IRS Plans New Letters to Tax Preparers as Circular 230 Rules are Revised

The Internal Revenue Service said in an email to tax professionals Friday that it is planning to send letters to federal tax return preparers with expired Preparer Tax Identification Numbers or who have personal non-compliance issues.

In the same weekly email to tax professionals, the IRS also noted that tax professionals who represent taxpayers before the IRS should be aware that there were significant revisions made to Circular 230 on June 12, 2014.

The IRS noted on its Web site that it sends many letters annually to federal tax return preparers. Beginning in November 2014, the agency began its sixth year of a hands-on effort to improve the accuracy and quality of tax returns and to heighten awareness of preparer responsibilities. For example, Letter 4911 notifies tax preparers that they are not compliant with their personal tax responsibilities and should resolve the matter to avoid affecting their status as a PTIN holder. Letter 5538 is sent to tax preparers whose PTINs have expired, but their PTINs have subsequently been used on tax returns.

Separately, on its Web site, the IRS also noted that tax professionals who represent taxpayers before the IRS should be aware that there were significant revisions made to Circular 230 last June.

The IRS pointed out that the most important Circular 230 provisions for tax professionals to review are either new or are areas where professionals are most likely to make errors including:

•    Diligence as to Accuracy (10.22)
•    Due Diligence Standards for Signing and Advising – Returns/Docs (10.34)

•    Negotiation of Taxpayer Checks (10.31)
•    Giving False or Misleading Info (10.51(a)(4))
•    Willfully Assisting, Counseling or Encouraging a Client to Evade Taxes or Payment Thereof (10.51(a)(7))
•    Conflicting Interests (10.29)
•    Due Diligence for Written Advice (10.37)
•    Competence (10.35)
•    Expedited Suspension (10.82)

Under regulation section 10.1(a)(1), the IRS’s Office of Professional Responsibility has exclusive authority for disciplinary proceedings and sanctions. The section was revised as of June 2014 to provide that exclusive authority for disciplinary procedures and sanctions rests with OPR.

“OPR makes independent determinations about whether a practitioner has behaved in a way that reflects on their fitness to continue to practice before the IRS,” said the IRS. “OPR can propose and negotiate discipline or can commence a proceeding before an administrative law judge to impose discipline.”