What Is Circular 230? Duties, Standards, and Sanctions for Tax Pros

Circular 230 is the Treasury Department regulation, codified at 31 CFR Part 10, that governs who may represent taxpayers before the IRS and how those representatives must conduct themselves. It applies to attorneys, CPAs, enrolled agents, and other paid tax professionals who deal with the IRS on a client’s behalf. Violations can lead to public censure, suspension, disbarment, or monetary penalties capped at the gross income the practitioner earned from the offending conduct.

Who Circular 230 Covers

Three groups have unlimited rights to represent clients before the IRS: attorneys, certified public accountants, and enrolled agents. Unlimited means any client, any matter, any IRS office, including audits, collections, and appeals.¹ Attorneys and CPAs qualify through their active state licenses. Enrolled agents earn the designation by passing the three-part Special Enrollment Examination and clearing a suitability check covering tax compliance and criminal background.²

Enrolled actuaries have narrower practice rights, limited to matters involving qualified retirement plans. Enrolled retirement plan agents held similar limited authority for employee plan matters; the IRS stopped accepting new applicants in February 2016, though existing holders keep their designation.³

Unenrolled Preparers

People without one of those credentials can still prepare returns for pay, but their representation rights are tight. An unenrolled preparer who signed a return can represent that client only during an examination of that specific return, and only before revenue agents, customer service representatives, and similar IRS employees.⁴ They cannot handle appeals, collection matters, or returns they did not prepare.

The IRS runs a voluntary Annual Filing Season Program for non-credentialed preparers. Completing its continuing education requirements earns a Record of Completion. Since January 2016, preparers without either a professional credential or an AFSP Record of Completion cannot represent clients before the IRS at all, even on returns they signed.¹

The PTIN Requirement

Anyone who prepares or helps prepare federal returns for compensation must hold a valid Preparer Tax Identification Number, credential or not. For 2026, the fee to obtain or renew a PTIN is $18.75, and it must be renewed annually before filing season begins.⁵ Preparing returns for pay without a valid PTIN triggers penalties under the Internal Revenue Code.

Two narrow carve-outs let someone represent another person without any credential: representing an immediate family member, or representing one’s regular full-time employer. Neither extends to other taxpayers or other matters.⁴

What “Practice Before the IRS” Means

The phrase is broader than most people expect. It covers all matters connected with a client’s rights, privileges, or liabilities under the tax laws, including preparing and filing documents, corresponding with the IRS, representing clients at conferences and hearings, and providing written tax advice.⁴ Preparing a return for pay counts, which is why even unenrolled preparers fall under Circular 230’s conduct rules.

Core Duties to Clients and the IRS

Section 10.22 sets the due diligence standard. A practitioner must exercise due diligence when preparing returns, when making representations to the IRS, and when making representations to clients about IRS-administered matters.⁶ Practitioners can rely on the work of others if they used reasonable care in engaging, supervising, and evaluating those people. Ignoring something that looks wrong is not an option.

When a practitioner discovers that a client has not complied with the tax laws or has made an error on a filed return, the practitioner must promptly tell the client and explain the consequences, including potential penalties and interest. The duty runs to the client. Circular 230 does not require the practitioner to report the error to the IRS, but the practitioner must advise the client on how to correct it.

Going the other direction: when the IRS makes a lawful request for records or information, the practitioner must hand them over promptly. The only exception is a good-faith belief that the materials are protected by a recognized privilege such as attorney-client privilege, and the practitioner must identify the privilege being asserted.⁷

Client records must be returned on request. A fee dispute does not change that. The practitioner can keep copies, but originals go back immediately, and “records” means any documents the client needs to meet their federal tax obligations.

A practitioner is also flatly prohibited from endorsing or otherwise negotiating a client’s federal tax refund check. This rule exists to prevent fraud and protect client funds.

Fees

Circular 230 prohibits unconscionable fees. There is no fixed dollar threshold; the standard depends on complexity, time required, experience, and what other professionals in the area charge for similar work.

Contingent fees are allowed only in narrow situations: work related to an IRS examination of an original return, a refund claim filed solely to recover statutory interest or penalties, or a judicial proceeding under the Internal Revenue Code. A contingent fee is also permitted for an amended return or refund claim filed within 120 days of the taxpayer receiving written notice of an examination or challenge to the original return.⁴ Charging a contingent fee to prepare an original return is not allowed.

