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Circular 230. A picture containing text light dark lit Description automatically generated.

It defines “practice” and who may practice before the IRS; describes a tax professional’s duties and obligations while practicing before the IRS; authorizes specific sanctions for violations of the duties and obligations; and describes the procedures that apply to administrative proceedings for discipline..

The Five Subparts of the Circular 230 are:. Rules relating to the authority to practice before the Internal Revenue Service. The duties and restrictions relating to practice before the IRS. Sanctions for violating the regulations. Rules applicable to disciplinary proceedings. General provisions..

OFFICE OF PROFESSIONAL RESPONSIBILITY. The OPR supports the IRS’s strategy to enhance enforcement of the tax law by ensuring that tax professionals adhere to tax practice standards and follow the laws. The OPR is the governing body responsible for interpreting and applying the regulations governing practice before the IRS..

Section 10.2(4) “Practice before Internal Revenue Service”.

“Practice before Internal Revenue Service”. - is defined as all matters connected with a presentation to the Internal Revenue Service..

Such presentations include, but are not limited to: Preparing documents; Filing documents; Corresponding and communicating with the IRS; Rendering written advice with respect to any entity, transaction, plan, or arrangement, or another plan or arrangement having a potential for tax avoidance or evasion; and Representing a client at conferences, hearings, and meetings..

Eligible Practitioners. Provided they are not currently disbarred or suspended, the following practitioners may practice before the IRS: A ttorneys C ertified public accountants E nrolled agents E nrolled actuaries Enrolled retirement plan agents Registered tax return preparers.

Review Question #1. 1. The regulations found in Circular 230 can be found in? A) 162 of the Internal Revenue Code B) Title 31 Code of Federal Regulations, Subtitle A, Part 10 C) IRS Publication 225 D) IRS Publication 334.

Answer #1. 1. The regulations found in Circular 230 can be found in? A) 162 of the Internal Revenue Code B) Title 31 Code of Federal Regulations, Subtitle A, Part 10 C) IRS Publication 225 D) IRS Publication 334.

Icon Description automatically generated. 2. Which of the following is false regarding the Office of Professional Responsibility (OPR)? A) It is part of the Internal Revenue Service B) The OPR has the power to administer and enforce the regulations contained in Circular 230 C) The OPR has the power to discipline tax practitioners for Circular 230 violations D) None of these statements are false.

Answer #1. Icon Description automatically generated.

Section 10.22 “Diligence as to Accuracy”. Due Diligence - Types & Tax Due Diligence - IndiaFilings.

Diligence as to accuracy. Section 10.22, “Diligence as to Accuracy,” is one of the 19 sections contained within Circular 230 Subpart B—“Duties and Restrictions Relating to Practice Before the Internal Revenue Service.”.

Diligence as to accuracy. Although it is not required, it is highly recommended to stay current with the laws. By completing AFSP, your name will be placed in PTIN registry..

Circular 230 states the following regarding to diligence as to accuracy in Section 10.22: In general, a practitioner must exercise due diligence (1) In preparing or assisting the preparation of, approving, and filing tax returns, documents, affidavits, and other papers relating to IRS matters;.

(2) In determining the correctness of oral or written representations made by the practitioner to: the Department of the Treasury; and clients with reference to any matter administered by the Internal Revenue Service..

Circular 230 states the following regarding to diligence as to accuracy in Section 10.22: Reliance on others. “Except as provided in §§ 10.34 and 10.37, a practitioner will be presumed to have exercised due diligence for purposes of this section if the practitioner relies on the work product of another person and the practitioner used reasonable care in engaging, supervising, training, and evaluating the person, taking proper account of the nature of the relationship between the practitioner and the person.”.

Tax practitioners are expected to do his or her best to make sure that they provide correct information to both the IRS and clients..

For example , a practitioner who relied on information provided to her by an enrolled agent whom she knew to be in good standing would be seen to have used reasonable care. However, if she relied on information received by hearsay from her cousin’s friend—a person with no known tax credential or experience. She would not follow diligence as to accuracy..

Censured by consent for admitted violation of § 10.22(a)(1) (Revs. 2005 and 2008) (requiring practitioner to exercise due diligence in preparing, and filing of, tax returns for the tax years 2006, 2007, 2008, and 2009) Disqualified by consent for violations under 31 C.F.R. § 10.22(a)(1–3) (2007) (failed to exercise due diligence in preparation of documents, failed to exercise due diligence in determining the correctness of written representation made to the Department of Treasury, and failed to exercise due diligence in determining the correctness of written representations made to clients with reference to matters administered by the IRS). Suspended by consent under 31 C.F.R. §§ 10.51(a)(6) and 10.22(a)(2)..

Review Question #1. 1. Terrance is a Circular 230 tax practitioner who is representing his client Mike during an audit of his last two tax returns. The IRS revenue agent has noted that Mike's Schedule C for his roofing business claims what seems to be an excessive amount of deductions for expenses each year. This could be caused by a few circumstances, but which one of the following could represent a serious violation of Terrance's due diligence requirements in preparing the returns?.

Review Question Choices. A. The expenses all appeared valid because George provided detailed receipts and logbooks to support his claim . B . In both years, Henry prepared the returns by hand and accidentally transcribed some of the numbers incorrectly on to Schedule C. C . Henry used the dollar amounts that George provided verbally for each expense, even though there was no supporting evidence for any of them. D . Henry prepared the returns using supporting material provided by George that was actually false, but Henry had no reason to suspect or know it was false ..

