In a letter submitted to the Internal Revenue Service, the American Institute of CPAs has requested that the Department of the Treasury and the IRS consider updating proposed changes to Treasury Department Circular No. 230, Regulations Governing Practice Before the Internal Revenue Service. IRS REG-116610-20, also known as Circular 230, contains the rules governing the practice of attorneys, certified public accountants, enrolled agents, enrolled retirement plan agents and other persons representing taxpayers before the IRS.
The AICPA’s recommendations were submitted to clarify the proposed revisions to the Treasury’s standards, as well as other rules that tax and valuation practitioners must follow. These recommendations aim to define practitioners’ responsibilities to taxpayers, the public, the government and other stakeholders, including fellow practitioners.
The AICPA’s recommendations include the following:
Section 10.21 – Knowledge of error or omission
Revise the provision that requires a practitioner to request the client’s agreement to disclose an identified error by instead requiring the tax practitioner to advise the client to disclose the error to the IRS and inform them of the potential consequences of non-disclosure.
Section 10.33 – Best practices for tax practitioners
Re-evaluate or remove the provision in the proposed regulation that requires tax practitioners to assess their own mental fitness or that of a fellow tax practitioner, as they are not qualified to make such determinations. Furthermore, fitness to practice is already addressed in Section 10.35 (Competence) and 10.36 (Procedures to ensure compliance). Additionally, remove the provision requiring tax practitioners to have a business succession plan, as it is beyond the scope of Circular 230.
Section 10.51 Fees that constitute disreputable conduct
Modify the definition of contingent fee found in proposed section 10.51(b)(2) to mirror the AICPA’s Code of Professional Conduct. The IRS is proposing a complete ban on contingent fees, and we are requesting that they be permitted in certain limited circumstances.
Section 10.61 Disqualification of appraisers
Avoid identifying individual valuation standards utilized by appraisers who represent clients before the IRS. The standards should instead require appraisers to prepare valuations that ‘conform to the substance and principles of generally accepted appraisal standards’ and to clearly state that the IRS will expect appraisers to adhere to enforceable valuation standards in a way that is consistent with professional standards in the respective valuation discipline.
The AICPA has also requested the opportunity to testify in person at the Treasury and IRS public hearing scheduled for March 6, 2025. The group cites the broad applicability of these regulations to its members and the fact that these regulations have not been revised in over ten years as reasons for this request.
“By having a clear and robust set of performance standards which outline the responsibilities of practitioners who represent clients in front of the IRS, we as members of the tax profession are reinforcing many of the principles outlined in the AICPA’s Guiding Principles of Good Tax Policy,” says Elizabeth Young, Director, AICPA Tax Practice & Ethics. “In addition to our recommendations, our testimony would represent the interest of a substantial portion of our members who provide tax services.”
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