Source: https://www.irs.gov/tax-professionals/office-of-professional-responsibility-subgroup-report
Timestamp: 2019-08-24 05:02:08
Document Index: 380204803

Matched Legal Cases: ['§6109', '§301', '§7701', '§7701', '§6109', '§10', '§7701', '§6109', '§7701', '§6109', '§10', '§10', '§10', '§10', '§10', '§10', '§10', '§10', '§10', '§10', '§10', '§10', '§10', '§10', '§10', '§10', '§ 10', '§6694', 'art 10', '§6109']

Office of Professional Responsibility Subgroup Report | Internal Revenue Service
Office of Professional Responsibility Subgroup Report
The IRSAC OPR Subgroup (hereafter “Subgroup”) is comprised of a diverse group of nine professionals, including lawyers, CPAs, enrolled agents, appraisers, and a representative of the tax software industry. All the members of the Subgroup are completing their third year on the Subgroup and they all greatly appreciate the opportunity they have had to work together with the Office of Professional Responsibility, especially this year with the promulgation of the registered tax return preparer regulations.
The Subgroup has always enjoyed a very good working relationship with the Office of Professional Responsibility and this year was no exception as all the personnel from the Office of Professional Responsibility whom the Subgroup interacted with were all extremely cooperative and forthcoming.
The IRSAC was asked to provide feedback and recommendations on six topics which are included in this report. Please find following a brief summary regarding each of these six issues, followed by a more complete analysis of each of the issues.
1. Recommendations regarding definition of “preparer”
The IRSAC supports the IRS in its efforts to improve service to taxpayers and increase compliance through the registration of return preparers and the application of ethical rules to all return preparers. The IRSAC is concerned, however, about the lack of clarity and guidance regarding the definition of the term “preparer” for purposes of the new registered tax return preparer requirements and urges the IRS to consider postponing application of the new registration requirements to non-signing preparers. Some of the specific recommendations in this area as follows: 1) the IRS should postpone implementation of the registration requirements with respect to all non-signing preparers pending further study, 2) if the definition of return preparer included in the final regulations is retained, additional guidance should be issued that provides a measurable standard to determine what constitutes the preparation of “substantially all” of a tax return, and 3) the IRS and OPR should not attempt to hold a firm/employer accountable for a non-signing employee’s failure to comply with the new registration requirements until clarifying guidance on the definition of return preparer has been issued.
2. Proposed CE program and sponsor requirements
The IRSAC is concerned the proposed Circular 230 revisions, which require OPR review and approval of every continuing education program, will impede effective administration. Some of the specific recommendations in this area as follows: 1) develop an acceptable alternative to the full OPR review of every continuing education program that is required in proposed Circular 230, 2) consider an alternative more like the current sponsor arrangement in Circular 230, but increase oversight of providers to check compliance with Circular 230 requirements regarding qualified continuing education programs, and 3) develop some type of online system that will streamline and expedite the process for OPR approval of providers and programs, as well as the assignment of course numbers.
3. Enrollment of former IRS employees
The IRSAC was asked to provide input and feedback regarding whether former IRS employees should be granted Enrolled Agent status (full or limited) simply by virtue of their past IRS employment. Some of the specific recommendations in this area as follows: 1) Treasury should revise Circular 230 to remove the authority to grant enrollment to former IRS employees simply based on their past IRS work experience, and 2) Circular 230 should require all persons, including former IRS employees, to take and pass the enrolled agent examination as a prerequisite to becoming an enrolled agent.
4. Circular 230 definition of “willfully”
Most ethical violations covered by Circular 230 require the Office of Professional Responsibility to establish that the conduct was “willful” before sanctions may be imposed. Currently, Circular 230 does not contain an explicit definition of “willful” conduct. In that regard, we recommend Treasury amend Circular 230 to clearly define “willful” as “a voluntary, intentional violation of a known legal duty.”
5. Precedential guidance regarding ethical issues
OPR requested that the IRSAC investigate the feasibility of creating a structure to provide information and precedential guidance to practitioners seeking to be compliant with the applicable rules and regulations of Circular 230. The Subgroup discussed and brainstormed this issue and offered a number of suggestions, including the creation of an “Information Network” staffed by expert volunteers.
