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P3-U08 · Part 3 · Source cycle 2026-2027

Practitioner Misconduct

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Practitioner Misconduct — OPR, Sanctions & Discipline

Rule

The Office of Professional Responsibility (OPR) interprets and applies Circular 230 to ensure tax professionals comply with the law. OPR has exclusive authority over practitioner standards, disciplinary proceedings, and sanctions, and reviews reinstatement requests.

Who Is Subject to OPR Oversight

  • Attorneys and CPAs who interact with IRS at any level
  • EAs, ERPsAs, and enrolled actuaries
  • Qualified appraisers (providing valuations for tax matters)
  • AFSP certificate holders (representing on returns they prepared/signed)
  • Other licensed/unlicensed individuals giving written advice with tax-avoidance/evasion potential
  • Anyone filing a Form 2848 for limited/special representation

Four Categories of Misconduct

  1. Misconduct in representing a taxpayer — unethical/illegal acts while representing a client before the IRS (e.g., providing false info, improperly attempting to influence IRS employees, bribing an examiner)
  2. Misconduct related to the practitioner's OWN returns — willfully failing to file the practitioner's personal returns, evading tax, or filing false personal returns
  3. Knowingly, recklessly, or through gross incompetence giving false advice — false statements of fact/law, advising/assisting illegal acts, or ignoring information showing the advice is false/misleading
  4. Misconduct not directly involving IRS representation — e.g., conviction of certain crimes (fraud or other crimes involving dishonesty/breach of trust) that bear on fitness to practice

Specific Acts That Can Trigger Sanctions (§10.51, non-exhaustive)

  • Conviction of any federal tax crime, OR any crime involving dishonesty/breach of trust
  • Conviction of any felony (federal or state) that renders the person unfit to practice
  • Giving false/misleading information to Treasury (including misstating one's own credentials)
  • Soliciting business in a Circular 230-prohibited manner, or making false/misleading statements to deceive clients
  • Willfully failing to file federal returns or willfully evading assessment/collection
  • Willfully aiding a client in violating federal tax law or advising tax evasion
  • Misappropriating client funds collected for tax payments
  • Attempting to influence IRS employees by threats, false accusations, coercion, or bribery
  • Being disbarred/suspended as a CPA, actuary, or attorney by a state authority
  • Knowingly aiding/abetting another person to practice during their suspension/disbarment
  • Contemptuous conduct in IRS matters (abusive language, false charges, defamatory material)
  • Willfully disclosing/using taxpayer information, failing to sign a return, or signing without a valid PTIN
  • Willfully failing to e-file
  • Representing a taxpayer without proper authorization

"Reckless conduct" (§10.51) = a highly unreasonable omission or misrepresentation involving an extreme departure from the standard of care a practitioner should observe.

OPR Referrals

Most OPR disciplinary cases begin with internal/external referrals (IRS employees, taxpayers, practitioners, law enforcement, state licensing authorities).

Mandatory OPR referral Discretionary OPR referral
IRC §6700 — promoting abusive tax shelters IRC §6662 — accuracy-related penalty
IRC §6701 — aiding/abetting understatement IRC §6694(a) — unreasonable-position understatement
IRC §7407 — injunction against a preparer IRC §6695(a) — failure to furnish return copy
IRC §7408 — injunction re tax shelters/reportable transactions IRC §6695(b) — failure to sign a return
IRC §6695(d) — failure to retain copy/list
IRC §6702 — frivolous return/submission

IRS employees MUST refer in writing when they believe a practitioner violated Circular 230. Referral is also mandatory after assessing a penalty under IRC §6694(b) (willful understatement). Common referral reasons: negotiating/splitting taxpayer refunds; multi-year/multi-client misconduct patterns; conflicts of interest (e.g., representing both spouses with joint liability).

