January 31st 2012 by
Circular 230 are the IRS rules for all individuals preparing tax returns or giving tax advice for compensation. The following are some of the rules included in Circular 230.
Paid tax preparers must:
- Sign all tax returns that they prepare.
- Advise their clients of any error in or omission from documents filed with the IRS and advise the client of any potential consequences with noncompliance.
- Exercise due diligence in preparing returns and determining correctness of documents filed with the IRS.
- Return documents and records provided by the client that are necessary for the client to comply with tax obligations.
- Provide clients a copy of tax returns.
Paid tax preparers cannot:
- Take a position on a tax return unless there is a realistic possibility of the position being sustained on its merits. Frivolous tax return positions are prohibited.
- Unreasonably delay prompt disposition of any matter before the IRS.
- Cash IRS checks to a client for whom the return was prepared.
- Represent a client before the IRS if it involves a conflict of interest.
Also included in Circular 230 are rules that allow paid tax preparers to represent taxpayers before revenue agents, customer service representatives and other similar employees of the IRS including the Taxpayer Advocate Service during an examination.
According to Circular 230, Registered Tax Return Preparers (RTRPs) may not do the following:
- Represent clients before appeals officers, revenue officers or IRS Counsel or similar IRS employees regardless of circumstances.
- Provide legal advice.
- Take a position on a return that lacks a reasonable basis or is a willful attempt to understate a tax liability.
- Negotiate tax refund check issued to taxpayer by the government.
Other paid tax preparers, such as CPAs, EAs and attorneys may assist clients in these manners.
RTRPs also have other limitations outlined in Circular 230, including certain items when advertising and solicitation:
- Cannot make false, fraudulent or deceptive claims.
- Use the word “certified” or imply an employer/employee relationship with the IRS.
- An RTRP can use “designated as a registered tax return preparer by the IRS.”
All paid tax professionals must follow these guidelines when advertising and solicitation:
- A practitioner may publish a written schedule of fees with the following information.
- Fixed fees for specific routine services.
- Hourly rates.
- Range of fees for particular services.
- Fee charged for individual consultation.
- Must include statement disclosing whether clients will be responsible for such fees.
- Cannot charge more than published fees for 30 calendar days after last date schedule of fees were published.
If a paid tax preparer does adhere to Circular 230, the IRS has the authority to censure, suspend and disbar. The IRS can also issue monetary penalties.
Editor’s Note: This is the third in a series four “hot topic” articles for tax preparers. Each one will be published on succeeding Tuesdays in January 2012, and links to the other articles will be provided as they publish.
First Article: Tax Return Preparer Requirements
Second Article: What is a Preparer Tax ID Number?
Third Article: What is a Registered Tax Return Preparer?
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