6. Oversight of preparers under Title 31
With the implementation of the new regulations surrounding the registration of all tax return preparers there may be the temptation to focus the oversight of the new class of registered tax return preparers exclusively under Title 26 as opposed to under Title 31. While this may appear to be more effective and efficient, oversight of the ethical behavior of the new registered tax return preparers should be administered by OPR under Title 31 and the enforcement of the new PTIN rules and how registered tax return preparers apply the tax law when preparing tax returns should be administered under Title 26.
ISSUE ONE: RECOMMENDATIONS REGARDING THE DEFINITION OF “PREPARER” FOR PURPOSES OF NEW REGISTERED RETURN PREPARER REQUIREMENTS
The IRSAC supports the IRS in its efforts to improve service to taxpayers and increase compliance through the registration of return preparers and the application of ethical rules to all return preparers. The IRSAC is concerned, however, about the lack of clarity and guidance regarding the definition of the term “preparer” for purposes of the new registered tax return preparer requirements and urges the IRS to consider postponing application of the new registration requirements to non-signing preparers.
In December 2009, the Internal Revenue Service announced the results of a six-month long study of the paid tax return preparer industry and proposed new requirements for registration, testing and continuing education of return preparers, which are intended to improve service to taxpayers, increase confidence in the tax system and result in greater compliance. Since these new requirements only apply to return “preparers,” the definition of return preparer is the key to determining the applicability of these requirements. Unfortunately, no clear definition of the term currently exists.
The IRS Return Preparer Review report recommended that the requirement to register and obtain a Preparer Tax Identification Number (PTIN) be applied only to “signing preparers,” at least initially. A requirement applicable to signing preparers is clear and easy to apply because there is only one signing preparer per tax return. Registration of the signing preparer makes sense because the signing preparer is the one with “primary responsibility for the overall substantive accuracy.” Registration of the signing preparer also meets the principal objectives of the regulation, which are “to enable the IRS to more accurately identify tax return preparers and improve the IRS’s ability to associate filed tax returns and refund claims with the responsible tax return preparer.” It is difficult to see how registration of a non-signing preparer will meet these objectives when the IRS will only have visibility to the PTIN of the signing preparer because only the signing preparer’s PTIN is transmitted with the return.
Despite the IRS’s initial recommendation regarding registration of signing preparers and the objective stated in the preamble to both the proposed and final IRC §6109 regulations, the final regulations issued September 30, 2010, extend the requirements beyond the signing preparer to include “any individual who is compensated for preparing, or assisting in the preparation of, all or substantially all of a tax return or claim for refund of tax,” if the individual otherwise meets the definition of tax return preparer under Treas. Reg. §301.7701-15. Although the regulations contain several examples designed to illustrate the application of the definition of tax return preparer, the definition remains somewhat vague. For example, notwithstanding the scenarios in the PTIN FAQs, there are no specific guidelines for determining whether an individual prepared or assisted in the preparation of “substantially all” of a tax return. In addition, the regulations refer to the IRC §7701 definition of a preparer and seem to incorporate that definition, yet some of the wording in the regulation appears to be inconsistent with the definition found in §7701. One can clearly interpret the definition and examples in the §6109 regulations as an expansion of the class of individuals considered a preparer.
To add to the confusion, the proposed revisions to Circular 230, issued on August 19, 2010, contain yet another definition of “preparer.” Under proposed §10.2(a)(8), a preparer is defined as “any individual within the meaning of §7701(a)(36) and 26 CFR 301.7701-15.” There is also a provision in the proposed revisions to Circular 230 that makes the failure to obtain a PTIN an ethical violation subject to sanction by OPR. In addition, the proposed revisions to Circular 230 attempt to hold firms/employers accountable for an employee’s lack of compliance with Circular 230. As a result, a firm/employer could be sanctioned for failure of an employee to obtain a PTIN.
Although the goals of the new requirements are laudable, the new requirements should not impose an undue hardship on tax return preparers or their employers and should not unnecessarily increase tax preparation costs to taxpayers. They should be narrowly tailored to meet the IRS objectives of ensuring preparer competence and improving taxpayer compliance, while at the same time minimizing the burden on preparers and disruption in the industry. The regulations in their current form are burdensome and difficult to apply due to a lack of clarity regarding who is a return preparer. For example, the intern scenario (the third of the six scenarios) in the PTIN FAQs could lead to undue burdens on firms preparing tax returns. The regulations also potentially subject firms/employers to penalties and sanctions for an employee’s failure to comply with rules that are unclear.
