Unit 4: Circular 230 and Best Practices

Question 1

4 subpart of circular 230:

Answer 1

• Authority to practice
• Duties and restrictions relating to practice
• Sanctions for violations
• Disciplinary procedures

Question 2

Reliance on Others:

Answer 2

A practitioner will be presumed to have exercised due diligence if he relies on the work product of another person. That is assuming that the practitioner used “reasonable care” when he hired, supervised, trained, and evaluated that person of the information provided

Question 3

Employee best practices:

Answer 3

• Communicating clearly with the client regarding the terms of the engagement
• Establishing the facts, determining which facts are relevant, evaluating the reasonableness of any assumptions, relating the applicable laws to the relevant facts, and arriving at a conclusion supported by the law and the facts.
• Advising the client of the conclusions reached and the impact of the advice rendered
• Acting fairly and with integrity in practice before the IRS

Question 4

Competence 10.35:

Answer 4

This provision states that a practitioner must be competent to engage in practice before the IRS. “Competence” is defined as having the appropriate level of knowledge, skill, thoroughness, and preparation for the specific matter related to a client’s engagement

Question 5

Knowledge of Client’s Omission 10.21:

Answer 5

A practitioner who knows that a client has not complied with the revenue laws or who has made an error or omission other tax return has the responsibility to advise the client promptly of the noncompliance, error, or omission, as well as its consequences.

Question 6

A practitioner may still represent a client when a conflict of interest exists if:

Answer 6

• The practitioner reasonably believes that he or she will be able to provide competent and diligent representation to each affected client
• The representation is not prohibited by law; and
• Each affected client waives the conflict of interest and gives informed consent, confirmed in writing, within 30 days after giving any non-written informed consent to the tax practitioner.

Question 7

How long should a consent of conflict of interest be held by a practitioner?

Answer 7

At least 36 months from the date representation ends and must be given to any office or employee of the IRS

Question 8

IRS Information Requests 10.20:

Answer 8

When the IRS requests information, a practitioner must comply and submit records promptly. If the requested information or records are not in the practitioner’s possession, the preparer must advise the requesting IRS officer and provide any information the practitioner may have, regarding the identity of the person who may have possession or control of the requested information and records.

Question 9

Return of Client Records 10.28

Answer 9

A practitioner is required to return a client’s original records upon request, whether or not the practitioner’s fees have been paid.

Question 10

“Client Records” do not include:

Answer 10

Any return, claim for refund, schedule, affidavit, appraisal, or any document prepared by the practitioner if he withholds these documents pending the client’s payment of fees.

Question 11

Practitioner Fees 10.27

Answer 11

The IRS prohibits practitioners from charging “Unconscionable fees”. Although that term has not been defined, it is generally believed to refer to fees that the courts would consider grossly disproportionate in relation to the services provided or fees retained for services not provided

Question 12

A practitioner is allowed to charge a contingent fee in limited circumstances under Circular 230, including:

Answer 12

• Representation during the examination of an original tax return
• During the examination of an amended return or claim for refund, if the amended return or claim for refund was filed within 120 days of the taxpayer receiving a written notice of examination or a written challenge to the original tax return.
• Services rendered in connection with a refund claim for credit or a refund filed in conjunction with a penalty or interest charge assessed by the IRS
  -Services rendered in connection with any judicial proceeding arising under the IRC

Question 13

In the case of direct mail and e-commerce communications, the practitioner must retain a copy of the communication, along with a list of persons to whom the communication was mailed or distributions, for at least

Answer 13

36 months

Question 14

How long must a practitioner adhere to a published fee schedule?

Answer 14

at least 30 calendar days after it was published.

Question 15

A practitioner may charge based on the following:

Answer 15

• Fixed fees for specific routine services
• Hourly rates
• A range of fees for particular services
• A fee for an initial consultation

Question 16

When advertising fees on radio or television, the broadcast must be recorded, and the practitioner must retain a copy of the recording for at least:

Answer 16

36 months

Question 17

Negotiation of Taxpayer Refund Checks 10.31

Answer 17

A practitioner must not endorse, negotiate, or cash a refund check issued to the taxpayer.

Question 18

No Delay Tactics Allowed 10.23

Answer 18

A practitioner must not unreasonably delay the prompt disposition of any matter before the IRS

Question 19

No Employment of Disbarred or Suspended Person 10.24:

Answer 19

A practitioner may not knowingly employ a person or accept assistance from a person who has been disbarred or suspended from practice.

This restriction applies even if the duties of the disbarred or suspended person would not include the actual preparation of tax returns.

Question 20

Practice by Former Government Employees 10.25

Answer 20

A former government employee ( and his partners and associates) cannot represent or knowingly assist a taxpayer if the representation would violate any law of the United States.

A government employee who personally and substantially participated in a particular matter cannot represent or assist a taxpayer in the same particular matter after leaving his government position.

Question 21

Performance as a Notary 10.26:

Answer 21

A practitioner who is a notary public and is employed as counsel, attorney, or agent in a matter before the IRS or who has a material interest in the matter cannot engage in any notary activities related to that matter