The IRS has an initiative to enforce ethical standards for attorneys, CPAs, enrolled agents, and enrolled actuaries that are practicing before the IRS. The Internal Revenue Manual provides guidance to taxpayers and IRS employees in regard to situations that should be referred to the Office of Professional Responsibility.
Office of Professional Responsibility Referral
Generally, a referral to the OPR is not warranted if it was a simple mistake and not willful but may be referred if the practitioner has a habit of failing to meet Circular 230 standards.
Mandatory referrals to the OPR may arise from the following penalties:
1. Willful or reckless conduct by the practitioner
2. Aiding and abetting penalties
3. Promoting abusive tax shelters
4. Action to enjoin promoters of abusive tax shelters
Of course their can be many more situations that could require a referral to the OPR but these are the main violations that warrant such procedures.
The following a situations that warrant a referral to the OPR:
1. The erroneous claim for refund or credit penalty is asserted when there is no reasonable basis for, and lack of due diligence in preparing, the return claim.
2. False or fraudulent statement is made to the IRS.
3. Appraisal that results in an understatement of the tax liability of another person.
4. Disreputable conduct carried out by the practitioner in violation of Circular 230.
5. A practitioner participates in a frivolous tax return situation.
6. The accuracy related penalty is assessed for a substantial understatement and the practitioner did not exercise due diligence in preparing the return.
7. A practitioner fails to comply with the tax shelter registration requirement.
The IRS personnel are cautioned to exercise discretion in making referrals to the OPR and therefore the Examination personally will be making more referrals to the OPR in the future.