The proposed and final regulations provide that the IRS may prescribe exceptions to any of the requirements in the regulations if necessary for effective tax administration. One example mentioned in the proposed regulations is an exception during the interim period while procedures are being implemented.
The IRSAC supports the IRS in its efforts to improve service to taxpayers and increase compliance through the registration of return preparers and the application of ethical rules to all return preparers but is concerned about the lack of clarity and guidance around the definition of return preparer and urges the IRS to consider the following recommendations.
The IRS should postpone implementation of the registration requirements with respect to all non-signing preparers pending further study regarding how the term “preparer” can be defined in such a way as to provide clarity for practitioners and their firms/employers, as well as meet the IRS’ objectives of ensuring preparer competence and improving taxpayer compliance without unnecessarily increasing the burden to preparers and their employers.
The regulations and other guidance should align the definition of preparer for purposes of the IRC §6109 regulations with the definition in the proposed changes to Circular 230 and the definition under IRC §7701 in order to eliminate some of the confusion and complexity caused by having multiple definitions for the same term within the Code and Treasury Regulations.
If the definition of return preparer included in the final regulations is retained, additional guidance should be issued that provides preparers and their firms/employers a measurable standard they can apply to determine what constitutes “substantially all” of a tax return or claim for refund.
Any definition of the term “substantially all” for purposes of IRC §6109, and the regulations thereunder, should be consistent with other definitions of the
term found in the Code and regulations in order to eliminate some of the confusion and complexity caused by having multiple definitions of the same term.
The IRS and the OPR should not attempt to hold a firm/employer accountable for an employee’s failure to comply with the new registration requirements until clarifying guidance on the definition of return preparer has been issued.
ISSUE TWO: RECOMMENDATIONS REGARDING CONTINUING EDUCATION PROGRAM AND SPONSOR REQUIREMENTS UNDER PROPOSED CHANGES TO CIRCULAR 230
The IRSAC supports the IRS in its efforts to improve service to taxpayers and increase compliance through the registration of preparers and the application of the ethical rules to all return preparers but is concerned the proposed Circular 230 revisions, which require OPR review and approval of every continuing education program, will impede effective administration.
In December 2009, the Internal Revenue Service announced the results of a six month long study of the paid tax return preparer industry and proposed new requirements for registration, testing and continuing education, which are intended to improve service to taxpayers, increase confidence in the tax system and result in greater compliance. One of the IRS’s proposals requires ongoing continuing professional education for all paid tax return preparers, except attorneys, CPAs and EAs who are already subject to continuing education requirements. On August 19, 2010, Treasury released proposed revisions to Circular 230, which are intended, among other things, to implement the new continuing education requirements. Also included in the proposed revisions to Circular 230 are extensive changes to the continuing education provider requirements. Under proposed Circular 230, §10.9(a)(2), all continuing education providers are required to obtain OPR approval for any programs they wish to qualify for the IRS continuing education credit. Circular 230 does not specify the process OPR is to follow in approving programs; it
merely states that the approval must be obtained “in the time and manner required by forms or procedures established and published by the Internal Revenue Service.”
OPR has instituted procedures for approval of continuing education programs that require providers to submit a host of information, including complete course materials and resumes of instructors and program writers indicating their qualifications. Please see Exhibit A for a list of items OPR currently requires for approval of continuing education programs. Note the statement at the end of the list indicating this list “is not comprehensive, additional information may be requested.” These OPR procedures impose an undue burden on providers and make timely approval of programs impractical.
Prior to issuance of the proposed regulations on the registration of tax return preparers, the only preparers subject to the IRS mandated continuing education requirements were enrolled agents. Currently, there are approximately 46,000 EAs. Under the proposed regulations, the IRS estimates approximately 600,000 additional preparers will be subject to the new continuing education requirements. This dramatic increase in the number of preparers subject to the IRS continuing education requirements raises the following serious questions that must be considered:
Will there be a sufficient number of qualified providers and qualified programs to meet the continuing education needs of an additional 600,000 preparers when the continuing education requirements take effect?
Is OPR review of every program feasible given the number of providers and programs that will be needed to meet the continuing education needs of an additional 600,000 preparers?
Does OPR have sufficient staff to adequately review every program?
Will applications for program approval be reviewed on a first in first out basis? If not, how will OPR address the situation where there are many simultaneous submissions of applications?
What criteria will OPR apply when judging the content of programs and qualifications of instructors?