Answer. A. The expenses all appeared valid because George provided detailed receipts and logbooks to support his claim . B . In both years, Henry prepared the returns by hand and accidentally transcribed some of the numbers incorrectly on to Schedule C. C . Henry used the dollar amounts that George provided verbally for each expense, even though there was no supporting evidence for any of them. D . Henry prepared the returns using supporting material provided by George that was actually false, but Henry had no reason to suspect or know it was false ..

Review Question #2. 2. Lois is an EA who is preparing a tax return that includes Schedule C for a small craft-making business. The client has gathered about a dozen receipts for the cost of repairs that were made on his equipment during the year and that he feels should be tax-deductible. He has added the amounts together by hand and arrived at a total to tell Lois. What due diligence requirements, if any, does Lois have in this case before entering an amount for Repairs on Schedule C?.

Review Question Choices. A. She should ensure that all of the receipts are both valid and deductible, and then total them by calculator. B. None. She can take the client's word for the total amount. C. She should ask the client if he is confident that he added correctly. D. She should use a calculator to add the receipts together in case the client made a mistake..

A. She should ensure that all of the receipts are both valid and deductible, and then total them by calculator. B. None. She can take the client's word for the total amount. C. She should ask the client if he is confident that he added correctly. D. She should use a calculator to add the receipts together in case the client made a mistake..

Section 10.51 “Incompetence & Disreputable Conduct”.

Section 10.51 Incompetence & Disreputable Conduct.

Section 10.51 Incompetence & Disreputable Conduct.

Section 10.51 Incompetence & Disreputable Conduct.

Section 10.51 Incompetence & Disreputable Conduct.

8. Misappropriation of, or failure to remit properly or promptly, funds received from a client for the payment of taxes or other obligations due to the United States. 9. Directly or indirectly attempting to influence or offer or agree to attempt to influence the official action of any officer or employee of the IRS using threats, false accusations, duress, or coercion, or any special inducement or promise of advantage or by bestowing of any gift, favor, or item of value..

10. Disbarment or suspension from practice as an attorney, certified public accountant, public accountant, or actuary by any duly constituted authority of any state, territory, or possession of the United States, including a commonwealth or the District of Columbia, any federal court of record, or any federal agency, body, or board. 11. Knowingly aiding and abetting another person to practice before the IRS during a suspension, disbarment, or ineligibility of such other individuals..

12. Contemptuous conduct in connection with practice before the IRS, including the use of abusive language, making false accusations or statements, knowing them to be false, or circulating or publishing malicious or libelous matter. 13. Giving a false opinion, knowingly recklessly or through gross incompetence including an opinion that is intentionally or recklessly misleading or engaging in a pattern of providing incompetent opinions on questions arising from federal tax laws.

14. Willfully failing to sign a tax return prepared by the practitioner when the practitioner’s signature is required by federal tax laws unless the failure is due to reasonable cause and not due to neglect. 15. Willfully disclosing or otherwise using a tax return or tax return information in a manner not authorized by the IRC, contrary to the order of a court of competent jurisdiction or contrary to the order of an administrative law judge in a proceeding instituted under §10.60..

16. Willfully failing to file on magnetic or other electronic media a tax return prepared by the practitioner when the practitioner is required to do so by federal tax laws unless the failure is due to reasonable cause and not due to neglect. 17. Willfully preparing all or substantially all, or signing, a tax return or claim for refund when the practitioner does not possess a current or otherwise valid PTIN or other prescribed identifying number. 18. Willfully representing a taxpayer before an officer or employee of the IRS unless the practitioner is authorized to do so..

Text Description automatically generated. Section 10.34 “Standards with the respect to Tax Returns. Documents, Affidavit and Other Paper ”.

Section 10.34 Standards with the respect to Tax Returns. Documents, Affidavit and Other Paper.

Due Diligence & The Earned Income Tax Credit. Maximizing the Earned Income Tax Credit | Internal Revenue Service.

Due Diligence & The Earned Income Tax Credit. .. From Circular 230, due diligence requirements extend to all parts of the preparation of a tax return by a paid tax preparer. However, there are some areas where tax practitioners need to be particularly vigilant due to the complexity of the regulations and the opportunity for fraudulent claims by a taxpayer. This is particularly so in the case of the earned income tax credit (EITC), where the IRS has recently passed new regulations that increase the due diligence requirements of tax practitioners..

Due Diligence & The Earned Income Tax Credit. IRS estimates that between 21% to 26% of EITC claims are paid in error. The IRS can assess a penalty against a paid preparer who does not submit the form with returns or claims for refund when required. The penalty for a return or claim filed in 2021 is $540 per tax benefit claimed, and up to $2,160 per return. The form must be submitted to the IRS electronically or attached to each return mailed to the IRS..

.. The IRS reports that about 60% of EITC errors fall into three key categories: Claiming EIC for a child who does not meet the qualifying child requirements. 2. Filing as single or head of household when married. 3. Incorrectly reporting income or expenses..

Requirement to Lodge form 8867 with Tax Return. ..

Due Diligence Requirements. .. There are four due diligence requirements for tax practitioners who prepare EITC claims. Practitioners must: 1. Meet the knowledge requirement by interviewing the taxpayer, asking adequate questions, contemporaneously documenting the questions and the taxpayer’s responses on the return or in your notes..

.. 2. Complete Form 8867 truthfully and accurately and complete actions described on Form 8867 for any applicable credit(s) claimed and HOH filing status if claimed. 3. Submit Form 8867 in the manner required. 4. Keep all five of the following records for 3 years from the latest of the dates specified later..

Consequences of Filing an Incorrect EITC Claim. Icon Description automatically generated.

Consequence of Filing an Incorrect EITC Claim. ..

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.. FIRM ➢IRS can also assess due diligence penalties against an employer if an employee fails to comply with the due diligence requirements. (See Treasury Regulation section 1.6695-2.