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Presentation on theme: "THE OFFICE OF PROFESSIONAL RESPONSIBILITY"— Presentation transcript:

What You Don’t Know CAN Hurt You Karen L. Hawkins, Director

2 The Statute & Regulations
31 U.S.C. §330 (1884) 31 C.F.R. Part 10 (cir. 1886) Authorizes regulation of representatives of persons before the Department of the Treasury The enabling statute authorizing oversight of tax professionals appears at Title 31, section 330 and, no, that isn’t a typo. The statute dates to Which means regulation of individuals involved with Treasury Department matters preceded the Internal Revenue code and the IRS. The statute authorizes the Treasury Department to regulate those who represent others before Treasury again- no reference to IRS or IRC. Page2

3 “Fitness” to Practice good character good reputation
necessary qualifications to enable the representative to provide valuable service to the client competency to advise and assist persons in presenting their cases As part of its authority to regulate, the statute authorizes Treasury to make determinations regarding a representative’s (recite bullets). This litany of characteristics is what I refer to as the foundational basis for determining someone’s “fitness” to advise and represent others in connection with matters administered by the IRS. Page3

4 Finding It Online at
Substantial revisions effective August 2, 2011 NPRM – Additional Revisions Proposed – Final Regs pending This slide is a handy reference for the link that will get you to the latest version of Circular 230 which has been in effect since August of last year. Every time you sign a Power of Attorney, Form 2848, in order to speak to the IRS about one of your clients, you are attesting that you are familiar with the provisions in Circular 230. So if you did not realize that you were making such a representation on the 2848, you will want to take a look at page 2 of the form and familiarize yourself with Circular 230 so your attestation is truthful. The rest of this webinar will help with that by introducing you to some of the key provisions contained in the regulations. Page4

5 Calendar Year 2012 Discipline Results
Activity Attorney CPA EA Unenrolled Totals Total Receipts Disbarments (FAD/Consent) Suspensions (FAD/Consent) Expedited Suspensions DDA/Other Conditions Censure Reprimands/Soft Letter Cease & Desists CWOS, LOJ , NCOA, CWOA Reinstatements Total Dispositions Page5

6 Calendar Year 2013 Discipline Results Through Q3
Activity Attorney CPA EA RTRP Unenrolled Totals Total Receipts Disbarments (FAD/Consent) Suspensions (FAD/Consent) Expedited Suspensions DDA/Other Conditions Censure Reprimands/Soft Letters Cease & Desist Letters CWOS, LOJ, CWOA, etc Reinstatements Total Dispositions

7 JURISDICTION 31 USC 330(a)(1); (b); (c); (d) 10.2(a)(4) 10.7(c)
10.8(c) (Notice ) 10.50(b)/10.60(b) Page7

8 Key Circular 230 Provisions
Diligence as to Accuracy (10.22) Due Diligence Standards – Returns/Docs (10.34) Competence (Proposed 10.35) Requirements for Written Advice (Proposed 10.37) Ensuring Compliance (Proposed 10.36) Oral or Written Opinions (10.51(a)(13)) Page8

9 Diligence as to Accuracy (10.22)
Must exercise Due Diligence in: Preparing, approving and filing tax returns, documents, affidavits etc. relating to IRS matters. Determining correctness of oral/written representations made to the client or to Treasury personnel. Reliance on Another’s Work Product? With Reasonable Care. 10.22 is, in my opinion, the single most important regulation in Cir 230. Despite its shortness in length, speaks volumes about a practitioner’s integrity, qualifications and competence. (Recite Bullet 1) There is a safe harbor in – you will be deemed to have exercised due dili when you rely on the work product of another if you have used reasonable care in hiring, training, and supervising that person. This provision is not talking about your reliance on taxpayer information. We will get to that in a minute. Page9

10 Standards for Tax Returns Section 10.34(a)
May not sign a tax return or advise a position on a tax return, willfully, recklessly, or through gross incompetence if: Lacks reasonable basis Unreasonable position (6694(a)(2)) Willful attempt to understate liability (6694(b)(2)(A)) Reckless, intentional disregard of rules and regulations (6694(b)(2)(B)) Patterns matter The second most important provision, and the one which has the most potential to impact many practitioners in a variety of practice activities is 10.34(a) was added back to Cir 230 with the 2011 revisions so it is new and important to know because it defines the level of due diligence required when you are signing a return or advising about a position to be taken on a return. Essentially you (recite slide and expand on bullets). Patterns matter in these circumstances because they serve as evidence that the conduct is more than negligent error. Page10