What will be the turnaround time for program approval; how will OPR ensure that programs are approved in a timely manner, particularly when late legislation is a common occurrence?
What mechanism(s) does OPR have in place to ensure consistency in the review and approval of programs?
The IRS simply cannot review and approve every continuing education program, just as the IRS cannot audit every tax return that is filed. Providers should ultimately be responsible for ensuring their programs meet the IRS requirements and should be held accountable if the requirements are not met. The current sponsor program contained in Circular 230, §10.6(g) is fundamentally sound. There simply needs to be better oversight and enforcement of existing rules to ensure requirements are being met and that providers who are not meeting the requirements are dealt with appropriately.
OPR should enable approved providers to utilize some type of online template or system to electronically submit limited information regarding courses (such as name of course, date, location, instructor, CE hours, and outline of the topics to be covered) to OPR for expedited approval and assignment of course numbers. The template could
include a checklist or check boxes where the provider must certify compliance with all requirements (the program was developed by individual(s) qualified in the subject matter, program subject matter is current, instructors are qualified with respect to the program content, certificates of completion bearing a program number will be provided to participants upon successful completion, attendance records will be maintained, etc.) OPR could then do random reviews (or targeted reviews in the event of specific complaints) to verify provider compliance with the requirements.
The IRSAC supports the IRS in its efforts to improve service to taxpayers and increase compliance through the registration of tax return preparers and the application of the ethical rules to all tax return preparers but is concerned about (1) the feasibility of proposed Circular 230 revisions that would require OPR review and approval of every continuing education program; (2) the additional burden such a requirement imposes on continuing education providers and instructors; and (3) the potential negative impact on tax compliance that is likely to result if OPR is not able to review and approve programs in a timely manner. In light of these concerns, the IRSAC requests the IRS to consider the following recommendations.
Develop an acceptable alternative to the full OPR review of every continuing education program that is required in proposed Circular 230, §10.9(a)(2).
Consider an alternative more like the current sponsor arrangement in Circular 230 §10.6(g), but increase oversight of providers to check compliance with Circular 230 requirements regarding qualified continuing education programs.
Develop some type of online system that will streamline and expedite the process for OPR approval of providers and programs, as well as the assignment of course numbers.
ISSUE THREE: CIRCULAR 230 ENROLLMENT OF FORMER INTERNAL REVENUE SERVICE EMPLOYEES
The IRSAC was asked to provide input and feedback to the Office of Professional Responsibility (OPR) regarding the issue of whether former Internal Revenue Service (IRS) employees should continue to be granted Enrolled Agent (EA) status under Circular 230, §10.4 simply by virtue of past IRS employment.
Circular 230, §10.4(c) authorizes the enrollment of former IRS employees based on qualifying past job experience, which is defined as a minimum of five years continuous employment during which time the applicant was "regularly engaged in applying and interpreting the provisions of the Internal Revenue Code and regulations pertaining to income, estate, gift, employment or excise taxes.” The application for enrollment as an EA under this section must be made within three years from the date of the applicant’s separation of employment from the IRS.
The OPR currently admits seven categories of former IRS employees (Customer Service Representative, Tax Compliance Officer, Revenue Officer, Revenue Agent, Tax Law Specialist, Appeals Officer, and Criminal Investigator/Special Agent) to full enrollment status based on standard positional descriptions, in conjunction with the employee’s grade level and last two evaluations. Taxpayer Advocates may have also been added to the list of former IRS employees receiving full enrollment status. In addition, OPR typically grants full enrollment status to certain IRS executives (including District and Area Directors, Service Center Directors, and executives in technical capacities) with more than five years of service. Circular 230, §10.4(c)(3) authorizes limited enrollment if a former IRS employee’s experience is limited to certain types of cases, such as collections. According to a 2006 Treasury Inspector General for Tax Administration (TIGTA) audit report, the granting of enrollment to former IRS employees was far more restrictive prior to the creation of the Office of Professional Responsibility in 2003, and was far more likely to be limited.
