Circular 230 for Tax Professionals: Conflicts, Section 10.34 Standards, and Avoiding OPR Suspension

A single email signing off on a tax position you "reasonably should have known" was wrong can end a thirty-year career. Not through a malpractice lawsuit. Not through an IRS preparer penalty. Through a quiet referral to the Office of Professional Responsibility (OPR), followed by a sanction letter, followed by your name appearing in a searchable public database next to the word "disbarred."

That is the reality of Circular 230—formally titled "Regulations Governing Practice Before the Internal Revenue Service" and codified at 31 C.F.R. Part 10. It is the one body of rules every attorney, CPA, and enrolled agent who touches federal tax matters must internalize. Yet most practitioners can recite their state board ethics code line-by-line while struggling to identify which Circular 230 section governs a conflict-of-interest waiver, or how long they must retain written consent forms, or whether their firm's compliance procedures actually satisfy Section 10.36.

This guide walks through the parts of Circular 230 that get practitioners in trouble, the recent proposed changes that are likely to reshape the contingent-fee landscape, and the practical workflows that keep your PTIN—and your livelihood—intact.

What Circular 230 Actually Is (and Isn't)

Circular 230 is a Treasury regulation, not a statute. It draws its authority from 31 U.S.C. Section 330, which authorizes the Secretary of the Treasury to regulate the practice of representatives before the Treasury Department. Despite the unassuming name, it is the operating manual that governs how tax professionals interact with the IRS on a taxpayer's behalf.

A few important framing points:

It applies to "practice before the IRS." That phrase has a specific meaning: communicating with the IRS for a taxpayer on matters regarding the taxpayer's rights, privileges, or liabilities under laws or regulations administered by the IRS. Representation in audits, appeals, collection cases, and rulings is clearly inside. After the Loving v. IRS decision, mere return preparation by unenrolled preparers is largely outside, though OPR retains influence over signing preparers in indirect ways.
The covered practitioners are attorneys, CPAs, enrolled agents (EAs), enrolled retirement plan agents, enrolled actuaries, and appraisers submitting valuations on federal tax matters. Annual Filing Season Program (AFSP) participants also fall within OPR's general jurisdiction.
The enforcer is the Office of Professional Responsibility (OPR). OPR holds exclusive delegated authority over Circular 230 discipline. Its director can refer cases to an Administrative Law Judge (ALJ), and ALJ decisions are appealable to the Treasury Appellate Authority.
Sanctions are reputational and economic. Censure (a public reprimand), suspension from practice, disbarment (minimum five years before petitioning for reinstatement), monetary penalties up to the practitioner's gross income from the conduct, and disqualification as an appraiser.

Knowing those scaffolding facts is half the battle. The other half is knowing the specific section numbers regulators will cite when something goes wrong.

The Core Sections Every Practitioner Must Know

Section 10.22 — Diligence as to Accuracy

Section 10.22 is the single most cited provision in OPR sanction letters. It requires due diligence in three areas:

Preparing or filing returns, documents, affidavits, and other papers relating to IRS matters.
Determining the correctness of oral or written representations to clients about IRS matters.
Determining the correctness of oral or written representations made to the Treasury Department.

The presumption rule is important: a practitioner is presumed to have exercised due diligence if they relied on another person's work product and used reasonable care in engaging, supervising, training, and evaluating that person. So a partner who blindly signs returns prepared by a poorly trained junior cannot hide behind delegation. Conversely, a partner who has documented training programs, peer review, and engagement workflows is on much firmer ground when a position turns out to be wrong.

Section 10.29 — Conflicting Interests

A practitioner cannot represent a client before the IRS if the representation involves a conflict of interest—unless three conditions are met:

The practitioner reasonably believes they can provide competent and diligent representation to each affected client.
The representation is not prohibited by law.
Each affected client provides informed written consent, confirmed in writing, no later than thirty days after the conflict is first known to the practitioner.

The written consent must be retained for at least thirty-six months from the date the representation concludes. That retention rule is a common documentation gap. Many firms obtain the waiver but never preserve it in a way that survives partner departures or system migrations.

Where do conflicts hide? They lurk inside:

Spouses who jointly file but are separating.
Two shareholders of a closely held S corporation who disagree on a Section 754 election or compensation allocation.
A partnership and one of its partners under audit when the partner's allocation may be challenged.
An estate and its beneficiaries when basis adjustments or DSUE elections benefit one and disadvantage another.
A partnership representative under the BBA centralized audit regime acting for partners with divergent interests.

