Module 1: Circular 230

Question 1

What does Circular 230 address?

Answer 1

1. Rules governing the authority to practice before the IRS
2. Duties/restrictions relating to practice before the IRS
3. Sanctions for violation of the regulations
4. Rules applicable to disciplinary proceedings

Question 2

To whom do the rules governing practice before the IRS apply?

Answer 2

• attorneys
• CPA’s
• enrolled agents
• enrolled actuaries
• enrolled retirement plan agents

Question 3

When may a practitioner withhold info/records?

Answer 3

If he believes “in good faith” and on reasonable grounds the info/records to be privileged

Question 4

What would be considered conflicts of interest for government employees?

Answer 4

• Individual personally/substantially participated in particular matter involving specific parties while gov’t employee, can NEVER represent/assist parties w/respect to that particular matter
• Individual, while gov’t employee, had “official responsibility” for particular matter, cannot represent parties w/respect to matter within TWO YEARS
• Individual cannot appear before IRS w/in ONE YEAR regarding any rule “participated in development” of or had official responsibility w/in one year of leaving

Question 5

Unconscionable fee

Answer 5

Grossly unfair

Question 6

What 3 situations are contingent fees allowed?

Answer 6

• IRS examination or audit
• Claim solely for a refund of interest and/or penalties
• Judicial proceeding arising under the IRS

Question 7

Best practices for tax advisors

Answer 7

1. communicating w/client regarding terms of engagement to determine client’s purpose
2. establishing the facts and arriving at a conclusion supported by the law and the facts
3. Advising about importance of conclusions reached
4. Acting fairly and with integrity
5. Taking reasonable steps to ensure all members of firm follow procedures

Question 8

Tax returns: A practitioner may not:

Answer 8

“willfully for recklessly” sign a tax return or advise a client to take a tax position that the practitioner knows or should know lacks a reasonable basis

Question 9

What must a practitioner do if they have knowledge of omission by the client?

Answer 9

Advise the client of the omission and the consequences under the law

Consider withdrawing if client will not rectify

Do not notify IRS

Question 10

Regarding what must the practitioner exercise due diligence?

Answer 10

1. Preparing returns and other documents

2. Determining the correctness of her/his representations to the IRS

Question 11

Client record retention rules

Answer 11

Practitioner must return all client records at request of client, but may retain copies of records

If state laws allows practitioner to retain records in case of fee dispute, may do so

Question 12

Potential failures to comply with Circular 230

Answer 12

1. Indiv. fails to have adequate procedures to comply
   - Indiv. fails to ensure the procedures for compliance are followed
   - Indiv. knows or should know of a pattern of noncompliance and fails to take prompt action to correct