11 Standards for Documents and Other Papers- 10.34(b)
May not advise Taking Positions in Documents that are Frivolous. May not advise Making Submissions: to Delay or Impede Tax Administration that are Frivolous Containing or Omitting Information that demonstrates an intentional disregard of rules or regulations. 10.34(b) has effectively been ignored but it is one OPR is focusing on more recently when discussing violations with IRS field personnel. This portion of the regulations addresses advice given on submissions of documents other than tax returns to the IRS. (Recite bullets and elaborate on delay/impede bullet with example) Page11

12 Disclosure re: Unreasonable Positions (10.34(c))
Advised position? Prepared or signed return? Submitting docs/other papers to IRS? Then- Must Advise Client of Potential Penalties and their Avoidance through Disclosure Applicable even if no Practitioner Penalty Exposure Page12

13 Reliance on Client Data- 10.34(d)
Reliance on Client Information in good faith, without verification, is OK, but… Cannot ignore implications of other information furnished Cannot ignore actual knowledge Must make reasonable inquiries for incorrect, inconsistent or incomplete information No Willful Blindness No Don’t Ask Don’t Tell Page13

14 Proposed §10.35. A practitioner must possess the necessary competence to engage in practice before the Internal Revenue Service. Competent practice requires the knowledge, skill, thoroughness, and preparation necessary for the matter for which the practitioner is engaged. See ABA Model Rule 1.1, “Competence” AICPA Code of Professional Conduct Article V, “Due Care”. Page14

15 Proposed Section 10.36 Any practitioner who has (or practitioners who have or share) principal authority and responsibility for overseeing a firm’s practice governed by this part must take reasonable steps to ensure that the firm has adequate procedures in effect for all members, associates, and employees for purposes of complying with Circular Any practitioner who has (or practitioners who have or share) this principal authority will be subject to discipline for failing to comply with the requirements of this Section. Page15

16 Prop. §10.37 Requirements For Written Advice
Reasonable factual and legal assumptions Reasonably consider all relevant facts Reasonable efforts to identify and ascertain the relevant facts Not rely upon representations, statements, findings, or agreements if reliance would be unreasonable No audit lottery advice (“odds” for an audit, or that a matter will not be raised on audit). Page16

17 Prop (cont) Reliance on taxpayer is unreasonable if the practitioner knows or should know that one or more representations, or assumptions on which any representation is based, are incorrect, inconsistent or incomplete May only rely on the advice of another practitioner if the advice was reasonable and the reliance is in good faith considering all the facts and circumstances . May not rely on another practitioner who has a conflict (ref ); or is incompetent Page17

18 Oral or Written Opinions – 10.51(a)(13)
It is Disreputable/Incompetent Conduct to Give: False opinions-knowingly, recklessly, through gross incompetence; Intentional or recklessly Misleading Opinions; Pattern of Incompetent Opinions Page18

19 10.51(a)(13) (cont) False Opinion = knowing misstatements of fact/law;
assertion of unwarranted positions; Counseling/assisting conduct known to be illegal/fraudulent; concealing matters required by law to be revealed. Page19

20 10.51(a)(13) (cont) Reckless conduct=
highly unreasonable omission/misrepresentation involving extreme departure from standards of ordinary care that a practitioner should observe under the circumstances Gross Incompetence= gross indifference, grossly inadequate preparation, consistent failure to perform obligations to client Patterns matter Page20

21 Recent/Relevant Cases
Tewolde: Tiongson: Walker: Page21

22 Recent/Relevant Cases
Bohn: Gee: Christensen: Page22

23 Recent/Relevant News Attorney Censured by the OPR for Mishandling Conflicts of Interest: Refund Splitting: Page23

24 Proposed Revisions 10.1 (OPR Authority) 10.31 (Electronic refunds)
10.35 (rescission of covered opinion reg) 10.35 (competence) 10.36 (Respondeat Superior) 10.37 (All Written Tax Advice) 10.39 (rescission re: Bond Practice) 10.82 (compliance & procedure) Page24

25 More Info? Office of Professional Responsibility
1111 Constitution Ave. N.W. SE:OPR Rm. 7238 Washington, D.C Information on OPR, Circular 230 and Discipline visit: Page25


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