The OPR supports the IRS's strategy to improve tax law enforcement, ensuring that tax professionals meet tax practice standards and comply with the law. The OPR is the regulatory body responsible for interpreting and enforcing the Guidance Practices Regulation before the Federal Revenue Agency. OPR is solely accountable for professionals' conduct and discipline, including the initiation of disciplinary proceedings and the application of sanctions. It operates independently of the components of the IRS Title 26 application.
IRS Definition of Circular 230
Circular 230 contains the rules governing practice before the Revenue Agency.
Practice before the IRS includes all aspects of registering with the IRS in relation to a taxpayer's rights, privileges, or responsibilities under laws or regulations administered by the IRS. The practice includes, but is not limited to, preparing or filing documents, communicating and corresponding with the IRS, providing written tax advice, and representing a client at conferences, hearings, and meetings. Preparing tax returns is not a "practice" as currently defined by case law.
Circular 230 is a publication that guides practicing before the IRS. Here are some examples of IRS practice:
Correspondence and communication with the IRS on behalf of a taxpayer
Prepare and send a response to an IRS notification or request
Providing tax advice
Represent a taxpayer at conferences, hearings, or meetings with the IRS
Sign agreements, such as those in which the taxpayer agrees to extend the statute of limitations for tax assessment.
According to Circular 230, the power of attorney authorizations (Form 2848 Authorization) is reserved for persons authorized to practice the profession before the IRS. These professionals mainly belong to the following categories:
Annual Filing Season Program (AFSP) Record of Completion
CPA
Lawyers
Registered agents
The AFSP designation has limited representation rights. If your tax preparer has an AFSP designation, he or she can represent you to verify a return he or she has prepared and signed. However, he or she cannot represent you for issues with an unpaid balance or the IRS appeals office. Only CPAs, registered agents, and lawyers can represent you before any IRS department.
What does "practice before the IRS" mean?
"Practice Before the IRS" covers all matters relating to the presentation to the IRS or any of its directors or employees concerning the rights, privileges, or responsibilities of a taxpayer under any laws or regulations administered by the IRS. These presentations include, but are not limited to, document preparation; a compilation of documents; correspond and communicate with the IRS; provide oral and written advice on any entity, transaction, plan, or arrangement that presents the potential for tax avoidance or evasion; and represent a client at conferences, hearings, and meetings.
Who is subject to the jurisdiction of circular 230?
Anyone who files a power of attorney as part of a taxpayer's limited representation to the IRS connected with a specific case before the agency.
Authorized and unauthorized persons who provide written advice on any entity, transaction, plan or arrangement, or other plan or arrangement of a type determined by the IRS to have the potential for tax evasion or avoidance. For this purpose, "written recommendation" means all forms of written material, including the content of an email, provided under any law or regulation administered by the IRS.
Individuals who are not registered or authorized and who represent taxpayers prior to IRS inspection, customer service, and similar staff, including the taxpayer defense service, connect with their statements prepared and signed.
Individuals who provide appraisals used in connection with federal tax matters (e.g., charitable contributions, donations, the fair market value of sales income, etc.).
Licensed state prosecutors and chartered public accountants (CPAs) licensed and updated with the state licensing authority who interact with the tax administration at all levels.
Persons registered to perform their duties with the Revenue Agency: registered agents, agents registered with the pension plan, and chartered actuaries.
What sanctions does circular 230 authorize, and to whom does it apply?
Circular 230 includes censorship (essentially a public reprimand), suspension of practice privileges, and disqualification. The suspension can be for a fixed or indefinite period, and the practitioner must request and obtain the reinstatement of the OPR before the reinstatement privileges. When a practitioner is barred for a fixed period, the person cannot request his/her reinstatement before the period. When a practitioner is expelled, he/she cannot apply for reinstatement for five years. The OPR can also offer a financial sanction to any professional who engages in conduct liable to sanction. The financial penalty may be proposed against the individual or the company or both and maybe in addition to any censorship, suspension, or disqualification. The sanctioned amount may be equal to the gross income value derived from the behavior that gave rise to the sanction.
Before any of the above sanctions are imposed, the practitioner (or company) receives a notification and an opportunity for a conference and an opportunity for a formal proceeding.
If formal disciplinary action is not appropriate, the OPR may issue a private reprimand or a "soft letter" warning. The "soft letter" typically notifies the allegations' practitioner and warns of the violation of the obligations set out in Circular 230 but does not conclude that the violation has been committed.
The OPR may also disqualify an assessor from other documents related to tax matters. A taxpayer cannot rely for federal tax purposes on an assessment made by a disqualified assessor made after the disqualification.
Documents that are required from professionals who choose to be represented during a circular 230 investigation?
If you receive an indictment or other letter of inquiry from the OPR, you may choose to have a representative to interact with the OPR on your behalf. If so, some form of documentation authorizing this representation should be provided. The OPR will accept:
A Form 2848 with an adequate description of the scope of representation; or
A letter of a representation containing vital elements of a Form 2848. Also, the letter of representation must have the following elements:
A statement from which to send correspondence, i.e., only to your representative or you and your representative. (Please note that in some cases, OPR will send a direct email with a copy to its representative, regardless of any other instructions, as this is a legal obligation.)
A statement that the representative has the appropriate state or federal licenses, such as a lawyer, CPA, or EA;
A statement that the representative is authorized to represent persons before the IRS;
A statement that your representative has been authorized to represent you before the RPO
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