In order to obtain a historical perspective and understand how the policy on enrollment of former IRS employees was administered prior to the creation of the Office of Professional Responsibility, the Subgroup interviewed Patrick McDonough, who was the former Director of Practice from 1998-2002. McDonough indicated that between 1981 and 1995, almost any former IRS employee with five years of experience with the IRS could apply for and obtain EA status. Although the Director of Practice did ask for recommendations from the IRS office to which the applicants were last assigned, almost all applications by former IRS employees were granted. When McDonough became the Director of Practice, according to him, the policy was changed and EA status was only granted to Revenue Agents and Appeals Officers who had previously been Revenue Agents. According to McDonough, as many as 1,000 former employees per year applied for EA status during his tenure. McDonough indicated that many of the EA disciplinary problems reviewed by his office involved former IRS employees who were Revenue Officers. In his opinion, many Revenue Officers are not equipped to deal with examination issues because they do not typically have the necessary tax law knowledge. McDonough firmly believes former IRS employees should be required to pass the Special Enrollment Exam (SEE).
Although Circular 230, §10.4(c)(5) requires former employees to “have been regularly engaged in applying and interpreting the provisions of the Internal Revenue Code and the regulations relating to income, estate, gift, employment, or excise taxes,” it appears this requirement was routinely ignored by OPR until the current Director took over the position in early 2009. In September 2006, the Treasury Inspector General for Tax Administration (TIGTA) issued an audit report, which analyzed the means by which OPR admits former IRS employees as enrolled agents, pursuant to Circular 230, §10.4(c). The audit report concluded that OPR’s then-current methods of admitting former employees were inconsistent and inadequate to protect taxpayers from unqualified EAs. The TIGTA report recommended the discontinuance of the enrollment program for former IRS employees. Since Director Hawkins took over, OPR has reverted to strictly adhering to the provisions of Circular 230 by limiting the practice of former IRS employees wishing to “automatically” become enrolled agents.
Treasury should revise Circular 230, §10.4 to remove the authority to grant enrollment to former IRS employees simply based on past IRS work experience.
Circular 230 should require all persons, including former IRS employees, to take and pass the SEE as a requirement to enrollment as an EA.
If Treasury does not revise Circular 230 to require passage of the SEE by all individuals desiring to become EAs, OPR should continue to strictly follow the requirements outlined in Circular 230, §10.4(c)(5) when reviewing enrollment applications of former IRS employees to ensure the employees have the requisite tax knowledge and technical experience. In addition, if a former IRS employee wishes to prepare tax returns for compensation, they should be required to pass the registered tax return preparer exam that is required of other registered tax return preparers for the level of tax preparation services they will be providing.
ISSUE FOUR: RECOMMENDATION REGARDING THE DEFINITION OF “WILLFULLY” USED IN CIRCULAR 230
Most ethical violations covered by Circular 230 require the Office of Professional Responsibility to establish that the conduct was “willful” before sanctions may be imposed. Currently, Circular 230 does not contain a definition of “willful” conduct.
We recommend Treasury amend Circular 230 to clearly define “willful” as “a voluntary, intentional violation of a known legal duty.”
Under Circular 230, §10.52(a)(1), a practitioner may be sanctioned if the practitioner is shown to have “willfully” violated any Circular 230 provision (other than §10.33 which refers to best practices). A practitioner may also be sanctioned pursuant to §10.51 for incompetence and disreputable conduct, including “willfully” failing to make a Federal tax return. Circular 230 does not contain any guidance regarding when a practitioner is considered to have “willfully” violated a provision.
CURRENT “WILLFUL” STANDARD
In assessing whether a practitioner has willfully violated a Circular 230 requirement, the Appellate Authority has applied the criminal standard from Cheek v. United States, 498 U.S. 192 (1991). In Cheek, “willful” was defined as a “voluntary, intentional violation of a known legal duty” without regard to any “bad motive” or “evil intent” of the taxpayer. Thus, under this standard, the government must show that the law imposed a duty, the practitioner knew of the duty, and the practitioner voluntarily and intentionally violated the duty. Cheek also held that a good faith mistake, even if not
“objectively reasonable,” negates a finding of “willfulness” in the case of a violation of a Code provision, in view of the Code’s complexity.
There have been two recent decisions, wherein the Appellate Authority questioned whether the standard in Cheek is appropriate for disciplinary proceedings under Circular 230, notwithstanding the fact that the practitioner in each case was found to have “willfully” violated Circular 230 under the Cheek standard. These cases are: Office of Professional Responsibility v. Juanita A. Gonzales (December 9, 2009) and Office of Professional Responsibility v. Kevin Kilduff (January 20, 2010).
