Ms Karen Hawkins
Director, Office of Professional Responsibility
Internal Revenue Service
1111 Constitution Avenue, Northwest
Washington, DC 20224

Re: The Office of Professional Responsibility Guide to Sanctions

Dear Ms. Hawkins,

As president of the National Association of Enrolled Agents (NAEA), I write to comment on the recently released Office of Professional Responsibility’s (OPR’s) interim guidance on sanctions for tax noncompliance amongst Circular 230 practitioners. As the organization representing the interests of 46,000 enrolled agents, NAEA is well positioned to offer an informed perspective on sanction guidelines.

Overall, we applaud efforts by OPR to make its operations more transparent, which we believe this document and the penalty grid within it attempts to do. We also appreciate that OPR worked with the IRSAC OPR Subgroup in crafting this document. Reaching out to Circular 230 practitioners in the main increases the likelihood that OPR procedures will accomplish their stated goals and that the procedures will be both understood and not unduly burdensome.

We offer a number of general observations about the sanction guide as well as raise specific questions with respect to one of the examples provided.

While a number of enrolled agents have expressed concerns about potential rigidity in a penalty grid, we appreciate in particular the statement at the bottom of page 1:

Choosing a corrective sanction that is reasonable and appropriate for the circumstances involved is extremely important. All relevant factors must be given careful consideration. This document serves as a guide for determining the proper corrective sanction, and is not intended to establish a rigid standard…

We suggest, however, that the document may be improved by incorporating this philosophy directly within the penalty grid itself. Our concern is that the penalty grid may be extracted from the sanction guide and that this piece of important advice lost. The penalty grid should indicate possible sanctions, not definite sanctions. The mere existence of a grid is at least mildly troublesome insofar as the facts and circumstances differ for each practitioner and notwithstanding advice to OPR staff to treat the grid as a guideline we suggest that results will in practice largely reflect the prescribed penalties in the grid.

The penalty grid and examples focus exclusively on the consequences of tax noncompliance (either filing or payment noncompliance) by a Circular 230 practitioner. This leads us to the conclusion that while the document may reveal OPR’s overall philosophy to sanctions for any infractions of Circular 230, the document itself is intended to provide specific guidance on only tax noncompliance issues. If our conclusion is appropriate, the title of the document is rather generic (i.e., Guide to Sanctions) and for clarity purposes we suggest a title more descriptive (e.g., Guide to Sanctions for Tax Noncompliance, by which it is referred on the OPR web landing page). If our conclusion is incorrect, statements to that extent within the document would be both welcome and helpful.

Example 1 caused considerable discussion centered on the following issue: the conclusion that the CPA in the example was not practicing and therefore not subject to OPR sanctions. We conclude OPR is making a nuanced distinction between the definitions of who may practice as stated in Circular 230 § 10.3 (b) and § 10.3(c) and at the very least suggesting a distinction between enrolled agents on the one hand and certified public accountants (and attorneys) on the other.

Section 10.3(b) states, “Any certified public accountant who is not currently under suspension or disbarment from practice before the Internal Revenue Service may practice before the Internal Revenue Service by filing with the Internal Revenue Service a written declaration that the certified public accountant is authorized to represent the party…” Meanwhile, § 10.3(c) more succinctly states, “Any individual enrolled as an agent pursuant to this part who is not currently under suspension or disbarment from practice before the Internal Revenue Service may practice before the Internal Revenue Service.” We note as well that § 10.3(a), which defines an attorney authorized to practice is written similarly to § 10.3(b).

Does OPR intend to make the distinction that a certified public accountant (or, given the similar definitions in § 10.3(a), an attorney) at some point must have filed a Form 2848 (Power of Attorney and Declaration of Representative) in order to be considered “in practice” before the agency? If this is so, does it mean that once a certified public accountant represents (by virtue of filing a Form 2848) a taxpayer, she would be considered to be practicing from that point forward?

By extension, does OPR intend to treat an enrolled agent similarly situated to the certified public accountant (i.e., solely in the business of preparation and never having filed a Form 2848) as “in practice” before the agency by virtue of enrollment? Or would the example draw the same conclusion had the return preparer been an enrolled agent? Not to put too fine a point on it, the practical distinction is that an enrolled agent, based on the penalty grid, would receive a 4-8 month suspension for failure to file while his similarly situated “non-practicing” certified public accountant would receive a pass for lack of jurisdiction.

Not to speak ill of our Circular 230 brethren—as that is surely not our intent—does OPR believe this disparate treatment reasonable given that an attorney or certified public accountant may at a moment’s notice represent a taxpayer? Shouldn’t their behavior during the period in which they are eligible to practice though elect not to practice be of note and interest to OPR? Or does OPR use this example to suggest that while certified public accountants and attorneys are self regulating, enrolled agents are regulated solely by OPR and therefore OPR holds them to a different—and arguably higher—standard?

Ultimately, we believe Circular 230 practitioners—attorneys, certified public accountants, enrolled actuaries, and enrolled agents—ought to be held to a high standard and that it is not unreasonable for OPR to expect them to comply with the various filing requirements as set forth in the Internal Revenue Code. We don’t believe OPR’s interest in § 10.51(a)(6) is unreasonable. We question, however, whether Example 1 leads to an uneven application across practitioner type, and if so, suggest that that state of affairs is indeed unreasonable.

Please understand that enrolled agents encourage and appreciate efforts to increase transparency in the operations of the Office of Professional Responsibility. NAEA believes a clear, common sense and burden sensitive regulatory environment is a worthy goal and to that end I offer any assistance you desire. In particular, I suggest that the operational definition of practice—and who is practicing—is worth further conversation. NAEA’s Senior Director, Government Relations, Robert Kerr will reach out to your office to schedule such a meeting. Otherwise, you may reach him at 202-822-6232 or


Sandra Martin, EA

1 By extension, we also question whether an attorney or certified public accountant who has never filed a Form 2848 is held to other Circular 230 standards (e.g., knowledge of a client’s omission, diligence as to accuracy, or advising with respect to tax return positions).


May 21, 2009

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