Conflicts of Interest

A practitioner cannot represent one client if doing so would be directly adverse to another client, or if there is a significant risk the representation would be materially limited by responsibilities to another client, a former client, or the practitioner’s own personal interests.⁸

Conflicted representation is permissible only if all three conditions are met: the practitioner reasonably believes competent representation can be provided to each client, the representation is not prohibited by law, and each affected client gives informed written consent. Written consent must be obtained within 30 days of the practitioner becoming aware of the conflict, and copies must be retained for at least 36 months after the representation ends.⁸

Standards for Return Positions and Written Advice

Section 10.34 governs positions on returns. A practitioner cannot willfully, recklessly, or through gross incompetence sign a return or advise a client to take a position that lacks a reasonable basis, meaning a realistic chance of being sustained on its merits.⁹ Willfully understating a tax liability, or recklessly disregarding IRS rules, triggers higher penalty standards under IRC Section 6694(b). A pattern of positions that fall short of these thresholds can itself be evidence of willful or reckless behavior, even where each individual position looked borderline.

A paid preparer must also sign the return. Failure to sign is a separate penalty under IRC Section 6695: $50 per unsigned return, with a $25,000 annual cap per preparer.¹⁰

Section 10.37 covers written tax advice, including email. The rules are strict but straightforward:¹¹

The advice must be based on reasonable factual and legal assumptions, including assumptions about future events.
The practitioner must consider all relevant facts and circumstances known or reasonably knowable, and make reasonable efforts to identify facts that matter.
The practitioner cannot rely on client or third-party representations that are known or should be known to be incorrect, incomplete, or inconsistent.
The advice must relate applicable law and authorities to the specific facts.
The practitioner cannot factor in the likelihood that a return will not be audited or that a particular issue will not be raised.

That last point catches practitioners out. Telling a client “this position is aggressive, but audit odds are low” violates Section 10.37. The analysis has to stand on the legal merits, not on statistical odds of examination.⁴

Sanctions and How Discipline Works

The Office of Professional Responsibility enforces Circular 230. OPR investigates based on referrals from IRS personnel, state licensing boards, and public complaints, and holds exclusive authority over practitioner discipline.¹² The sanctions escalate:

Censure is a public reprimand. The practitioner keeps the right to practice but receives a formal warning published in the Internal Revenue Bulletin.¹³
Suspension is a temporary loss of the right to practice before the IRS.
Disbarment is permanent removal, with the ability to petition for reinstatement after five years.¹⁴
Monetary penalties can be imposed on the individual, and separately on an employer or firm that knew or reasonably should have known about the misconduct. The penalty cannot exceed the gross income derived from the conduct.⁴

OPR publishes all censures, suspensions, and disbarments in the Internal Revenue Bulletin, so the record is visible to the public and to prospective clients.¹⁵ When OPR and the practitioner cannot settle, the matter goes to a civil hearing before an Administrative Law Judge under the Administrative Procedure Act, with a right to appeal to a Treasury Appellate Authority within 30 days.¹⁶

Proposed Changes Still Pending

In December 2024, Treasury published a notice of proposed rulemaking that would significantly revise Circular 230. As of early 2026, the changes remain proposals and have not taken effect. The most notable would reclassify certain contingent fee arrangements as disreputable conduct subject to sanctions, establish new standards for appraisers and appraisal submissions, add a duty to maintain technological competence, and remove references to the registered tax return preparer designation that courts invalidated in 2014.¹⁴ Practitioners who rely on contingent fees in the currently permitted situations should watch whether these proposals are finalized.

1
Internal Revenue Service. Annual Filing Season Program
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Internal Revenue Service. Enrolled Agents Frequently Asked Questions
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Internal Revenue Service. Enrolled Retirement Plan Agent (ERPA) Program Changes
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Internal Revenue Service. Treasury Department Circular No. 230 (Rev. 6-2014)
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Internal Revenue Service. IRS Reminds Tax Pros to Renew PTINs for the 2026 Tax Season
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eCFR. 31 CFR 10.22 – Diligence as to Accuracy
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eCFR. 31 CFR Part 10 Subpart B – Duties and Restrictions Relating to Practice Before the Internal Revenue Service
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eCFR. 31 CFR 10.29 – Conflicting Interests
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eCFR. 31 CFR 10.34 – Standards With Respect to Tax Returns and Documents, Affidavits and Other Papers
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Office of the Law Revision Counsel. 26 USC 6695 – Other Assessable Penalties With Respect to the Preparation of Tax Returns for Other Persons
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eCFR. 31 CFR 10.37 – Requirements for Written Advice
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Internal Revenue Service. Office of Professional Responsibility and Circular 230
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eCFR. 31 CFR 10.50 – Sanctions
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Federal Register. Regulations Governing Practice Before the Internal Revenue Service
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Internal Revenue Service. Announcement of Disciplinary Sanctions
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Internal Revenue Service. Due Process Procedures in Circular 230 Matters