Section 10.34 — Standards for Returns and Documents

Section 10.34 is the workhorse standard for return positions. A practitioner may not willfully, recklessly, or through gross incompetence:

Sign a return or refund claim, advise a client to take a position on a return or claim, or prepare a portion of a return or claim that contains a position the practitioner knows or reasonably should know lacks a reasonable basis.
Advise a client to take a position on a document submitted to the IRS unless the position is not frivolous.
Advise a client to submit a document containing or omitting information that demonstrates an intentional disregard of a rule or regulation—unless the practitioner also advises the client to submit a document that evidences a good-faith challenge to the rule.

Critically, Section 10.34 also imposes an affirmative duty to inform the client of:

Any penalties reasonably likely to apply to the position (substantial understatement under Section 6662, accuracy-related penalty, civil fraud, etc.).
The opportunity to avoid those penalties through disclosure—typically by attaching Form 8275 or Form 8275-R.

That obligation is procedural but devastating when missed. OPR can prove a Section 10.34 violation merely by showing the practitioner acted recklessly or with gross incompetence; willfulness is not required.

Section 10.35 — Competence

Added in the 2014 final regulations, Section 10.35 is short and broad: practitioners must possess the necessary competence to engage in practice before the IRS, including appropriate knowledge, skill, thoroughness, and preparation. Competence can be borrowed by consulting with another practitioner who has the required expertise—provided that consultation is meaningful and documented.

Section 10.36 — Procedures to Ensure Compliance

Section 10.36 puts firm leadership on the hook. Any practitioner with principal authority and responsibility for a firm's federal tax practice must take reasonable steps to ensure the firm has adequate procedures for all members, associates, and employees to comply with Circular 230. The 2014 final regulations clarified that Section 10.36 requires both the existence and the implementation of those procedures. A binder on a shelf is not enough.

What does an adequate compliance program look like in practice?

A written conflict-check process triggered before every engagement.
A documented review-and-signoff workflow for returns and written advice.
A training schedule covering Circular 230 updates, ethics, and reportable transactions.
A whistleblower or anonymous-report channel for staff who suspect a position is unsupportable.
Engagement letter templates that allocate responsibilities and document client-supplied facts.
Retention rules that map to Section 10.29 (36 months post-engagement) and Section 10.34 disclosure duties.

When OPR sees one practitioner make a Section 10.34 error, the question they then ask is, "What did the firm's responsible practitioners do to prevent it?" That question is answered by Section 10.36.

Section 10.37 — Written Advice

Section 10.37 replaced the old "covered opinion" rules that produced the infamous boilerplate disclaimers practitioners used to attach to every email. Today, the rules are principles-based. When providing written federal tax advice, you must:

Base the advice on reasonable factual and legal assumptions.
Use reasonable efforts to identify and ascertain the relevant facts (no asking the client a single yes/no question and calling it a day).
Not rely on unreasonable factual representations.
Relate applicable law to the relevant facts.
Not consider the audit lottery.
Refrain from relying on another person's advice when you know or reasonably should know that the other person is not competent.

The standard is also calibrated to "the scope of the engagement and the type and specificity of the advice sought by the client." A two-paragraph email answering a quick question does not require the same depth as a tax memo backing a $50 million reorganization, but both fall within Section 10.37.

Section 10.51 — Disreputable Conduct

Section 10.51 is the catch-all. It lists a long menu of conduct that can trigger discipline, including conviction of crimes involving dishonesty, giving false or misleading information to the IRS, willfully failing to file a federal tax return, willfully evading tax, soliciting business through misleading advertising, and aiding and abetting another's violation of the federal tax laws. Failure to pay one's own taxes—a surprisingly common path to OPR sanctions—lives here too.

The Pending Contingent-Fee Overhaul

In December 2024, Treasury published proposed regulations updating Circular 230 in several material ways. The proposal received a flood of comments through early 2025 and was the subject of a public hearing in March 2025. The most consequential change concerns contingent fees.

Under current Section 10.27, contingent fees are generally prohibited in connection with practice before the IRS, with narrow exceptions (e.g., a contingent fee charged for services rendered after the IRS has begun an examination). The proposed regulations would eliminate current Section 10.27 and instead categorize certain contingent-fee arrangements as disreputable conduct under a new Section 10.51(b)(1). The prohibited arrangements would target contingent fees charged for preparing original returns, amended returns, or refund claims prior to an examination.

What does this mean operationally?

Refund-mill style engagements built around contingent fees for amended returns claiming refundable credits become explicitly sanctionable. The Employee Retention Credit (ERC) cottage industry is squarely in the crosshairs.
Legitimate post-examination representation on a contingent basis is preserved.
Practitioners using contingent fees in narrow areas (e.g., judicial proceedings, original audit work, whistleblower claims under Section 7623) should re-read the proposed text carefully and document fee structures before the rule finalizes.