In Gonzales, the Appellate Authority suggested that the definition of “willful” under the Rules of Professional Conduct of the State Bar of California might be preferable:
For example, the California Supreme Court has determined that the term “willful” under the Rules of Professional Conduct of the State Bar of California means “simply a purpose or willingness to commit the act, or make the omission referred to. It does not require any intent to violate law, or to injure another, or to acquire any advantage.”6
The above quote could be read as supporting a “willful” standard that does not require a practitioner to know of the duty he is accused of having violated. The Appellate Authority was signaling a potential lowering of the Cheek “willful” standard for purposes of Circular 230.
6 Quoting Richard A. Phillips v. State Bar of California, 782 P.2d 587, 591 (1989), quoting Durbin v. State Bar, 590 P.2d 876 (1979).
HOW TO DEFINE “WILLFUL”?
The basic Cheek test for defining “willful” — “a voluntary, intentional violation of a known legal duty” — seems sound in the Circular 230 context. A practitioner should not be considered to have “willfully” violated Circular 230 unless the government demonstrates that the law imposed a duty on the practitioner, the practitioner knew of the duty (even if he did not know the duty was in Circular 230), and the practitioner voluntarily and intentionally violated that duty.
This high standard of “willful” is appropriate given the quasi-penal nature of Circular 230, the vagueness of key requirements (such as the “due diligence” requirement), and the overall complexity of the tax code and regulations. Circular 230 not only reflects complex Code concepts, it also incorporates complex non-tax requirements, such as the conflict of interest provisions of §10.29. Additionally, §10.30 imposes detailed advertising and solicitation rules, including specific document retention requirements, which may not conform to the rules of a state in which a practitioner is licensed to practice. Further, although the Cheek “willful” test was adopted in a criminal setting, Circular 230’s standard of proof is lower than the “beyond a reasonable doubt” standard in criminal cases.7
The definition of “willful” for Circular 230 purposes should not encompass good faith mistakes but should permit consideration of the objective reasonableness of the practitioner’s position and the practitioner’s background and experience in assessing a practitioner’s knowledge regarding the duty he or she is accused of violating and in determining the existence of good faith. Such an exception is essential from the
standpoint of fundamental fairness and helps to encourage voluntary compliance with our tax laws by both practitioners and their clients. Treasury previously has indicated that “willful” (as well as reckless and grossly incompetent) violations are inconsistent with reasonable cause and good faith.
7 See Circular 230 § 10.76(b) (imposing a preponderance of the evidence standard under Circular 230 if the sanction is censure or suspension of less than six months and a clear and convincing standard if the sanction is a monetary penalty, suspension of six months or more, or disbarment).
Circular 230 should contain a clear definition of “willful.” Due to the quasi-penal, complex, and vague nature of Circular 230, it is important that practitioners know the standard for discipline. Changes to the standard should be done through notice and comment process, instead of judicial determinations.
A “willful” violation should be defined as a voluntary, intentional violation of a known legal duty. In addition, Circular 230 should specify that the objective reasonableness of any assertions by the practitioner and the nature and extent of the practitioner’s familiarity with federal tax matters can be considered in assessing the practitioner’s knowledge with respect to the legal duty.
ISSUE FIVE: PRECEDENTIAL GUIDANCE REGARDING ETHICAL ISSUES
Tax professionals practicing before the IRS are governed by Treasury Department Circular 230 and are subject to discipline by the Office of Professional Responsibility (OPR). The application of tax laws, rules and regulations to everyday practice is challenging and practitioners are often met with ethical and procedural situations for which there is little guidance or precedent. As the IRS has increased its attention to compliance, tax practitioners are in need of additional resources for timely advice and information on which they can rely upon to a certain degree. To this end, OPR is interested in investigating the feasibility of creating a structure to provide information and guidance to practitioners seeking to be compliant with the applicable rules and regulations of Circular 230.
The Subgroup discussed and brainstormed this issue and offers the following suggestions:
One avenue for consideration is the creation of a formal body within OPR, which could generate authoritative responses upon which the inquiring practitioner could rely. The IRS does generate private letter rulings for taxpayers who are seeking an official ruling on complicated tax positions for which there is no clear precedential guidance. Such rulings are authoritative and the taxpayer may rely upon them. However, the generation of the private letter ruling is a lengthy and costly process. Furthermore, the IRS is not obligated to produce such rulings and only produces private letter rulings in instances in which it deems appropriate.
