Update on the IRS's Office of Professional Responsibility: the importance of firm responsibility.

• Author: Namorato, Cono

I want to take a few minutes to talk to you about my views on the current state of tax practice, what you can do in your own practice to foster and monitor professional behavior, and where I see the Office of Professional Responsibility heading in the near future. I hope that nothing I say will cause indigestion, although the phrase "monetary sanctions" [authorized by the American Jobs Creation Act of 2004] has been known to have that effect on some people.

Let me start with a bit of background. I think this is a story that we all are familiar with by now. During the 1990s, the size and complexity of the tax system increased enormously. As the economy grew, more revenue came from sources easily subject to manipulation, and it became more difficult and time consuming to conduct sophisticated and timely audits. At the same time, the Internal Revenue Service's enforcement resources shrank when the focus turned to other areas of tax administration.

Some promoters and tax professionals recognized the IRS's diminished capacity and began planning and marketing a wide range of truly abusive tax schemes and devices. The tax gap grew, and taxpayer morale suffered. Although only a small number of unscrupulous practitioners were involved, everyone was affected because of unfair competitive advantages.

Please do not misinterpret my comments. Putting the small number of unscrupulous practitioners aside, I believe the tax field is fortunate to have so many public spirited individuals with high ethical standards. As an alumnus of the private tax bar, I know of no harder working or more dedicated group of professionals. And, by the way, my experience in the last year has not changed that view. You must be current on a mass of materials, including court decisions, regulations; published rulings; tax literature, and an almost continuous flow of new legislation. On a good day, this is a daunting task. Unfortunately, despite the honorable efforts of most practitioners, the unscrupulous few have tarnished the reputation and standing of the entire tax community.

In recognition of the corrosive effect that practitioner misconduct has on tax administration, the Commissioner decided to devote significant resources to building a high profile and effective Office of Professional Responsibility. For those practitioners who choose not to abide by the standards of professional conduct, OPR has the resources and the expertise to pursue appropriate disciplinary sanctions...