Circular 230

Question 1

List the components of the IRS best practices as outlined in Circular 230

Answer 1

• Communicate clearly with client
• Establish facts
• Relate applicable law
• Advise client regarding consequences

Question 2

List the general requirements/ duties of IRS practitioners as highlighted in circular 230

Answer 2

• Furnishing requested information promptly
• Exercising due dilligence
• Not unreasonably delaying IRS matters

Question 3

Identify the elements of an impermissable fee as described in Circular 230

Answer 3

• Unconscionable

- Contingent (With some exceptions)

Question 4

What is Circular 230?

Answer 4

The department of Treasury’s rules of practice that cover CPAs and others who practice before the IRS

Question 5

List the types of covered opinions outlined in Circular 230

Answer 5

• Tax avoidance transactions
• Transactions with principal purpose of avoiding tax
• Four categories of transactions with significant purpose of avoiding tax

Question 6

Conflict of Interest Substantive Provision

Answer 6

When representing one client would be adverse to another client. 3 Exceptions:

1. ) Reasonably believe they can provide competent representation to the client.
2. ) Representation is not prohibited by law
3. ) Affected client gives consent in writing. Practitioner must keep for 3 years.

Question 7

Solicitation Substantive Provision

Answer 7

May not solicit clients. They may however publish accurate written schedules of fees and hourly rates

Question 8

Best Practices Substantive Provision

Answer 8

1. ) Communicating Clearly with the client regarding the terms of the engagement.
2. ) Establishing facts, determining which are relevant, evaluating the reasonableness of assumptions, relating the applicable law, and arriving at the conclusion.
3. ) Advising the client regarding the import of the conclusion reached
4. ) Acting Fairly and with integrity
5. ) Ensuring firm employees comply with the best practices

Question 9

3 categories of “covered opinions”

Answer 9

These represent the types of transactions that have recently been abused and should be subjected to higher standards in the future:

1. ) Transaction that is the same or substantially similar to a transaction that IRS has already determined to be a “tax avoidance transaction”
2. ) Any transaction or entity that has the principal purpose to avoid or evade income taxes
3. )Transactions where tax avoidance is not the principal purpose but is nonetheless a significant purpose. See pg 18