DEFENDING COMPLAINTS BY THE OFFICE OF PROFESSIONAL RESPONSIBILITY (OPR) FOR VIOLATING IRS CIRCULAR 230

FREQUENTLY ASKED QUESTIONS

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FAQs Regarding Investigations Involving Potential Censure, Suspension, or Disbarment of Practitioners by the Office of Professional Responsibility for Violations of IRS Treasury Department Circular No. 230.

Practitioners before the Internal Revenue Service should be aware of the potential for an ethics investigation and proceeding against them for possible violations of Treasury Department Circular No. 230. Those regulations can be found in Title 31 of the Code of Federal Regulations Subtitle A, Part 10 (31 CFR Subtitle A, Part 10). They apply not only to attorneys and accountants, but to all “practitioners” as that term is defined in § 10.2(a)(5) of Circular 230.

The Nissenbaum Law Group has a robust ethics practice that spans Pennsylvania, New York and New Jersey. The firm is well-suited to representing clients before the OPR in defense of investigations or complaints regarding violations of Circular 230 that could lead to the practitioner’s potential censure, suspension, or disbarment. Since the practitioner’s ability to handle tax matters going forward could be impaired or eliminated in that way, so the stakes are exceedingly high. Given the fact that Circular 230 is patterned after the Rules of Professional Conduct governing attorneys—while at the same time admittedly incorporating a number of significant distinctions from the RPCs—our law firm welcomes the opportunity to defend practitioners involved in such investigations or hearings.

The following is a list of frequently asked questions (FAQs) relating to this important area of practice before the IRS.

FAQ # 1 – What agency has jurisdiction in regard to Circular 230?

The federal Department of the Treasury oversees the IRS Office of Professional Responsibility (OPR). The latter handles matters relating to practitioner misconduct in advocating for a taxpayer before the IRS. It is responsible for any disciplinary proceedings or sanctions of practitioners representing taxpayers before the IRS.

FAQ # 2 – To whom does Circular 230 apply?

Circular 230 applies to practitioners who represent the interest of taxpayers before the IRS. The term practitioner is defined by Treasury Circular No. 230 § 10.2(a)(5) to include attorneys, certified public accountants, enrolled agents, enrolled actuaries, enrolled retirement plan agents, registered tax return preparers, and other persons representing taxpayers before the Internal Revenue Service. Circular 230 sets forth the parameters for the type of activities to which it applies,

Practice before the Internal Revenue Service comprehends all matters connected with a presentation to the Internal Revenue Service or any of its officers or employees relating to a taxpayer’s rights, privileges, or liabilities under laws or regulations administered by the Internal Revenue Service. Such presentations include, but are not limited to, preparing documents; filing documents; corresponding and communicating with the Internal Revenue Service; rendering written advice with respect to any entity, transaction, plan or arrangement, or other plan or arrangement having a potential for tax avoidance or evasion; and representing a client at conferences, hearings, and meetings.

Treasury Circular No. 230 § 10.2 (a)(4)

FAQ # 3 – Does Circular 230 require certain disclosures by the practitioner to the taxpayer they are representing before the IRS that are not required by the ABA Rules of Professional Conduct (RPCs) governing an attorney’s required disclosures to their clients in litigation?

There are a number of disclosures that Circular 230 requires of the practitioner that have no obvious analog in the ABA Rules of Professional Conduct (RPCs) governing attorneys. What is unique is that they are disclosures from the practitioner to the taxpayer they represent. Two examples are:

  • Requirement of Advising a Taxpayer of Noncompliance The practitioner must advise the taxpayer for whom it is acting if it knows that the taxpayer has not complied with United States revenue laws or has made “any error or omission from any return, document, affidavit, or other paper which the taxpayer submitted or executed under the United States revenue laws”.
  • Requirement of Advising a Taxpayer of Consequences The practitioner must also advise the taxpayer of the consequences provided under the Code and regulations of such noncompliance, error, or omission (Treasury Circular No. 230 § 10.21).

FAQ # 4 – What are the usual steps for a proceeding against a practitioner under Circular 230 for misconduct?

Proceedings regarding misconduct under Circular 230 are relatively similar to those under the Rules of Professional Conduct governing attorneys. They are reflected in the following five categories: (1) investigation, (2) filing of the complaint, (3) motions, (4) discovery and (5) the decision by the Administrative Law Judge, including its findings and conclusions. The general requirements for each of these categories are explained below.

