Wiley Tax Preparer: A Guide to Form 1040

CHAPTER 41

Sanctions for Violating Circular 230

Circular 230, Regulations Governing Practice Before the Internal Revenue Service, sets forth the duties and responsibilities of practitioners, including tax return preparers. (Rules for Part A of Circular 230 are discussed in Chapter 39; rules for Part B of Circular 230 are discussed in Chapter 40.)

If the tax return preparer fails to comply with these duties and responsibilities, he or she may be subject to sanctions. Sanctions may result in monetary penalties or disciplinary action which may prevent the tax return preparer from operating as a practitioner.

Sanctions—Section 10.50

The IRS has the authority to take disciplinary action against a tax return preparer for:

1. Incompetence or disreputable conduct (defined later in this chapter),

2. Violating the regulations, OR

3. Having an intent to defraud, willfully and knowingly misleading, or threatening a client or a prospective client.

Disciplinary action can be:

TIP: The IRS rarely institutes a proceeding to suspend or disbar a practitioner without first giving him or her the opportunity to demonstrate or achieve compliance with Circular 230.

• Censure. This is a public reprimand. Censure does not make the tax return preparer ineligible to represent clients. However, it may subject him or her to conditions designed to promote high standards of conduct for the future.
• Suspension ...