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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

Part 3 Practitioner Duties and Sanctions (Circular 230) question: EA agrees to charge

Part 3Practitioner Duties and Sanctions (Circular 230)

During an examination of a client's original 2023 return, an EA agrees to charge 25% of any tax reduction he obtains. Is this fee permitted?

A No, unless the client signs a written consent within 30 days
B Yes, but only if the fee is less than 20% of the tax savings
C No, because contingent fees are never allowed in IRS matters
D Yes, because it relates to an exam of an original return

Show the answer and explanation

Answer: D. Yes, because it relates to an exam of an original return

Section 10.27 generally prohibits contingent fees, but allows them for services in connection with the IRS's examination of, or challenge to, an original return, an amended return or refund claim filed within 120 days of receiving written notice of the examination, a claim filed solely for interest or penalties, and judicial proceedings. An examination of the original return qualifies. Source: 31 CFR 10.27(b)(2); Circular 230 (31 CFR Part 10, Rev. 6-2014). Tax year: 2025 (law as of 31 Dec 2025).

Common mistake

Treating all contingent fees as banned.

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Study note: Practitioner Duties and Sanctions (Circular 230)Part 3practice questions & mock exams

Related Part 3 practice questions

An EA offers to prepare original 2025 returns for 10% of each client's refund. Under Circular 230, this fee arrangement is While preparing a 2025 return, an EA learns that his client omitted $20,000 of income from her 2023 return, which another firm prepared. What must the EA do under Circular 230?Under Circular 230, practice before the IRS includes all of the following EXCEPT

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Original study material mapped to the public IRS SEE content outlines; not a real exam question.Not affiliated with or endorsed by the IRS or PSI. Verify figures and rules against current guidance before relying on them.