot Rely on This Article to Avoid the Imposition of Penalties. Houston Business and Tax Law Journal, Volume 7 Part 2.
  4. ^ In the United States, all fifty states and the District of Columbia have laws which require licensure for those attesting to financial statements, purporting to be CPAs, giving legal advice, or purporting to be attorneys. The rules vary by state.
  5. ^$file/13-5061-1479431.pdf
  6. ^ Circular 230 part 10.3
  7. ^ Circular 230 part 10.7.
  8. ^ Willis, Hoffman, et al, South-Western Federal Taxation, 2009 edition page 26-22. ISBN 978-0-324-66052-4. Circular 230 part 10.20 through 10.34.
  9. ^ Order, July 16, 2014, docket entry 49, Ridgely v. Lew, case no. 1:12-cv-00565 (CRC), U.S. District Court for the District of Columbia.
  10. ^ This includes positions contrary to any published guidance or regulation, as well as positions for which there is less than a "reasonable basis." See Form 8275 and Form 8275-R.
  11. ^ Circular 230 part 10.33 defines best practices, with examples.
  12. ^ Circular 230 sections 10.35 and 10.37
  13. ^ Circular 230 part 10.35(b)(4)(ii)], page 22. This requirement has led most professional firms to include a similar statement in all written communications about tax matters.
  14. ^ Circular 230 part 10.50 et seq.
  15. ^ "Internal Revenue Bulletin: 2012-23". Internal Revenue Service. 4 June 2012. Retrieved 27 June 2012. 

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