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Special Enrollment Examination

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Part 3 Practitioner Duties and Sanctions (Circular 230) question: EA learns

Part 3Practitioner Duties and Sanctions (Circular 230)

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?

A Promptly advise the client of the omission and its consequences
B Withdraw from the engagement immediately and notify the other firm
C Amend the 2023 return himself, without waiting for the client's consent
D Report the omission to the IRS within 30 days of learning of it

Show the answer and explanation

Answer: A. Promptly advise the client of the omission and its consequences

Section 10.21 requires a practitioner who knows that a client has not complied with the revenue laws, or has made an error or omission in a return, to advise the client promptly of the noncompliance, error or omission and of its consequences. The practitioner is not required to notify the IRS or to correct the return himself, and he may not amend without the client's authorization. Source: 31 CFR 10.21; Circular 230 (31 CFR Part 10, Rev. 6-2014). Tax year: 2025 (law as of 31 Dec 2025).

Common mistake

Thinking the practitioner must report the client to the IRS.

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Related Part 3 practice questions

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?An EA offers to prepare original 2025 returns for 10% of each client's refund. Under Circular 230, this fee arrangement is 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.