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THE OFFICE OF PROFESSIONAL RESPONSIBILITY
What You Don’t Know CAN Hurt You
Karen L. Hawkins, Director
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
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“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
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Finding It
• Online at www.irs.gov/pub/irs-pdf/pcir230.pdf
• Substantial revisions effective August 2, 2011
• NPRM – Additional Revisions Proposed – Final Regs pending
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Calendar Year 2012 Discipline Results
Activity Attorney CPA EA Unenrolled Totals
• Total Receipts 516
• Disbarments (FAD/Consent) - 1 - 1 2• Suspensions (FAD/Consent) 2 2 3 - 7• Expedited Suspensions 29 25 7 - 61• DDA/Other Conditions - 1 2 - 3• Censure 1 2 1 - 4• Reprimands/Soft Letter 150• Cease & Desists 50• CWOS, LOJ , NCOA, CWOA 409 • Reinstatements 25
• Total Dispositions 813
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Calendar Year 2013Discipline Results Through Q3
Activity Attorney CPA EA RTRP Unenrolled Totals
• Total Receipts 631• Disbarments (FAD/Consent) - 4 2 - - 6• Suspensions (FAD/Consent) 1 1 1 - - 3• Expedited Suspensions 13 24 4 - 1 42• DDA/Other Conditions 2 4 5 - 1 12• Censure - 2 - 1 - 3• Reprimands/Soft Letters 117• Cease & Desist Letters 22• CWOS, LOJ, CWOA, etc. 470• Reinstatements 11
• Total Dispositions 701
JURISDICTION
• 31 USC 330(a)(1); (b); (c); (d)• 10.2(a)(4)• 10.7(c)• 10.8(a)• 10.8(c) (Notice 2011-6)• 10.50(b)/10.60(b)
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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))
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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.
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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
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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.
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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
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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
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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”.
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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 230. 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.
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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).
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Prop. 10.37 (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. 10.29); or is incompetent
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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
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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.
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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
Recent/Relevant Cases• Tewolde:
http://www.irs.gov/uac/Newsroom/IRS-Office-of-Professional-Responsibility-Disbars-Return-Preparer-Accused-of-Filing-False-Returns
• Tiongson: http://www.irs.gov/pub/irs-utl/Tiongson%20-%20IRS_Decision%20on%20Tiongson%20Motion%20for%20Default%20(FINAL)%20-%204-3-13.pdf
• Walker: http://www.irs.gov/pub/irs-utl/Walker%20FAD%202-18-13.pdf
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Recent/Relevant Cases• Bohn: http://www.irs.gov/pub/irs-utl/Morton
%20Bohn%20SJ%20Order%20-FINAL%20Redacted.pdf
• Gee: http://www.irs.gov/pub/irs-utl/opr-_edgar_h__gee_jr__-_final_order.pdf
• Christensen: http://www.irs.gov/file_source/pub/irs-utl/Redacted%20Final%20Order%20Assessing%20Sanction%20-%20IRS%20Christenson.pdf
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Recent/Relevant News
• Attorney Censured by the OPR for Mishandling Conflicts of Interest: http://www.irs.gov/file_source/PUP/taxpros/agents/Atty%20Censured%20by%20OPR%20for%20Mishandling%20Conflicts%20of%20Interests.pdf
• Refund Splitting: http://www.irs.gov/file_source/pub/irs-utl/OPR%20Targeting%20Preparers%20Compensated%20Through%20Shared%20Refunds.pdf
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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)
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More Info?• Office of Professional Responsibility
1111 Constitution Ave. N.W.SE:OPR Rm. 7238 Washington, D.C. 20224
• Information on OPR, Circular 230 and Discipline visit:http://www.irs.gov/Tax-Professionals/Circular-230-Tax-Professionals
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