Complaints

  • Form 14157 (Complaint: Tax Return Preparer) — reports theft of refund, e-file problems, preparer misconduct, PTIN issues, false documents, employment tax, etc.
  • Form 14157-A (Preparer Fraud or Misconduct Affidavit) — for suspected preparer fraud (e.g., return copy given to client differs from return filed with IRS)
  • Anonymous complaints are allowed; complainant identity is not disclosed to the subject

Authority

  • Circular 230 §§10.50–10.52 (jurisdiction; incompetence/disreputable conduct)
  • Circular 230 §§10.53–10.64 (sanctions)
  • Circular 230 §§10.70–10.82 (procedures; reinstatement)
  • IRC §6700 (abusive shelters), §6701 (aiding/abetting), §7407 (preparer injunction), §7408 (shelter injunction)
  • Form 14157 / Form 14157-A (preparer complaints)

Sanctions

Sanction Effect
Reprimand (private) Lightest; private letter from OPR director; stays in the practitioner's record
Censure (public) Public reprimand; name published in the Internal Revenue Bulletin (facts not published). Does NOT bar practice, but conditions may be imposed on future representation
Suspension Cannot represent taxpayers before IRS during the suspension. Period: 1 to 60 months (5 years)
Disbarment Cannot represent taxpayers before IRS. Minimum 5 years; reinstatement is at IRS discretion. Facts published in the IRB
Monetary penalty May be imposed on individuals/firms in addition to censure/suspension/disbarment — up to the total gross income derived or to be derived from the conduct
Disqualification From a specific IRS proceeding
  • Expedited suspension available when a state license is revoked/suspended or the practitioner is convicted of a crime involving dishonesty/breach of trust; also for willful misconduct re personal federal tax obligations.
  • Reinstatement: After disbarment, a practitioner may apply to OPR after 5 years. OPR considers compliance with the sanction terms and conduct during the disbarment period. For suspensions shorter than 5 years, the practitioner may apply immediately when the period expires.

Edge Cases

  • Disbarred/suspended person may STILL prepare returns for a fee (per Loving v. IRS) — but may NOT practice before the IRS (represent, sign filings, submit POAs, etc.). OPR cannot restrict PTIN use for disciplinary reasons.
  • Disbarred person CAN appear as a fiduciary: A disbarred practitioner may still represent themselves, or act as a fiduciary/receiver/guardian/executor/administrator (if qualified under applicable law), appear as a witness, provide info at IRS request, or receive info under a Form 8821 — but receiving 8821 info does NOT authorize representation.
  • Prohibited acts during suspension/disbarment: cannot prepare/submit IRS documents (other than fee-prepared returns); cannot give written advice on tax-avoidance arrangements; cannot attend meetings/hearings or sign closing agreements/waivers; cannot receive refund checks or sign returns for taxpayers; cannot file a POA or hold out as eligible to practice; cannot aid/abet another in practice.
  • Conviction vs. prosecution: Circular 230 sanctions turn on CONVICTION of a crime, not mere prosecution. Misdemeanor convictions are generally not sanctionable unless listed; but the regulations warn that unlisted crimes can still be sanctioned.
  • Unintentional late payment of personal tax is NOT misconduct — but WILLFUL failure to file personal returns IS misconduct (§10.51(a)(6)).

Common Traps

  • Censure does NOT stop practice: A censured practitioner may still represent taxpayers before the IRS. Candidates often wrongly assume censure = no practice. Only suspension/disbarment stops representation.
  • Shortest suspension is 1 month: OPR can suspend from 1 month up to 60 months (5 years). Disbarment is a separate, more severe sanction (min 5 years). Do not confuse the two.
  • Burden of proof in discipline hearings: For disbarment, monetary penalties, or suspensions of 6 months or more, OPR must prove by clear and convincing evidence. For censure or suspensions under 6 months, the standard is a preponderance of the evidence.
  • Failure to respond = admission: If a practitioner fails to answer a complaint, the allegations are deemed admitted and discipline can proceed without a hearing.
  • Email is NOT valid service of a complaint: Complaints must be served by certified mail, first-class mail (if certified fails), private delivery, personal service, or by leaving it at the office. The practitioner has at least 30 days to respond; adverse evidence must be produced within 10 days of service.
  • Appeal path: ALJ decision → either party may appeal within 30 days to the Treasury Appellate Authority → "final agency decision" → practitioner may challenge in U.S. District Court (which only reverses if the decision is arbitrary/capricious, contrary to law, or an abuse of discretion).
  • OPR does NOT prosecute criminally: OPR refers criminal matters to DOJ/IRS Criminal Investigation. A common wrong answer says "OPR criminally prosecutes."

Connected Rules

  • circular-230-rules — §§10.22–10.31 duties and restrictions that, if violated, lead to sanctions
  • practitioner-standards-tax-advice — §§10.34/10.37 standards whose violation triggers discipline
  • penalties-refund-professional-responsibility — IRC §6694/6695 penalties that generate mandatory referrals
  • irs-authority-practice-requirements — who may practice; inactive/terminated EAs

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