It has been observed that often the reason for a practitioner to seek external guidance relates to an issue encountered in the process of filing a tax return. That being said, the timeliness of resolving the issue is frequently critical. While the ability of OPR to respond authoritatively to inquiries would be ideal, the budgetary requirements for the ability to respond both authoritatively and timely make this solution impractical.
An alternative would be the creation of an “Information Network” staffed by expert volunteers from the many professional organizations to whom many tax practitioners belong. The entire process would have OPR oversight. Expert volunteers from the various professional organizations would be grouped into issue-centric specialty centers. These specialty centers would potentially consist of members of the ABA, AICPA, EA and appraiser communities. This Information Network would work through one of the social networks and perhaps utilize a listserv type of posting system. Questions would be submitted electronically via a special web address and form created by OPR. The identities of the requesters would remain anonymous to the viewers of the website, although OPR might need to require some form of authenticating identification in order to submit a question. At this point, it is thought that the primary viewers of the website will be tax practitioners so a possible requirement for access to the website would be that users must have a valid PTIN.
The current thinking is that an employee of OPR would serve as the coordinator and referee of the process. Questions would be forwarded first to the appropriate expert group. The group, when ready to respond, would post the question and the response to the appropriate web site. OPR would have the ability to review the response in case they chose to weigh in on the matter. Additionally, OPR could, for a desired issue, provide formal guidance by issuing a formal advisory opinion. These formal advisory opinions could be posted on the OPR page of the IRS website so they are accessible by all practitioners. Many state bar disciplinary authorities use some type of advisory opinion system.
Part of the process would include an “Open Forum”, allowing registered users of the website to post comments. This would create an open discussion of various issues among the community as website users would be able to post comments regarding the issues being discussed. All communications would be time stamped, saved and searchable.
ISSUE SIX: REGISTERED TAX RETURN PREPARER OVERSIGHT – TITLE 26 vs. TITLE 31
With the implementation of the new regulations surrounding the registration of all tax return preparers there may be the temptation to focus the oversight of the new class of registered tax return preparers exclusively under Title 26 (generally, the Internal Revenue Code) as opposed to under Title 31 (which contains the Circular 230 regulations). While this may appear to be more effective and efficient, it is the opinion of the IRSAC that the oversight over the ethical behavior of registered tax return preparers remain separate from the oversight of registered tax return preparers pursuant to §6694 of the Internal Revenue Code.
The Office of Professional Responsibility was created many years ago to administer the laws and regulations governing the practice of attorneys, certified public accounts, enrolled agents, enrolled actuaries and appraisers who represent taxpayers before the Department of Treasury and the Internal Revenue Service (31 U.S.C. 330; 31 C.F.R., Part 10).
Its mission is to foster excellence in tax professionals by setting, communicating, and enforcing standards of competence, integrity and conduct. These standards are embodied in the Treasury Department’s Circular 230.
Under current proposed revisions to Circular 230, the definition of practice before the IRS has been expanded to include the preparation of income tax returns and other documents for submission to the IRS and the new registered tax return preparers were
added to the list of who may practice before the IRS. The administration of the new PTIN rules falls under Title 26 under §6109 of the Internal Revenue Code.
Although there is currently no indication that IRS or Congress intends to merge all of the oversight of registered tax return preparers under one Title, there has been a tendency in the past to want to consolidate.
Oversight of the ethical behavior of the new registered tax return preparers should be administered by the Office of Professional Responsibility under Title 31 and the enforcement of the new PTIN rules and how registered tax return preparers apply the tax law when preparing tax returns should be administered under Title 26.
(OPR Requirements for Continuing Education Program Approval)
REQUIRED MATERIAL FOR CONTINUING EDUCATION
The scope and purpose of the program(s);
Name of program(s);
A general outline of the program(s);
The level, content, and learning objectives of the program(s);
When/where the program(s) will be held;
Frequency of program(s);
Resume of the instructor, discussion leader, or speaker;
Resume of the program writer;
The number of continuing education credits that will be given for the program(s);
How the program(s) will be administered (e.g. web cast, conference, meeting);
Targeted audience (enrolled agent or enrolled retirement plan agent);
A copy of the certificate of completion;
Method(s) used to evaluate the program’s technical content and presentation;
Method(s) used to maintain records verifying participants who attended and completed the program;
How the sponsor organization is organized; and
Certification of status as professional, fraternal or trade organization.
Since the above is not comprehensive, additional information may be requested.