  1. Investigation
    • Once a referral alleging a violation of misconduct is received by the OPR, it will determine (based on all facts available), if the alleged violation puts a practitioner’s ability to practice into question.
    • If an investigation is warranted, the OPR will alert the practitioner with information regarding the allegations and that the investigation is being conducted.
    • The practitioner may, at this stage, supply the OPR with any important information, evidence, or documentation deemed relevant.
    • A conference may also be held between the OPR and the practitioner.
    • After this initial investigation a determination will be made as to whether corrective action or discipline will be sought.
  2. Filing of the Complaint
    • If the OPR seeks further action, a complaint will be filed and name the respondent with a clear and concise description of the facts and be signed by an authorized representative of the IRS under §10.69(a)(1) (Treasury Circular No. 230 § 10.62).
    • The respondent’s answer will be filed with the Administrative Law Judge (ALJ) and served on the IRS within the time specified on the complaint, unless the time is extended by the ALJ. (Treasury Circular No. 230 § 10.64)
    • A hearing shall be scheduled to occur no later than 180 days after the time for filing the answer (Treasury Circular No. 230 § 10.72). Hearings will be conducted pursuant to 5 U.S.C. 556.
  3. Motions
    • Any time after filing of the complaint, either party may file a motion with the Administrative Law Judge (ALJ) in writing and must be served on the opposing party as provided in §10.63(b).
    • The motion must specify its grounds and the relief sought.
    • Motions may include those for summary adjudication upon all or any part of the legal issues, or for extension of time for any other non-dispositive or procedural motion.
    • The ALJ may for good cause with notice to the parties, permit oral motions and oral opposition to motions (Treasury Circular No. 230 § 10.68).
  4. Discovery
    • Discovery may be permitted at the discretion of the Administrative Law Judge, upon a written motion demonstrating the relevance, materiality, and reasonableness of the requested discovery and subject to the requirements of §10.72(d)(2) and (3).
    • Within 10 days of receipt of the answer, the Administrative Law Judge will let the parties know the right to request discovery and the timeframe they should be filing a request. (Treasury Circular No. 230 § 10.71).
  5. Decision by Administrative Law Judge: Findings and Conclusions
    • Except in cases in which the respondent has failed to answer the complaint or if any party failed to appear at the hearing, all parties must have the chance within a reasonable opportunity to submit findings and conclusions and their supporting reasons to the Administrative Law Judge (Treasury Circular No. 230 § 10.75).
    • Within 180 days after the conclusion of a hearing and the receipt of any findings and conclusions, the Administrative Law Judge should make a decision in the case.
    • This shall include an order of censure, suspension, disbarment, monetary penalty, disqualification, or dismissal of the complaint- if found necessary (Treasury Circular No. 230 § 10.76).

FAQ # 5 – What are the potential sanctions for violating Circular 230?

The Practitioner may be censured, suspended, or disbarred from practice before the IRS if they violate Circular 230. This is set forth in the guidelines described in § 10.50:

  • if the practitioner is shown to be incompetent or disreputable within the meaning of §10.51,
  • fails to comply with any regulation in this part under the prohibited conduct standards of §10.52, or
  • with intent to defraud, willfully and knowingly misleads or threatens a client or prospective client.

It should also be noted that a monetary penalty may be imposed upon the practitioner and/or an employer (or any firm or other entity) in connection with the practitioner’s conduct. However, the employer may only receive penalty “if it knew, or reasonably should have known of such conduct.” This may be in addition to a censure, suspension, or disbarment of the practitioner, or in replacement of those sanctions.

FAQ # 6 – Can the matter be settled with the IRS before it completes a full proceeding?

Section 10.61 of 31CFR230 highlights that conferences may be held between the Commissioner (or their delegate) and the practitioner (or the representative of the entity in question). During this process, the practitioner may offer a consent to be sanctioned under § 10.50. Whether or not this offer is accepted is a discretionary decision, as set forth in § 10.61(b)(2).

The Commissioner or their delegate, may accept or decline the offer described in paragraph (b)(1) of this section. When the decision is to decline the offer, the written notice of declination may state that the offer would be accepted if it contained different terms. The Commissioner, or delegate, has the discretion to accept or reject a revised offer submitted in response to the declination or may counteroffer and act upon any accepted counteroffer.

The Nissenbaum Law Group Welcomes Potential Client Inquiries Regarding Circular 230 Investigation and Hearing Defense

The Nissenbaum Law Group welcomes inquiries from attorneys, certified public accountants, or any other practitioner that is seeking representation before the OPR in defense of investigations or proceedings regarding alleged practitioner misconduct.

 

PUBLICATIONS & PRESENTATIONS

Gary D. Nissenbaum, Esq.

  • Presented Seminar, Six Aspects of Attorney Ethics Enforcement in NJ, NY & PA That You May Not Have Heard About Before, Lawline, March 2024
  • Panelist, New Jersey Trust and Business Accounting, New Jersey Institute for Continuing Legal Education, February 2021
  • Presented Seminar, How to Avoid Serious Mistakes When Facing an Ethics Grievance or Random Trust Account Audit, Essex County Bar Association, December 2020
  • Presented Seminar, “Good Grievance, Charlie Brown!” Latest Developments in NJ Ethics Law and Procedure, New Jersey Institute for Continuing Legal Education, July 2020
  • Presented Seminar, How to Avoid Serious Mistakes When Facing an Ethics Grievance, Wilshire Grand Hotel, December 2019
  • Presented Seminar, Attorney Ethics Grievances: 20 Insights from the Trenches, Wilshire Grand Hotel, December 2016
  • Presented Seminar, Attorney Ethics Grievance Process, Union County Bar Association, 2011

Anthony C. Gunst, Esq.

  • Presented Seminar, Six Aspects of Attorney Ethics Enforcement in NJ, NY & PA That You May Not Have Heard About Before, Lawline, March 2024
  • Presented Seminar, How to Avoid Serious Mistakes When Facing an Attorney Ethics Matter, New Jersey Association of Legal Administrators, April 2023

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Looking for advice?

We're here to help.

Contact the Nissenbaum Law Group to schedule an appointment at 908-686-8000 or feel free to use the following form to e-mail us. Please include as much information as you can to ensure that we are able to handle your request as quickly as possible.

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