Florida Lawyers Have Distinct Ethical Duties and Obligations as to Federal Tax and IRS Matters

If part of your Florida law practice involves representing clients before the Internal Revenue Service or if you counsel clients on tax-related matters, you have ethical obligations that are independent of those established by the Florida Bar. The IRS has detailed regulations that establish specific ethics guidelines for tax practitioners, and lawyers who breach any of those regulations can be disbarred and prohibited from representing clients in any IRS matters.

What is “Practice Before the IRS”?

Even if you don’t think of yourself as a “tax lawyer,” you “practice before the IRS” and are subject to its rules of practice if you engage in any of the following:

  • Communicating with the IRS for a taxpayer regarding the taxpayer’s rights, privileges, or liabilities under laws and regulations administered by the IRS.
  • Representing a taxpayer at conferences, hearings, or meetings with the IRS.
  • Preparing and filing documents, including tax returns, with the IRS for a taxpayer.
  • Providing a client with written advice which has a potential for tax avoidance or evasion.
Circular 230

Circular 230 is the Internal Revenue Service’s compilation of regulations governing tax practice by lawyers, accountants and other professionals. The IRS’ Office of Professional Responsibility may censure or institute proceedings to censure, suspend or disbar any attorney, CPA, or enrolled agent who has violates Circular 230. In June, the IRS issued final regulations that made significant changes to Circular 230 and includes new standards for issuing tax advice, competence, and compliance.

“Incompetence and Disreputable Conduct”

In addition to the specific provisions contained in Circular 230, a lawyer may be disbarred or suspended from practice before the IRS, or censured, for “incompetence or disreputable conduct.” The following are examples of conduct that is considered disreputable by the IRS:

  • Being convicted of any criminal offense under the revenue laws or of any offense involving dishonesty or breach of trust.
  • Knowingly giving false or misleading information in connection with federal tax matters, or participating in such activity.
  • Soliciting employment by prohibited means as discussed in section 10.30 of Circular 230.
  • Misappropriating, or failing to properly and promptly remit, funds received from clients for payment of taxes or other obligations due the United States.
  • Directly or indirectly attempting to influence the official action of IRS employees by the use of threats, false accusations, duress, or coercion, or by offering gifts, favors, or any special inducements.
  • Being disbarred or suspended from practice as an attorney, CPA, public accountant, or actuary, by the District of Columbia or any state, possession, territory, commonwealth, or any federal court, or any federal agency, body, or board.
  • Knowingly aiding and abetting another person to practice before the IRS during a period of suspension, disbarment, or ineligibility of that other person.
  • Using abusive language, making false accusations and statements knowing them to be false, circulating or publishing malicious or libelous matter, or engaging in any contemptuous conduct in connection with practice before the IRS.
  • Giving a false opinion knowingly, recklessly, or through gross incompetence; or following a pattern of providing incompetent opinions in questions arising under the federal tax laws.

Additionally, personal conduct with regard to one’s own taxes can lead to expedited suspension from practicing before the IRS. Specifically, failure to file an annual return for four of the five preceding years or failure to file a return required more frequently than annually for five of the seven preceding years will constitute “willful, disreputable conduct” that can lead to a quick suspension.

While those Florida attorneys who focus their practice on tax matters may be familiar with Circular 230 and the rules governing tax and IRS cases, lawyers who occasionally find themselves assisting clients on federal tax matters need to be cognizant of these obligations as well.