Ethical Considerations

• Author: W. Patrick Cantrell
• Pages: 407-452

407

CHAPTER 9

Ethical Considerations

Practice before the IRS

I. Background Material

A. Governing Regulations

Title 31 of the U.S. Code authorizes the Secretary of the Treasury to reg-

ulate lawyers, certified public accountants, enrolled agents, enrolled

actuaries, and others who practice before the IRS.1 Regulations under

31 U.S.C.§330 are promulgated in 31 C.F.R. part 10 and are reprinted

as Treasury Department Circular 230.2

B. Director of the Office of Professional Responsibility (OPR)

The OPR director is appointed by the Commissioner. It is the director’s

responsibility to act upon all applications for enrollment to practice

before the IRS. He or she also presides over all matters involving dis-

ciplinary proceedi ngs.3

C. Definition of Practice

“Practice” includes all matters connected with a presentation to the

IRS or any of its employees relating to a client’s rights, privileges, or

liabilities under any law or regulation administered by the IRS.4

D. Parallel Autho rities

In addition to Circular 230, practitioners who are lawyers or CPAs must

also observe the rules of their respective professional organizations.

These rules are contained in the American Bar Association (ABA)

Model Rules and the American Institute of Certified Public Accoun-

tants (AICPA) Code of Professional Conduct. These professional asso-

ciation rules overlap with, but are not identical to, the rules contained

in Circular 230.

408 ETHICAL CONSIDERATIONS

II. Persons Entitled to Practice

A. Persons Covered by Circular 230

The rules contained in Circular 230 govern the recognition of lawyers,

certified public accountants, enrolled agents, and other persons repre-

senting clients before the Internal Revenue Service.

B. Authority to Practice

Lawyers and CPAs who are not under suspension or disbarment may

practice before the IRS. Enrolled agents and enrolled actuaries may also

practice. Practice by enrolled actuaries is limited to matters involving

qualified and nonqualified employee plans. Government employees

may not practice before the IRS.5

C. Enrolled Agents (EAs)

Any person who successfully passes a written examination adminis-

tered by the IRS, demonstrating special competence in tax matters, may

be granted enrollment status. Former IRS employees may also be granted

enrollment status if they meet certain conditions. For example, they must

apply for enrollment within three years of leaving the IRS’s employ, and

they must have been employed there for five continuous years in a posi-

tion that required interpreting the Internal Revenue Code (I.R.C.) and

regulations.6 Applicants who have been approved will receive from the

director of practice an enrollment card, sometimes called a “treasury

card.” These cards must be renewed every three years.7 This three-year

period is referred to as the “enrollment cycle.”

D. Continuing Education for EAs

To qualify for renewal enrollment, EAs must complete a minimum of

sixteen hours of continuing education in each year of an enrollment

cycle. Continuing education courses must be conducted by a qualify-

ing sponsor.8

E. Nonlicensed Representation

A person who is not a lawyer, CPA, or EA may represent a taxpayer

before the IRS if he or she fits within one of the following situations:

1. Individuals may appear on their own behalf before the IRS.

2. An individual may represent a member of his or her immediate

family.

3. A regular full-time employee of an individual employer may

represent the employer.

4. A general partner or a regular full-time employee may represent

a partnership employer.

5. An officer or employee of a corporation may represent the

corporation (or similar organization).

Client Issues 409

6. A fiduciary may represent a trust, estate, and the like.

7. Any individual may prepare a tax return, appear as a witness for

the taxpayer before the IRS, or furnish information at the request

of the IRS.9

III. Client Issues

A. Fees

A tax practitioner cannot charge an “unconscionable” fee for repre-

senting a client before the IRS. Moreover, practitioners may not (with

certain exceptions) charge contingency fees for services rendered in

connection with any matter before the IRS. “Matter before the IRS”

includes tax planning or advice rendered in connection with prepara-

tion of claims for refund. One of the exceptions to this general rule is

where such a claim is filed within 120 days of a taxpayer’s receipt of

notice of examination of the original retur n.10

Tax practitioners may disseminate the following information to

the general public:

1. Fixed fees for specific routine services;

2. Hourly rates;

3. A range of fees for particular services;

4. Fees charged for an initial consultation; and

5. Responsibility for costs incurred.

B. Advertising and Solicitation

In any kind of advertising or other public communication, a tax prac-

titioner may not use statements that are false, deceptive, or misleading

in any way. Enrolled agents may not use the word “certified.” How-

ever, they may use the terms “enrolled” or “admitted to practice,” or

the designation “EA.” Tax practitioners may not make uninvited ver-

bal solicitations of business regarding IRS matters, including in-person

contacts and telephone communications, if such solicitation would vio-

late state or federal law. All permitted solicitations must clearly identify

the source of the information used in choosing t he recipient.11

It is a violation for a practitioner to persist in attempting to contact

a prospective client if such client has made it known that he or she

does not wish to be solicited. In the case of a radio or television ad, the

practitioner is required to retain a copy of the actual audio or video

transmission. In the case of direc t mailing, the practitioner must retain

a copy of each mailing along with a list of recipients. All such copies

must be retained for three years.12

C. Conflicts of Interest

A tax practitioner is expressly forbidden to represent conflicting inter-

ests in his or her practice before the IRS. The only exception to this