The Ongoing Impact of Loving: The IRS May Not Be Able to Regulate Tax Opinions

Loving vs. IRSUnder Circular 230, the IRS regulates tax professionals in a variety of ways. For example, a tax practitioner who learns that a client has made an error in a return must promptly advise the client of the error and its consequences. 31 C.F.R. § 10.21. Among the subjects regulated under Circular 230 is written tax advice, which is subject to a reasonable practitioner standard. 31 C.F.R. § 10.37. Violations of the requirements of Circular 230 expose tax professionals to disciplinary proceedings before the IRS Office of Professional Responsibility (“OPR”). The authority of the IRS to regulate tax professionals rests on a statute that authorizes the Treasury Department to “regulate the practice of representatives of persons before the Department of the Treasury.” 31 U.S.C.… Read More

Clean Up Those Emails: A Plea.

Well actually it may be a bit of a rant.

I am still seeing something in my inbox that does not belong there: it is usually called a “Circular 230 Notice,” and generally says, in words or in substance, that “the IRS requires me to tell you that you cannot rely on what I am writing to avoid penalties.” It is a bit of boilerplate that is past its best by date.

The background: Circular 230 is a regulation promulgated by the Department of the Treasury that regulates practice before the IRS. 31 C.F.R. §§ 10.0-10.93. In a nutshell, it imposes standards of professional conduct on those of us who represent clients before the IRS.… Read More

Contingent Fees and Tax Refund Claims.

Earlier this year, the D.C. Circuit ruled that the Department of the Treasury could not regulate return preparers; the basic rationale was that the preparation of tax returns is not “practice before” the Department. As a consequence, the Court ruled that the Department exceeded its authority in regulating preparers. Loving v. IRS, 742 F.3d 1013, 1016-1022 (D.C. Cir. 2014).

Section 10.27(b) of Circular 230 also limits the ability of a practitioner to render services on a contingent fee basis and bars contingent fees in the context of most tax returns. Given Loving’s holding that the Department of the Treasury cannot regulate the preparation of tax returns, the question then becomes whether its bar on contingent fees can hold up.… Read More

A Challenge to Circular 230’s Limitation on Contingent Fees Is Rejected.

Circular 230, 31 C.F.R. § 10.0 et seq., regulates the conduct of attorneys, certified public accountants and other professionals in practice before the IRS, including regulation of the fees that they can charge. Circular 230 only permits contingent fees in three specific contexts:

  • In connection with an examination of, or challenge to an original tax return or an amended return or claim for refund or credit where the amended return or claim for refund or credit was filed within 120 days of the taxpayer receiving a written notice of the examination of, or a written challenge to the original tax return.
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