Representation Ethics

Code of Ethics

LG Brooks, BA, EA

August 2013

Representation Ethics

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Representation Ethics

Regulatory Oversight

�Office of Professional Responsibility (OPR)

(f/k/a The Office of the Director of Practice)• Establishes the rules & guidelines regarding practice

before the IRSbefore the IRS

• Enforces the provisions of Circular 230 for all “Enrollees”

• Oversight helps to ensure the integrity & credibility of the American Tax System

• Responsibility for disciplinary actions concerning Attorneys, CPAs, EAs and other practitioners

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Representation Ethics

OPR Objectives• Establishing procedures to identify & address the most

egregious compliance “violators”

• Establishing & communicating standards of conduct

• Maintaining a system of practitioner oversight

• Rejuvenating the “referral” process (not to be confused with client referrals)

• Establishing & administrating a system of sanctions for non-compliant practitioners

• Administering test for individuals who desire to be recognized as an “Enrolled Agent”

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Representation Ethics

The Small Business & Work Opportunity Act (SBWOA)

• Modified and clarified IRC §6694, “Understatement of Taxpayer’s Liability by Tax Return Preparer”

• Applies to “all” tax return preparers (not just 1040 types)

• Modified the “Standards of Conduct” for practitioners and tax return preparers

• 1st Tier-Preparer Penalties established at $1,000 regarding the understatement of a taxpayer’s liability (or 50% of the income derived or expected to be derived by the preparer

• 2nd Tier-Preparer Penalties…$5,000 for willful neglect

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Representation Ethics

Attorney-Client (Tax Advisor-Client) Privilege

• Established pursuant to RRA 98’

• Established Civil Privilege provision for non-attorneyqualified practitioners

• IRC §7525, Confidentiality Privileges Relating to TaxpayerCommunications”Communications”

• The fundamental purpose of the provision is to makeconfidential, communications between a client & theclient’s tax advisor

• Typically tax advisor must be a Federally Authorized Tax(FAT) practitioner

• Applies to all civil tax matters (non-criminal)

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Representation Ethics

Key Circular 230

• Diligence as to Accuracy (§10.22)

• Fees (§10.27)

• Conflicting Interest (§10.29)

• Negotiation of Taxpayer Checks (§10.31)

• Due Diligence Standards-Return/Documents (§10.34)

• Giving False or Misleading Information (§10.51(a)(4))

• Willfully Assisting, Counseling or Encouraging a Client to Evade Taxes or Payment Thereof (§10.51(a)(7))

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Representation Ethics

Information to be Furnished

• A practitioner must promptly submit records or informationto the IRS, upon a proper & lawful request (unless thepractitioner believes in “good faith” and on reasonablegrounds that the records or information are privilegedgrounds that the records or information are privileged

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Representation Ethics

Knowledge of Client’s Omission

• A practitioner who has knowledge of any error, omission ornon-compliance on behalf of a client, must promptly advisesuch client of the non-compliance, error or omission.Additionally, the taxpayer must inform/advise the client ofAdditionally, the taxpayer must inform/advise the client ofany consequences provided pursuant to the law withrespect to such error, omission or non-compliance matter.

• This provision not only applies to tax returns, but anydocuments, affidavits or any other paper the client isrequired to execute and submit to the IRS.

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Representation Ethics

Diligence as to Accuracy

• In general, a practitioner must exercise due diligence withrespect to tax administration matters.

• Preparing or assisting in the preparation of• Preparing or assisting in the preparation of

• Determining the correctness of oral or writtenrepresentations made by the practitioner to the IRS

• Determining the correctness of oral or writtenrepresentations made by the practitioner to clients

• Reliance on other practitioners or professionals

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Representation Ethics

Prompt Disposition of Pending Matters

• A practitioner must not unreasonably delay theprompt disposition of any tax matter before theInternal Revenue ServiceInternal Revenue Service

• Please consider that reasonable delays areunavoidable at times. The practitioner’s professionaldemeanor, diligence and consistent communicationwith the related IRS personnel should diminish the theprobability of any “unreasonable delay” determination

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Representation Ethics

FEES

• A practitioner may not charge an

unconscionable fee in connection with any

matter before the Internal Revenue Service.matter before the Internal Revenue Service.

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Representation Ethics

Return of Client Records

• In general, a practitioner must, at the request ofa client, promptly return any and all records ofthe client that are necessary for the client tothe client that are necessary for the client tocomply with his or her federal tax obligations.However, if a fee dispute exists, and if thepractitioner’s state law provisions allows such,the practitioner need only to return those recordsthat must be attached to the taxpayer’s return.

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Representation Ethics

Conflicting Interest

• In general, a practitioner must, at the request ofa client, promptly return any and all records ofthe client that are necessary for the client tothe client that are necessary for the client tocomply with his or her federal tax obligations.However, if a fee dispute exists, and if thepractitioner’s state law provisions allows such,the practitioner need only to return those recordsthat must be attached to the taxpayer’s return.

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