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Special Enrollment Examination

Part 1SEE Part 1: Individuals✓Part 2SEE Part 2: Businesses Part 3SEE Part 3: Representation, Practices and Procedures

Practices and Procedures

Practitioner Duties and Sanctions (Circular 230)

The duties Circular 230 places on practitioners in Subpart B (information to the IRS, client omissions, due diligence, records, fees, conflicts, advertising, refund checks, return positions, written advice, supervision and competence) and the sanctions in Subparts C and D. These sections are tested by number and by short scenarios, so knowing what each section requires and what it does not is the key skill.

Practices and Procedures5 min read7 sections

Must-know for the exam

A practitioner who learns of a client's error or omission must promptly advise the client of it and its consequences; there is no duty to tell the IRS (31 CFR 10.21).
Lawfully requested records must be produced promptly; if neither practitioner nor client has them, tell the IRS who may have them (31 CFR 10.20).
Contingent fees are barred except for IRS exams of original returns, amended returns or claims filed within 120 days of an exam notice, interest or penalty claims, and litigation (31 CFR 10.27(b)).
Client records needed for tax compliance must be returned on request even during a fee dispute; copies may be kept (31 CFR 10.28).
Conflicts need a reasonable belief in competent representation and informed written consent from each client, kept 36 months after representation ends (31 CFR 10.29).
A practitioner may not endorse or negotiate a client's federal refund check or direct it into an account he controls (31 CFR 10.31; IRC 6695(f)).
No return position that lacks a reasonable basis, or is unreasonable and undisclosed under IRC 6694(a)(2), may be signed or advised (31 CFR 10.34(a)).
Published fee schedules bind for at least 30 days after last publication; solicitations must be labeled; keep direct mail copies 36 months (31 CFR 10.30).
Sanctions are censure, suspension, disbarment and a monetary penalty up to the gross income from the conduct (31 CFR 10.50).
Expedited suspension applies to state license revocations for cause, certain convictions, federal disbarments, or not filing in 4 of 5 years (31 CFR 10.82).

On this page · 7 sections

Traps that cost marks

Thinking the practitioner must report the client to the IRS.
Treating all contingent fees as banned.
Assuming client consent cures a prohibited contingent fee.
Withholding a client's own records over an unpaid fee.
Treating an oral agreement or separate billing as enough.
Measuring the period from the date of the consent.
Allowing the practitioner to cash refunds with consent.
Treating a signed statement as automatic proof of due diligence.

Why it matters on the exam

Circular 230 is the code of conduct for everyone who practices before the IRS, and it is the backbone of Part 3 Domain 1. Questions usually describe a practitioner's choice and ask what the rule requires. The trap is nearly always an option that does more than the rule demands (report the client to the IRS) or less (keep the records until paid).

All citations are to 31 CFR Part 10 as revised June 2014 (Circular 230).

Duties to the IRS and to clients

Section	Duty	What it does not require
10.20	Produce lawfully requested records promptly, or identify who has them	Producing privileged material
10.21	Advise the client promptly of noncompliance, errors and omissions and their consequences	Notifying the IRS or amending without the client
10.22	Due diligence on accuracy; reliance on others is fine with reasonable care in hiring and supervising	Auditing every fact independently
10.23	No unreasonable delay in disposing of a matter	Refusing ordinary extensions for good reason

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Frequently asked questions

What must a practitioner do on learning a client made an error on a return?

Promptly advise the client of the noncompliance, error or omission and of its consequences. The practitioner is not required to correct it or tell the IRS. Source: 31 CFR 10.21, checked 12 Oct 2026.

How is a conflict of interest cured under Circular 230?

Only if the practitioner reasonably believes they can represent each client competently and diligently, the representation is not prohibited by law, and each affected client gives informed consent confirmed in writing, generally within 30 days. The consents are kept for 36 months after the representation ends. Source: 31 CFR 10.29.

Can an enrolled agent charge a contingent fee?

Only in limited cases: an IRS examination of, or challenge to, an original return; an amended return or refund claim filed within 120 days of written notice of examination; a claim filed solely about statutory interest or penalties; or a judicial proceeding under the Code. Source: 31 CFR 10.27(b), checked 12 Oct 2026.

Exam-style questions

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