Circular 230 Explained: Rules, Duties & Sanctions for Tax Pros
Circular 230 is the set of US Treasury rules that govern who may practise before the IRS and how they must behave. Issued by the Treasury Department (codified at 31 CFR Part 10) and enforced by the IRS Office of Professional Responsibility (OPR), it binds enrolled agents, CPAs, attorneys and other practitioners — setting duties like due diligence and competence, and sanctions (censure, suspension, disbarment, monetary penalties) for breaking them.
What Is Circular 230?
Circular 230 — formally Treasury Department Circular No. 230 — is a federal regulation that sets the rules of practice before the Internal Revenue Service. It is issued by the US Treasury under the authority of 31 U.S.C. §330 and codified at 31 CFR Subtitle A, Part 10, so it carries the force of law. The current published version is the June 2014 revision (Rev. 6-2014).
It does two things: it says who is allowed to represent taxpayers before the IRS, and it sets the standards of conduct those representatives must meet. Enforcement sits with the IRS Office of Professional Responsibility (OPR), which investigates alleged violations and can pursue disciplinary action against practitioners.
In December 2024, the Treasury and IRS issued proposed regulations (REG-116610-20) — the most significant proposed Circular 230 changes in a decade. They would, among other things, eliminate the obsolete registered-tax-return-preparer provisions, update the definition of "practice," revise the contingent-fee rules (§10.27), add appraiser standards, and introduce a technological-competence requirement. These are still in proposed form as of mid-2026 — the Rev. 6-2014 text governs until final rules publish. EA and CPA candidates should confirm with their review provider which version their exam tests.
Who Does Circular 230 Apply To?
Circular 230 binds anyone who practises before the IRS. Under §10.3, the recognised practitioner categories are:
| Practitioner | §10.3 | Scope of practice |
|---|---|---|
| Attorneys | §10.3(a) | In good standing of a state bar; full representation. |
| Certified Public Accountants | §10.3(b) | Duly qualified and in good standing; full representation. |
| Enrolled Agents | §10.3(c) | Federally licensed tax practitioners; unlimited representation. |
| Enrolled actuaries | §10.3(d) | Limited to actuarial matters. |
| Enrolled retirement plan agents | §10.3(e) | Limited to retirement-plan matters. |
A registered-tax-return-preparer category at §10.3(f) remains in the printed text but was invalidated by Loving v. IRS (2014) and is among the provisions the 2024 proposal would remove.
"Practice before the IRS" is the trigger. It covers:
- Preparing and filing documents and correspondence with the IRS.
- Representing taxpayers in audits, appeals and collections.
- Communicating with the IRS on a taxpayer's behalf.
- Advising on tax positions in connection with that representation.
What Circular 230 Does Not Cover
Scope matters as much as coverage. Following court decisions (notably Loving and Ridgely v. Lew), Circular 230's reach is narrower than many assume. It generally does not govern:
- Plain return preparation done outside of representing a client before the IRS — an unenrolled preparer who only prepares returns isn't practising before the IRS in the Circular 230 sense.
- State tax practice — Circular 230 is federal; state tax representation is governed separately.
- People who are not otherwise authorised practitioners, except where they hold themselves out as representing taxpayers before the IRS.
The 2024 proposal would update the "practice" definition, so this boundary is one to watch.
Key Duties & Best Practices Under Circular 230
Subpart B: practitioner duties
Subpart B sets the core duties. These are the rules most often tested and most often cited in disciplinary cases:
| Duty | Section | What it requires |
|---|---|---|
| Diligence as to accuracy | §10.22 | Exercise due diligence in preparing and filing returns and in determining the correctness of representations made to the IRS and to clients. |
| Knowledge of client's omission | §10.21 | On discovering a client's error or omission, promptly advise the client of it and the consequences. |
| Prompt disposition | §10.23 | Do not unreasonably delay the prompt disposition of any matter before the IRS. |
| Fees | §10.27 | No unconscionable fees; contingent fees are allowed only in limited circumstances. |
| Return of client records | §10.28 | Promptly return a client's records on request — even during a fee dispute. |
| Conflicting interests | §10.29 | No representation involving a conflict unless you reasonably believe you can serve each client competently and obtain informed written consent. |
| Solicitation | §10.30 | No false, fraudulent or misleading advertising or solicitation of business. |
| Best practices | §10.33 | Aspirational best practices: clear client communication, advice based on the law, and reasoned conclusions. |
| Standards for returns & documents | §10.34 | Do not sign or advise a return position that lacks a reasonable basis, is an unreasonable position, or willfully understates liability. |
| Competence | §10.35 | Have the knowledge, skill, thoroughness and preparation needed for the matter you take on. |
| Procedures to ensure compliance | §10.36 | A firm's responsible person must take reasonable steps to ensure the firm follows Circular 230. |
| Requirements for written advice | §10.37 | Base written advice on reasonable factual and legal assumptions, consider all relevant facts, and never factor in audit ("lottery") risk. |
| Incompetence & disreputable conduct | §10.51 | Lists the specific acts that count as grounds for sanction — e.g. conviction of certain crimes, giving false opinions, and failing to file one's own returns. |
| Violations subject to sanction | §10.52 | Triggers sanctions for willfully violating any Circular 230 rule (other than §10.33), or acting with reckless or gross incompetence. |
Written advice and the end of "covered opinions"
One point trips up even experienced practitioners. The June 2014 revision removed the old "covered opinion" rules (the former, far more burdensome §10.35) and replaced them with a single, principles-based written-advice standard at §10.37. That's also why the once-ubiquitous "Circular 230 disclaimer" footer on emails became unnecessary — it was a response to the old covered-opinion regime that no longer exists. Today, written advice simply must rest on reasonable assumptions and all relevant facts.
