Tax Lawyer's Blog

The IRS’s Declaration of Taxpayer Rights states that taxpayers have the unequivocal right to hire a tax professional to represent them in matters before the IRS. But this right to counsel is emasculated by the fact that the IRS is the agency charged with the investigation and punishment of tax professionals it believes have violated IRS rules.

This is one of the reasons I believe the IRS pays only lip service to taxpayers’ right to representation and why it’s agents regularly engage in conduct that diminishes that right. IRS officials know that a taxpayer representative’s fear of an OPR investigation (which ultimately could threaten his livelihood) may cause him to represent his client a little less vigorously than he otherwise might.

Anyone who has passed Basic Logic will conclude that the agency charged with the protection of a taxpayer’s’ right to counsel should not also be the agency charged with policing and punishing that counsel.

But Congress didn’t pass Basic Logic.

The IRS Office of Professional Responsibility is staffed with 58 employees whose job it is to investigate complaints about the conduct of tax professionals. If the OPR determines that a tax professional has violated one or more of the terms of Circular 230 it can punish the violater in one or more of the following ways:

Private Reprimand

OPR can unilaterally issue a private reprimand.  [A private reprimand letter] indicates that there was a violation of Circular 230 but that OPR believes that a letter serves to rectify the behavior. That letter is between OPR and the practitioner and is not released to the public. 

Censure (Public Reprimand)

OPR can also issue a Censure.  This is a letter of reprimand where the fact of the Censure is released to the public through the Internal Revenue Bulletin(IRB). A censure is appropriate when OPR does not believe that the behavior could be rectified by a private reprimand. 

Suspension/Disbarment

The next level is suspension which can run anywhere from a term of months to five years. 

After five years, disbarment is appropriate.  Under OPR regulations, any practitioner can apply after being disbarred for 5 years to be reinstated, upon proof of good behavior. 

As a general matter, the shorter suspensions may be for conduct that requires a suspension to bring home to the practitioner the severity of his or her conduct and to ensure that it will not happen again, while the longer terms of suspension up to and including disbarment may involve conduct that is perpetrating an ongoing harm to the taxpaying community and/or the Service and must be stopped. 

Monetary Penalty

Instead of or in addition to the above sanctions OPR may impose a monetary penalty on firms that know or should have known of misconduct by its employees.   

The OPR says that the wrongful actions of which tax professionals are most often accused are:

• unreasonable delay
• providing false and misleading information
• advising the filing of false returns
• contemptuous conduct such as using threats or abusive language
• rendering false or incompetent opinions
• failure to inform the client of the client’s omission

However, in the near future OPR expects the focus of complaints (and, presumably, OPR investigations) to shift more towards tax compliance issues:

We expect this mix to change as the impact of the new legislation and regulations takes hold with more emphasis on practitioners who have engaged in tax schemes and scams.

I believe there should be a regulatory regime for tax professionals; however, the enforcement arm of that regime should be some agency other than the IRS. 

A tax lawyer shouldn’t have to choose between saving his own ass and saving his client’s, yet that is often precisely what the current regulatory regime forces him to do.

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