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Title: Circular 230: A Primer

A Brief about Circular 230

• Civil and criminal tax defense: To be subject to circular 2030
• Circular 230 as a different aspect from Title 26 and Internal Revenue Code.
• Circular 230 is part of Title 31 (This is the enabling legislation)

Provisions of Title 31:

1. The ability by the Secretary of State to regulate the representatives’ practice before the Department of treasury prior to admitting them into practice
2. The ability by the Secretary of the Treasury to demand that any representative demonstrates good reputation, character, and any other relevant qualifications required to ensure professional competency.

The nature of Circular 230

Expanded nature of a very large body of regulation-related law now known as Circular 230.

Promulgations of regulations dating back to 1884

Both Circular 230 and Title 31 have beginnings that precede the income.

Issue of director of practice reporting to the Secretary of Treasury directly (1880s to 1980s)

Transfer of oversight of Circular 230 since the 1980s to the:

1. Director of Practice Office
2. Commissioner of the Internal Revenue Service
3. Office of Professional Responsibility (OPR)

 

History of enrolled agents

1. The events of 1966 and the beginning of enrolled agents
2. The trigger of enrolled agents:

• Realization by the Secretary of Treasury regarding lack of adequate representation by attorneys
• Realization by the Secretary of Treasury regarding lack of adequate representation by accountants

3. Addition of other people to perform the work of registration, hence the need for enrolled agents.
4. 1958: the time when the enrolled agents started giving an exam (Special Enrollment Exam, SEE)
5. 1966: Change of name for the people who were not CPA or attorneys to the good-sounding title ‘enrolled agents’
6. 1994: enrolled agents acquire the opportunity of shortening their title to ‘EA’.
7. 2000: disputes among some professionals who were working prior to the Internal Revenue Service; EAs were allowed to practice and get licensing under the Internal Revenue Service.

Internal Revenue Service

• The number of professionals registered may increased by hundreds of thousands within a few months.
• A historic moment: many significant changes current underway in the Internal Revenue Service.

Circular 230 in Detail

1. It covers practice being undertaken before the Internal Revenue Service.
2. The meaning of practice:
   • The practice has a lot to do with Title 26.
   • Information is contained in the Code of the Internal Revenue Service
   • It also has a lot to do with the practice of CPAs, attorneys, and enrolled agents within the Internal Revenue Service.
   • No jurisdiction of OPR over attorneys and CPAs

Four key areas of understanding in the analysis of Circular 230

1. Part 1: defines who may practice and what it means to practice
2. Part2: describes the duties and responsibilities of practitioners
3. Part 3: an explanation of the sanctions to be imposed
4. Part 4: an analysis of the nature of proceedings and how to determine if one is subject to disciplinary proceedings

Duties and responsibilities

• Starting point: Acquisition of PTIN and the commencement of practice
• Awareness required on duties as well as restrictions, though not much by way of qualifications
• The lengthy nature of Circular 230 and the responsibility to let one’s actions be informed by its provisions
• The need to memorize Circular 203 for reference purposes: A great way of dealing with the elusive nature of the document
• Dealing with inconsistencies and ambiguities, which are essential characteristics of law

Actions taken upon breaking rules

• Referrals are received from revenue officers, revenue agents, and appeals officers.
• Referrals may also be taken from the Criminal Investigations division
• From here, it is upon the Criminal Investigation division to pursue the matter
• Referrals may also be gotten from the Treasury Inspected General for Tax Administration (TIGTA): for cases of misbehaving former employees, yet the Justice Department has declined prosecution.
• Referrals from other practitioners regarding people engaging in professional misconduct
• Referrals from taxpayers, who may be the ultimate victims of undisciplined practitioners: mainly for unsophisticated complaints.

 

Projections for 2011 regarding referrals:

1. A larger referral source expected within the taxpayer community.
2. The introduction of a trend of sending complaints to the W & I or even to the SBSE, depending on the nature of the complaint
3. Increased reliance on Criminal Investigation, also depending on the issue under analysis
4. Increased screening so as to determine whether priority jurisdiction is required in a disciplinary issue
5. New, more stringent procedures of determining whether a case being complained about is worthy of referral
6. More rigorous analysis of complaints to determine if they meet the criteria for the formally laid-down version of professional misconduct
7. Section to be referred to during the rigorous analysis is ‘Duties and Restrictions’.
8. More reliance on independent investigations as provided for in Circular 230.

 

Provisions of the New Sanction in Circular 230: The monetary penalty of 2004

1. The penalty can be up to 100% of the monetary amount under contention
2. Main distinguishing feature of the monetary policy: the possibility of it being imposed on firms, and not just on individuals
3. Mainly reserved for people who are outlandish in whatever violation they have committed.
4. The rationale behind the monetary penalty: to prevent the violators from benefiting economically from their actions.

 

Reference

Circular 230 – A Primer (edited transcript), Retrieved from www.irstaxforumsonline.com/index.php?q=node  on December 16, 2011.

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