Circular 230 evolves: IRS makes changes in the interest of transparency and accountability.

• Author: Monterio, Brad
• Position: Regulatoryupdate

the IRS has expanded the type of practitioners governed by the Office of Professional Responsibility (OPR) in response to calls by the Taxpayer Advocate and others within the IRS for greater transparency, accountability and fiduciary responsibility for tax preparers.

Recent changes were made to U.S. Treasury Department Circular 230 the published regulations governing practitioner conduct in dealing with the IRS and, in some eases, their clients. These updates will impact on both the OPR and practitioners, even though some of the changes appear to be somewhat minor if one looks solely at the edits to the language in the regulations.

OPR Annexes More Territory

Changes to 230 will expand the authority of the OPR to what it estimates to be more than 1 million practitioners with the inclusion under its enforcement jurisdiction of all "paid tax return preparers'" (Reg. See. 1.6109-2) to its historical oversight mission of enforcement applicable to CPAs, attorneys, enrolled agents, enrolled actuaries and appraisers.

Prior to 2011, the OPR had jurisdiction over approximately 150,000 such practitioners.

With the addition of more than 850,000 paid tax return preparers to its oversight, the OPR intends to implement processes that are designed to bring greater transparency to its work and remove the shroud of mystery surrounding complaints and investigations.

These include alternative dispute resolution as an alternative to litigation, explicit notification of investigations within 60-90 days of complaint filings (Notice of Allegation), stricter standards for unreasonable delays by practitioners and more.

What CPAs Need to Know

For practitioners, the OPR's increasing enforcement of Circular 230 is likely to mean more CPAs will fall under the gaze of the OPR along with other tax preparers and professionals.

Recently, final regulations were promulgated that require all paid tax return preparers to obtain for a fee a Preparer 'Pax Identification Number (PT1N) that must be used for all returns, beginning with those prepared after Dec. 31, 2010. However, the main issue rests in the eligibility requirements to obtain the PTIN, which became effective Jan. 1 2011. Reg Sec. 1.6109-2(d) now requires that a tax return preparer must be an attorney CPA, enrolled agent or "registered lax return preparer."

To ensure competence and trustworthiness of practitioners, these registered tax return preparers will also have to comply with IRS competency testing, ethics and continuing professional...