IRS Proposes Modernized Rules for Tax Professionals Under Circular 230

WASHINGTON, December 23, ​2024 – The Department of the ​Treasury and the ​Internal ​Tax Service (IRS) ​have submitted a number of proposed regulations ​to update the rules applicable to ​tax professionals who practise before the IRS. These proposed amendments, which form part of ​the Department of Integrated Treasury Circular 230, reflect changes ​in tax practices and incorporate legal updates since the last amendments in 2011 and 2014.

According to the IRS, the reviews cover a number of key areas, such as those responsible ​for registered tax returns, the preparation ​of tax returns, and the ​processing of potential fees. ​The updated Regulation also provides for the technological competence of professionals and clarifies the competence of the Office of Professional Responsibility with regard to ​suspended or dissolved professionals. ​According to the IRS, these changes are essential ​to ​align Circular 230 with modern standards of practice and ​ensure the integrity of tax advisory services.

Updates to Circular 230

The proposed updates to Circular 230 ​include significant changes to streamline and modernize its provisions. These include the removal or modification of obsolete sections related to registered ​income tax returns and any expenses. These reviews ​also clarify the responsibilities of evaluators and establish new rules for their exclusion, ensuring harmonization with current ​tax legislation.

In addition, the updated rules require tax professionals to retain their technological skills as part of ​their practice. This adjustment highlights the IRS’ recognition of the growing role ​of technology in tax preparation and compliance. According ​to www.theaccountant-online.com, these ​changes are designed to equip professionals with ​the skills ​they need to navigate effectively in today’s digital tax environment.

Strengthening oversight and accountability

The draft Regulation reaffirms the authority of the ​Office of Audit and Performance Review to monitor the ​conduct of professionals and the application of disciplinary measures. The revisions ​expressly specify the jurisdiction of the OPR with respect to persons who have been suspended or uprooted, thereby ensuring uniform application of professional standards. According to the IRS, this ​measure is intended to defend the integrity and accountability of tax professionals in various functions, including registered agents, certified public accountants ​and evaluators.

In line with ​these updates, the IRS has proposed clearer guidelines for evaluators, ​setting rigorous ​standards for ​exclusion. As stated in www.irs.gov, these measures are ​part of a broader effort to improve the reliability and accuracy of contributions used in tax ​registers and compliance.

Impacts on tax professionals

The proposed amendments should affect a wide range of tax professionals, including registered agents, registered income ​tax returns, lawyers, registered actuaries and participants in the annual fill season program. These people will have ​to adapt to the ​new ​rules, in particular those ​relating to technological ​competence and compliance with updated legal provisions.

The public hearing on the ​proposed Regulations is scheduled for March 6, 2025. ​This session ​will allow stakeholders, including ​tax professionals and industry organizations, to express their views and seek clarification. As the ​website www.theaccountant-online.com indicates, the audience is ​a crucial step in the ​development of regulations and in addressing the practical realities of tax practice.

Complementary activities of industry stakeholders

The ​proposed regulations come at a time when industry stakeholders, such as the American ACP Institute (AICPA), are advocating further policy changes ​to support tax professionals ​and ​taxpayers. In October ​2024, AICPA urged the ​Financial Crimes Enforcement Network (FinCEN) to establish automatic reporting extensions, such as foreign ​bank and ​financial ​accounts (FBAR) and benefit property information (BOI) after major disasters. This ​promotion highlights the need for adaptation policies that address ​unforeseen challenges.

While the IRS emphasizes the modernization of ​Circular 230, these complementary efforts highlight the broader momentum to increase the efficiency and resilience of the tax administration. According to www.theaccountant-online.com, the proposed updates to Circular 230 ​and industry-led initiatives are aimed ​at creating a more robust and responsive tax system.

The updates ​proposed by the IRS are an important step in the ongoing ​effort to modernise the rules of tax practice and improve ​professional responsibility. With regard to technological advances, legal changes and performance, these ​rules are intended to provide ​professionals with the tools and ​standards necessary to ensure effective compliance and representation.