Circular 230: what counts as practice and who is covered

• Define practice before the IRS using the section 10.2(a)(4) language
• List the categories of individuals who may practice under section 10.3
• Apply section 10.8 to decide whether a preparer is subject to the subpart B duties
• Describe how Circular 230 is organized into subparts A to E

What Circular 230 is

Treasury Department Circular No. 230 is the IRS's name for the regulations at 31 CFR Part 10, issued under 31 U.S.C. 330. The statute lets the Secretary regulate representatives practicing before Treasury and, after notice and a proceeding, suspend, disbar or censure a representative who is incompetent, disreputable, or violates the regulations. The current IRS printing is Rev. 6-2014.

Section 10.0 describes the five subparts:

• Subpart A: authority to practice (who may practice, enrollment, PTINs, continuing education providers).
• Subpart B: duties and restrictions (information to the IRS, diligence, conflicts, fees, return standards, competence, written advice).
• Subpart C: sanctions (censure, suspension, disbarment, monetary penalties) and the list of disreputable conduct.
• Subpart D: rules for disciplinary proceedings.
• Subpart E: general provisions.

Most of what tax staff need day to day sits in subpart B.

Practice before the IRS

Section 10.2(a)(4) says practice before the IRS comprehends all matters connected with a presentation to the IRS or its officers or employees relating to a taxpayer's rights, privileges or liabilities. Presentations include preparing documents, filing documents, corresponding and communicating with the IRS, rendering written advice on a plan or arrangement with a potential for tax avoidance or evasion, and representing a client at conferences, hearings and meetings.

That is broad. Drafting a response to a CP2000 notice, calling the IRS on a client's account under a power of attorney, and writing a client email that recommends a tax position all fall inside it.

Who may practice

Section 10.3 lists the practitioners:

Section 10.2(a)(5) defines a practitioner as anyone described in 10.3(a) to (f). Attorneys and CPAs do not need to file the written declaration before giving written advice covered by 10.37, but giving that advice is still practice. The registered tax return preparer category remains in the text, but the program was halted after the D.C. Circuit held in Loving v. IRS (2014) that the IRS lacked authority to license return preparers through it.

How 10.8 reaches everyone else

Section 10.8 closes the gap for people who are not practitioners:

• 10.8(a): anyone who for compensation prepares or assists with all or substantially all of a return or refund claim must have a PTIN and is subject to the subpart B duties and the subpart C sanctions.
• 10.8(b): anyone may for compensation prepare less than substantially all of a return, appear as a witness, or furnish information at the IRS's request.
• 10.8(c): anyone who for compensation prepares all or a substantial portion of a document pertaining to tax liability for submission to the IRS is subject to subpart B and subpart C. Unless otherwise a practitioner, that person may not prepare all or substantially all of a return or sign returns.

For a firm this means unlicensed staff who prepare returns carry the same diligence, return standard and conflict duties as the CPA who signs. The CPA versus enrolled agent guide covers representation rights in more detail.

Practical points for staff

• Keep your PTIN current; section 10.8(a) ties coverage to the work, not the title.
• Representation needs a valid power of attorney on file before you discuss a client's account.
• A tax return under 10.2(a)(6) includes an amended return and a claim for refund.

Who is covered at Maple Street CPAs