Title: IRS Proposes Changes to Regulations for Tax Preparers
Title: Updates to Circular 230 Regulations for Tax Professionals
The IRS is currently proposing updates to the regulations governing tax professionals, including attorneys, CPAs, and enrolled agents (EAs). These changes, outlined in the proposed regulations, aim to modernize and align with current laws, enhancing the professionalism and competence of tax practitioners.
Circular 230 and Treasury Department Circular 230
Circular 230, officially titled Regulations Governing Practice before the Internal Revenue Service, is a set of rules and regulations that govern tax professionals' practices before the IRS. These guidelines come under Title 31 Code of Federal Regulations, Subtitle A, Part 10. Initially published in 1921, Circular 230 has been amended numerous times, with significant changes in 2005 and 2014.
Proposed Changes
The proposed changes to Circular 230 are extensive, addressing the modernization of tax practice standards, contingent fees, and best practices for tax professionals. Key proposed changes include:
- Modernization and Alignment with Current Law: The proposed regulations aim to revise or eliminate outdated provisions, ensuring better alignment with the evolving nature of tax practice.
- Elimination of Registered Tax Return Preparer Regulations: Since the Loving v. IRS decision, provisions related to registered tax return preparers are no longer enforceable. Therefore, the proposed regulations eliminate rules related to registered tax return preparers and remove references to them.
- Contingent Fee Rules: The current contingent fee rules will be removed, and charging contingent fees for preparing original returns, amended returns, and claims for refunds will be classified as "disreputable conduct."
- Strengthened Obligations Regarding Errors: Practitioners must advise clients of errors and explain the consequences and corrective actions. They must also consider whether they can continue to meet their obligations if clients refuse to take corrective action.
- Technological Competency Requirement: Practitioners must understand the benefits and risks of technology used to provide client services, store, or transmit confidential information, and handle tax return information.
- Best Practices Updates: The regulations expand best practices to include maintaining data security policies, incident response plans, and business continuity and succession plans. Practitioners must also identify and address potential mental impairments that could affect their practice capabilities.
- Authority and Discipline: The IRS Office of Professional Responsibility retains authority over suspended or disbarred practitioners, ensuring consistent oversight and discipline.
How to Participate
Individuals can submit their opinions and feedback on the proposed changes to Circular 230 between February 24, 2025, and February 24, 2025, via the Federal eRulemaking Portal at www.regulations.gov. A public hearing is also scheduled for March 6, 2025, where individuals can attend or participate virtually to share their thoughts on the proposed changes.
- Tax practitioners, such as attorneys, CPAs, and enrolled agents, will be impacted by the proposed updates to Circular 230 regulations.
- The updates to Circular 230, which is officially titled Regulations Governing Practice before the Internal Revenue Service, include modernizing tax practice standards for tax professionals.
- Appraisers and other tax professionals must now understand the benefits and risks of technology used in their practices, according to the proposed changes to Circular 230.
- The IRS Office of Professional Responsibility retains authority over suspended or disbarred practitioners, as stated in the proposed changes to Circular 230 regulations.
- Tax professionals, including CPA firms and attorney offices, should take note of the proposed changes to the Treasury Department's Circular 230 regulations and ensure they comply with the new guidelines.
