IRS Circular 230 at a Glance — Who Must Comply and What It Requires (2025)
IRS Circular 230 sets the ethical and practice standards for professionals who practice before the IRS—attorneys, CPAs, EAs, and others.
This 2025 overview clarifies who is covered, what “practice before the IRS” actually includes, and how the document is organized so you can operationalize it in real client work. To keep it practical, you’ll find mint-tone example boxes and a concise compliance checklist you can adopt today.
1) Who is subject to Circular 230?
Circular 230 applies to professionals who represent taxpayers before the IRS or provide submissions and explanations on their behalf:
Attorneys, CPAs, Enrolled Agents (EAs), and certain enrolled entities and persons. Return preparers with a valid PTIN may also trigger Circular 230 considerations when their activities cross into representation or when their written advice or submissions are used before the IRS.
Think of Circular 230 as a set of minimum practice standards. It’s not merely a list of prohibitions; it pushes for accuracy, diligence, proper documentation, and transparent communications. In practice, this means standardizing engagement letters, clarifying the scope of representation, and documenting facts and assumptions whenever a tax position could be challenged.
2) What is “practice before the IRS”?
“Practice before the IRS” covers representing taxpayers, submitting information,explaining facts or law, and advocating positions in matters administered by the IRS. Activities limited to commenting on rulemaking, or a company’s in-house employee representing only that employer within narrow limits, may fall outside typical “practice.” Even then, core principles like no false or misleading statements and maintaining accuracy still apply.
Why it matters: once your work is classified as “practice,” you’re squarely under Circular 230. Violations can lead to censure, suspension, disbarment, and monetary penalties under the IRS Office of Professional Responsibility (OPR). Avoid ambiguity by making the engagement scope explicit—especially whether you’ll respond to IRS inquiries, prepare submissions, or advocate positions.
3) How the rules are organized (Subparts A–D)
- Subpart A — Authority & Definitions: Applicability, definitions, and enrollment or eligibility basics.
- Subpart B — Duties & Restrictions (core practice rules):
- §10.20 Information to be furnished • §10.21 Knowledge of client’s noncompliance or errors
- §10.22 Diligence as to accuracy • §10.23 Prompt disposition of pending matters
- §10.27 Fees • §10.28 Return of client records • §10.29 Conflicts of interest
- §10.30 Advertising & solicitation • §10.31 Negotiation of taxpayer checks
- §10.37 Written advice (facts, assumptions, verification; audit-likelihood not considered)
- Subpart C — Sanctions: Grounds and types of discipline (censure, suspension, disbarment, penalties).
- Subpart D — Rules Applicable to Disciplinary Proceedings: Notice, hearings, appeals—your due-process roadmap.
In day-to-day practice, Subpart B does the heavy lifting: client intake, evidence requests, accuracy reviews, turnaround times, fee structures, conflicts screening, advertising copy, and written advice standards all live here.
4) Real-world examples & checklist
During a 2024 return review, you learn your client received staking rewards on a U.S. exchange but never reported them.
Under §10.21, you must promptly inform the client of the noncompliance and its consequences (additional tax, penalties) and advise on corrective steps—e.g., amending the return and assembling transaction records. Keep your communication in written form and document proposed next actions.
- Gather all facts and verify documents; flag inconsistencies for follow-up.
- Map law, regs, and rulings; decide if the position meets a reasonable basis or higher.
- If uncertain, consider a disclosure or a more conservative alternative.
- Record assumptions and limitations in written advice (§10.37); do not rely on audit-likelihood.
A startup client requests backup documentation for an IRS information request. Even if you have a fee dispute, §10.28 requires you to return records the client needs to comply with tax obligations without delay.
Workpapers for the current year may be withheld depending on your agreement and state rules, but provide copies or access sufficient for the client to meet IRS requirements and note exactly what you returned.
- Standardize your engagement letters (scope of IRS representation, conflicts, record return, fee terms).
- Adopt an intake fact-finding form (foreign income, digital assets, related-party items, grants/credits).
- Document queries and inconsistencies when relying on others’ work (§10.22).
- Track deadlines to avoid unreasonable delays (§10.23).
- Keep advertising claims accurate and non-misleading; retain solicitation records for 36 months (§10.30).
Do not receive or direct a client’s refund check or other government payment into your account.
Your guidance can cover the process and timeline, but the disbursement path must remain the client’s.