Sanctions & Disciplinary Actions
Subpart C: sanctions and discipline
When a practitioner is incompetent or disreputable (defined in §10.51), willfully violates the rules, or acts with reckless or gross incompetence (§10.52), the Office of Professional Responsibility can pursue sanctions under §10.50:
| Sanction | What it is | Typical trigger |
|---|---|---|
| Censure | A public reprimand; you keep practising. | Less serious misconduct, or a first/limited violation. |
| Suspension | Loss of the right to practise before the IRS for a set period. | Incompetent or disreputable conduct, or a willful violation. |
| Disbarment | Loss of the right to practise; reinstatement may be sought after a set period. | Serious or repeated misconduct. |
| Monetary penalty | A fine that may be imposed alone or alongside the above — and may also fall on the firm. | Any sanctionable conduct; capped at the gross income derived from it. |
The best-practices section (§10.33) is aspirational only — a violation of §10.33 on its own cannot trigger §10.52 sanctions. The sanctionable duties are the mandatory ones (e.g. §10.22, §10.34–§10.37).
Under §10.50(c), a monetary penalty cannot exceed the gross income derived (or to be derived) from the conduct, and can apply to an employer or firm that knew or should have known. Exact penalty mechanics can change — confirm current details on IRS.gov.
Circular 230 and the EA Exam
Circular 230 is core to Part 3 of the EA exam (Representation, Practices and Procedures) — the duties, conflict rules and sanctions above are directly testable, and the credential itself exists under §10.3 and §10.6 of this regulation. For how to study it, see our EA Part 3 study plan, and the ethics CPE rules EAs must meet to stay compliant.
Circular 230 and the CPA REG Exam
Circular 230 is also tested in the Regulation (REG) section of the CPA exam, within the "Ethics, Professional Responsibilities and Federal Tax Procedures" content area. CPAs are examined on practitioner duties, the standards for tax return positions (§10.34), conflicts of interest, and the disciplinary framework — much the same material EAs face in Part 3, though REG frames it alongside business law and the broader federal tax procedures a CPA must know. A CPA who represents taxpayers before the IRS is bound by Circular 230 exactly as an EA is. See our CPA REG exam guide and our wider CPA articles for where it fits.
Surgent via Eduyush covers Circular 230, representation and ethics in depth for both credentials — adaptive prep, ReadySCORE readiness tracking, and access until you pass.
Explore the Surgent EA Course →📘 Going the CPA route? See the Surgent CPA course, which carries the same Circular 230 coverage for the REG section.
Circular 230 FAQs
Is Circular 230 law?
Effectively, yes. It's a federal regulation issued under 31 U.S.C. §330 and codified at 31 CFR Part 10, so it carries the force of law for anyone practising before the IRS.
Who enforces Circular 230?
The IRS Office of Professional Responsibility (OPR). It investigates alleged violations and can pursue censure, suspension, disbarment or monetary penalties under §10.50.
What is §10.34 of Circular 230?
§10.34 sets standards for tax returns and documents: a practitioner must not sign or advise a return position that lacks a reasonable basis, is an unreasonable position, or willfully understates a tax liability.
Is Circular 230 tested on the EA exam?
Yes — it's central to Part 3 (Representation, Practices and Procedures), covering practitioner duties, conflicts of interest, and the sanctions for violations.
Vicky Sarin, CA (INSEAD), is the Founder of Eduyush and an authorised global reseller for Surgent EA Review. He has supported thousands of candidates across India, the Middle East and Southeast Asia working toward global finance credentials including the EA, ACCA, DipIFR, CPA and CIA. Connect on LinkedIn.
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