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Limits on Office of Professional Responsibility authority

A recent decision from a Nevada federal district court addresses authority of IRS Office of Professional Responsibility (OPR) to regulate tax preparers. The OPR is tasked with making sure that tax professionals follow tax practice standards as well as the law.

This administrative agency is responsible for pursuing disciplinary proceedings and enforcing sanctions. It is independent of other IRS criminal investigations and other agency enforcement departments.

Another OPR investigation

The Journal of Accountancy explained what happened. The plaintiff is the case was a licensed attorney in South Carolina. He was disbarred from the practice of law and suspended by the OPR in 2008 after pleading guilty to white collar criminal charges of mail fraud and money laundering.

Several years later, he founded a tax preparation firm. In his role he prepared tax returns. One client had him prepare tax returns for two years and discussed having him prepare a memorandum related to business tax obligations. But the client learned he had been disbarred in South Carolina, fired him and filed a complaint with the OPR.

Practice before the IRS

After the OPR opened an investigation, the former attorney asked for declaratory relief arguing OPR had no authority since he was not a "practitioner." The basis of his claim was that IRS authority didn't extend to those who don't represent taxpayers before the IRS.

The IRS argued a disciplinary agency continues to have authority over members who had been suspended. The court disagreed. It held that Section 31 U.S.C. 330(e) only applies when a practitioner represents taxpayers before the IRS.

This case illustrates that the administrative OPR can overstep its authority. An OPR case may also parallel a civil or criminal IRS investigation into tax practices such as record keeping for EIC.

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