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THE OFFICE OF PROFESSIONAL RESPONSIBILITY

THE OFFICE OF PROFESSIONAL RESPONSIBILITY. What You Don’t Know CAN Hurt You Karen L. Hawkins, Director. The Statute & Regulations. 31 U.S.C. §330 (1884) 31 C.F.R. Part 10 (cir. 1886) Authorizes regulation of representatives of persons before the Department of the Treasury. Page 2.

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THE OFFICE OF PROFESSIONAL RESPONSIBILITY

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  1. THE OFFICE OF PROFESSIONAL RESPONSIBILITY What You Don’t Know CAN Hurt You Karen L. Hawkins, Director

  2. The Statute & Regulations • 31 U.S.C. §330 (1884) • 31 C.F.R. Part 10 (cir. 1886) • Authorizes regulation of representatives of persons before the Department of the Treasury Page2

  3. “Fitness” to Practice good character good reputation necessary qualifications to enable the representative to provide valuable service to the client competency to advise and assist persons in presenting their cases Page3

  4. Finding It Online at www.irs.gov/pub/irs-pdf/pcir230.pdf Substantial revisions effective August 2, 2011 NPRM – Additional Revisions Proposed – Final Regs pending Page4

  5. Calendar Year 2012 Discipline Results Activity AttorneyCPA EAUnenrolledTotals Total Receipts 516 Disbarments (FAD/Consent) - 1 - 1 2 Suspensions (FAD/Consent) 2 2 3 - 7 Expedited Suspensions 29 25 7 - 61 DDA/Other Conditions - 1 2 - 3 Censure 1 2 1 - 4 Reprimands/Soft Letter 150 Cease & Desists 50 CWOS, LOJ , NCOA, CWOA 409 Reinstatements 25 Total Dispositions 813 Page5

  6. Calendar Year 2013Discipline Results Through Q3 Activity AttorneyCPAEARTRPUnenrolledTotals Total Receipts 631 Disbarments (FAD/Consent) - 4 2 - - 6 Suspensions (FAD/Consent) 1 1 1 - - 3 Expedited Suspensions 13 24 4 - 1 42 DDA/Other Conditions 2 4 5 - 1 12 Censure - 2 - 1 - 3 Reprimands/Soft Letters 117 Cease & Desist Letters 22 CWOS, LOJ, CWOA, etc. 470 Reinstatements 11 Total Dispositions 701

  7. JURISDICTION • 31 USC 330(a)(1); (b); (c); (d) • 10.2(a)(4) • 10.7(c) • 10.8(a) • 10.8(c) (Notice 2011-6) • 10.50(b)/10.60(b) Page7

  8. Key Circular 230 Provisions Diligence as to Accuracy (10.22) Due Diligence Standards – Returns/Docs (10.34) Competence (Proposed 10.35) Requirements for Written Advice (Proposed 10.37) Ensuring Compliance (Proposed 10.36) Oral or Written Opinions (10.51(a)(13)) Page8

  9. Diligence as to Accuracy (10.22) Must exercise Due Diligence in: Preparing, approving and filing tax returns, documents, affidavits etc. relating to IRS matters. Determining correctness of oral/written representations made to the client or to Treasury personnel. Reliance on Another’s Work Product? With Reasonable Care. Page9

  10. Standards for Tax Returns Section 10.34(a) May not sign a tax return or advise a position on a tax return, willfully, recklessly, or through gross incompetence if: Lacks reasonable basis Unreasonable position (6694(a)(2)) Willful attempt to understate liability (6694(b)(2)(A)) Reckless, intentional disregard of rules and regulations (6694(b)(2)(B)) Patterns matter Page10

  11. Standards for Documents and Other Papers- 10.34(b) May not advise Taking Positions in Documents that are Frivolous. May not advise Making Submissions: to Delay or Impede Tax Administration that are Frivolous Containing or Omitting Information that demonstrates an intentional disregard of rules or regulations. Page11

  12. Disclosure re: Unreasonable Positions (10.34(c)) Advised position? Prepared or signed return? Submitting docs/other papers to IRS? Then- Must Advise Client of Potential Penalties and their Avoidance through Disclosure Applicable even if no Practitioner Penalty Exposure Page12

  13. Reliance on Client Data- 10.34(d) Reliance on Client Information in good faith, without verification, is OK, but… Cannot ignore implications of other information furnished Cannot ignore actual knowledge Must make reasonable inquiries for incorrect, inconsistent or incomplete information No Willful Blindness No Don’t Ask Don’t Tell Page13