Comments from the AICPA, NASBA, the New York State Bar Tax Section, and others have pushed back on aspects of the proposal—particularly the breadth of the prohibition and the impact on lower-income taxpayers who can only pursue amended returns through contingent-fee arrangements. The final regulations have not yet posted as of the time of writing, but firms that currently use contingent fees in any pre-examination context should already be re-engineering those engagements.

How OPR Actually Comes After You

OPR cases typically begin in one of three ways:

A penalty referral. When the IRS assesses a return preparer penalty under Section 6694 or assesses an accuracy-related penalty under Section 6662 against a taxpayer where a practitioner signed the return, the case file is often referred to OPR.
A client complaint. A disgruntled client who lost an audit or paid penalties can file a complaint, which OPR triages.
A self-report. Practitioners who recognize their own misconduct can self-report. OPR has publicly stated that voluntary self-reporting is treated as a significant mitigating factor.

Once an investigation opens, OPR sends an "allegation letter" explaining the suspected violation and inviting a response. Practitioners typically have thirty days to respond, and the response is the single most important document in the proceeding. OPR can resolve cases informally through a consent agreement, or formally through an administrative complaint that triggers an ALJ hearing.

The sanctions menu—censure, suspension, disbarment, monetary penalty up to gross income from the conduct, and appraiser disqualification—is applied based on factors including willfulness, prior history, cooperation, impact on the tax system, and harm to clients. The cases are public. OPR maintains a searchable disciplinary lookup where any client (or competitor) can verify a practitioner's status.

After the Loving v. IRS decision, OPR's reach over unenrolled preparers narrowed, and a suspended or disbarred practitioner may now be able to retain a PTIN and prepare returns—just not represent taxpayers before the IRS. That distinction is critical for understanding the practical impact of a sanction. Your CPA license is governed by state boards. Your bar license is governed by your state. Your ability to represent clients before the IRS—including signing power of attorney on Form 2848—is governed by Circular 230.

The Conflict-of-Interest Workflow That Actually Works

Most Section 10.29 violations come from procedural slippage, not malice. A workable workflow:

Run a conflict check before sending the engagement letter. Every name, every entity, every spouse, every related party gets logged in the firm's conflict system.
Document the analysis. When a potential conflict surfaces, draft a one-page memo: who the affected parties are, why the practitioner reasonably believes representation can be competent and diligent, and what disclosures must be made.
Obtain informed written consent—same calendar day if possible. Use a template that itemizes the nature of the conflict, the risks (including the loss of the attorney-client privilege between conflicted clients), and the right to retain independent counsel.
Retain the consent for at least 36 months after the engagement concludes. Calendar a destruction date in the firm's document-retention system; do not let the consent disappear with a partner who leaves the firm.
Re-evaluate periodically. Conflicts evolve. A jointly engaged married couple who later separate must be re-consented or one of them must be released to independent counsel.

Written Advice Hygiene Under Section 10.37

Written advice—email or memo—is the most common source of OPR exposure for practitioners who never sign returns. A defensible written-advice protocol:

Identify the question precisely. Restate the issue at the top of the response. Vague questions invite vague answers, and Section 10.37 disfavors both.
Document the facts you relied on. State them in the advice and note their source ("based on the financial statements you provided," "based on your representation that the company has no foreign subsidiaries").
Flag the assumptions. Where you are accepting a client representation without independent verification, say so.
Apply law to facts—do not just cite statutes. Section 10.37 specifically requires the practitioner to relate the applicable law to the relevant facts.
Address penalty exposure when relevant. If the position requires a Form 8275 disclosure to avoid the substantial understatement penalty, the advice should say so.
Skip the audit-lottery analysis. Considering whether the IRS will catch the position is a Section 10.37 violation.

Why Your Records Are Your Defense

The thread running through every Circular 230 section is documentation. Section 10.22 due diligence is provable only if you can show the work you did. Section 10.29 written consents must be retained for thirty-six months. Section 10.34 disclosure advice is provable only if it appears in writing. Section 10.36 compliance procedures must be documented and demonstrably implemented. Section 10.37 written advice must capture facts, assumptions, and the application of law.

Accurate, contemporaneous bookkeeping inside your firm and inside your clients' businesses is part of that defense. When the IRS or OPR asks how you reached a position three years ago, the ledger entries, the source documents, and the chain of communications either tell a coherent story or they don't. Clean, version-controlled records are the difference between a routine response and a discipline case.

Keep Your Practice and Your Clients Audit-Ready

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