  14. Proposed §10.35. A practitioner must possess the necessary competence to engage in practice before the Internal Revenue Service. Competent practice requires the knowledge, skill, thoroughness, and preparation necessary for the matter for which the practitioner is engaged. See ABA Model Rule 1.1, “Competence” AICPA Code of Professional Conduct Article V, “Due Care”. Page14

  15. Proposed Section 10.36 • Any practitioner who has (or practitioners who have or share) principal authority and responsibility for overseeing a firm’s practice governed by this part must take reasonable steps to ensure that the firm has adequate procedures in effect for all members, associates, and employees for purposes of complying with Circular 230. Any practitioner who has (or practitioners who have or share) this principal authority will be subject to discipline for failing to comply with the requirements of this Section. Page15

  16. Prop. §10.37 Requirements For Written Advice Reasonable factual and legal assumptions Reasonably consider all relevant facts Reasonable efforts to identify and ascertain the relevant facts Not rely upon representations, statements, findings, or agreements if reliance would be unreasonable No audit lottery advice (“odds” for an audit, or that a matter will not be raised on audit). Page16

  17. Prop. 10.37 (cont) Reliance on taxpayer is unreasonable if the practitioner knows or should know that one or more representations, or assumptions on which any representation is based, are incorrect, inconsistent or incomplete May only rely on the advice of another practitioner if the advice was reasonable and the reliance is in good faith considering all the facts and circumstances . May not rely on another practitioner who has a conflict (ref. 10.29); or is incompetent Page17

  18. Oral or Written Opinions – 10.51(a)(13) It is Disreputable/Incompetent Conduct to Give: False opinions-knowingly, recklessly, through gross incompetence; Intentional or recklessly Misleading Opinions; Pattern of Incompetent Opinions Page18

  19. 10.51(a)(13) (cont) False Opinion = knowing misstatements of fact/law; assertion of unwarranted positions; Counseling/assisting conduct known to be illegal/fraudulent; concealing matters required by law to be revealed. Page19

  20. 10.51(a)(13) (cont) Reckless conduct= highly unreasonable omission/misrepresentation involving extreme departure from standards of ordinary care that a practitioner should observe under the circumstances Gross Incompetence= gross indifference, grossly inadequate preparation, consistent failure to perform obligations to client Patterns matter Page20

  21. Recent/Relevant Cases • Tewolde: http://www.irs.gov/uac/Newsroom/IRS-Office-of-Professional-Responsibility-Disbars-Return-Preparer-Accused-of-Filing-False-Returns • Tiongson: http://www.irs.gov/pub/irs-utl/Tiongson%20-%20IRS_Decision%20on%20Tiongson%20Motion%20for%20Default%20(FINAL)%20-%204-3-13.pdf • Walker: http://www.irs.gov/pub/irs-utl/Walker%20FAD%202-18-13.pdf Page21

  22. Recent/Relevant Cases • Bohn: http://www.irs.gov/pub/irs-utl/Morton%20Bohn%20SJ%20Order%20-FINAL%20Redacted.pdf • Gee: http://www.irs.gov/pub/irs-utl/opr-_edgar_h__gee_jr__-_final_order.pdf • Christensen: http://www.irs.gov/file_source/pub/irs-utl/Redacted%20Final%20Order%20Assessing%20Sanction%20-%20IRS%20Christenson.pdf Page22

  23. Recent/Relevant News • Attorney Censured by the OPR for Mishandling Conflicts of Interest: http://www.irs.gov/file_source/PUP/taxpros/agents/Atty%20Censured%20by%20OPR%20for%20Mishandling%20Conflicts%20of%20Interests.pdf • Refund Splitting: http://www.irs.gov/file_source/pub/irs-utl/OPR%20Targeting%20Preparers%20Compensated%20Through%20Shared%20Refunds.pdf Page23

  24. Proposed Revisions • 10.1 (OPR Authority) • 10.31 (Electronic refunds) • 10.35 (rescission of covered opinion reg) • 10.35 (competence) • 10.36 (Respondeat Superior) • 10.37 (All Written Tax Advice) • 10.39 (rescission re: Bond Practice) • 10.82 (compliance & procedure) Page24

  25. More Info? Office of Professional Responsibility 1111 Constitution Ave. N.W. SE:OPR Rm. 7238 Washington, D.C. 20224 Information on OPR, Circular 230 and Discipline visit: http://www.irs.gov/Tax-Professionals/Circular-230-Tax-Professionals Page25

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