, SOLUTION MANUAL FOR Federal Tax Research 13th Edition Sawyers
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, Solution and Answer Guide: Roby B. Sawyers and Steven L. Gill, Federal Tax Research Edition: 13 2025, 9780357988411;
Chapter 1: Introduction to Tax Practice and Ethics
Solution and Answer Guide
ROBY B. SAWYERS AND STEVEN L. GILL, FEDERAL TAX RESEARCH 13E, ©2025,
9780357988411; CHAPTER 1: INTRODUCTION TO TAX PRACTICE AND ETHICS
TABLE OF CONTENTS
Discussion Questions.................................................................................................................1
Exercises....................................................................................................................................21
DISCUSSION QUESTIONS
1. In a modern, industrial society, the tax system is derived from several disciplines.
Identify the disciplines that play this role in the United States. Explain how each of
them affects the U.S. tax system.
Answer: In the United States, the tax system is an outgrowth of the following five
disciplines: law, accounting, economics, political science, and sociology. The
environment for the tax system is provided by the principles of economics, sociology,
and political science, while the legal and accounting fields are responsible for the
system’s interpretation and application.
Each of these disciplines affects this country’s tax system in a unique way.
Economists address such issues as how proposed tax legislation will affect the rate
of inflation or economic growth. Measurement of the social equity of a tax and
determining whether a tax system discriminates against certain taxpayers are issues
that are examined by sociologists and political scientists. Finally, attorneys are
responsible for the interpretation of the taxation statutes, and accountants ensure
that these same statutes are applied consistently.
Page 4
© 2025 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 1
website, in whole or in part.
,Solution and Answer Guide: Roby B. Sawyers and Steven L. Gill, Federal Tax Research Edition: 13 2025, 9780357988411;
Chapter 1: Introduction to Tax Practice and Ethics
2. The elements of tax practice fall into what major categories in addition to tax
research?
Answer: The other major categories of tax practice in addition to tax research are as
follows:
Tax compliance
Tax planning
Tax litigation
Page 5
3. What is tax compliance as practiced in the United States? Give several examples of
activities that can be classified as tax compliance.
Answer: Tax compliance consists of gathering pertinent information, evaluating and
classifying that information, and filing any necessary tax returns. Compliance also
includes other functions necessary to satisfy governmental requirements, such as
representing a client during an Internal Revenue Service (IRS) audit.
Page 5
4. Several groups of individuals do most of the tax compliance work in the United
States. Identify these groups and briefly describe the kind of work that each group
does. In this regard, be sure to define the term enrolled agent.
Answer: Most of the tax compliance work is performed by commercial tax
preparers, enrolled agents (EAs), attorneys, and certified public accountants (CPAs).
Commercial tax preparers often complete noncomplex individual, partnership, and
corporate tax returns. EAs, attorneys, and CPAs usually perform the preparation of
more complex returns. The latter groups also provide tax planning services and
represent their clients before the IRS.
An EA is admitted to practice before the IRS by passing a special IRS-administered
examination, or who has worked for the IRS for five years and is issued a permit to
represent clients before the IRS. CPAs and attorneys are not required to take this
examination and are automatically admitted to practice before the IRS if they are in
good standing with the appropriate professional licensing board.
Page 5 and Circular 230
5. What is tax planning? Explain the difference between tax evasion and tax avoidance
and the role of each in professional tax planning.
Answer: Tax planning is the process of arranging one’s financial affairs to minimize
any tax liability. Much of modern tax practice centers around this process, and the
resulting outcome is tax avoidance. There is nothing illegal or immoral in the
avoidance of taxation as long as the taxpayer remains within legal bounds. In
contrast, tax evasion constitutes the illegal nonpayment of a tax and cannot be
© 2025 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 2
website, in whole or in part.
,Solution and Answer Guide: Roby B. Sawyers and Steven L. Gill, Federal Tax Research Edition: 13 2025, 9780357988411;
Chapter 1: Introduction to Tax Practice and Ethics
condoned. Activities of this sort clearly violate existing legal constraints and fall
outside of the domain of the professional tax practitioner.
Pages 5–6
6. Tax planning falls into two major categories: the “open” transaction and the “closed”
transaction. Discuss each type of transaction and describe how each affects tax
planning.
Answer: In an open tax planning situation, the transaction is not yet complete;
therefore, the tax practitioner maintains some degree of control over the potential tax
liability, and the transaction may be modified to achieve a more favorable tax
treatment. In a closed transaction, however, all of the pertinent actions have been
completed, and tax planning activities may be limited to the presentation of the
situation to the government in the most legally advantageous manner possible.
Page 6
7. What is tax litigation? What type of tax practitioner typically handles tax litigation on a
taxpayer’s behalf?
Answer: Tax litigation is the process of settling a dispute with the IRS in a court of
law. Typically, a tax attorney handles tax litigation that progresses beyond the final
IRS appeal.
Page 6
8. In tax litigation, what is usually the role of a CPA?
Answer: CPAs typically serve in a support capacity in tax litigation.
Page 6
9. Define tax research. Briefly describe the tax research process.
Answer: Tax research consists of the resolution of unanswered taxation questions.
The tax research process includes the following:
1. Identification of pertinent issues;
2. Specification of proper authorities;
3. Evaluation of the propriety of authorities; and,
4. Application of authorities to a specific situation.
Page 6
© 2025 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 3
website, in whole or in part.
,Solution and Answer Guide: Roby B. Sawyers and Steven L. Gill, Federal Tax Research Edition: 13 2025, 9780357988411;
Chapter 1: Introduction to Tax Practice and Ethics
10. Who issues Circular 230? According to Circular 230, what constitutes practice before
the IRS? Which tax practitioners are regulated by it?
Answer: Circular 230 is issued by the Treasury Department and applies to all who
practice before the IRS. At present, Circular 230 contains the following definition of
practice before the IRS. Practice before the Internal Revenue Service comprehends
all matters connected with a presentation to the Internal Revenue Service or any of
its officers or employees relating to a taxpayer’s rights, privileges, or liabilities under
laws or regulations administered by the Internal Revenue Service. Such
presentations include, but are not limited to, preparing documents; filing documents;
corresponding and communicating with the Internal Revenue Service; rendering
written advice with respect to any entity, transaction, plan or arrangement, or other
plan or arrangement having a potential for tax avoidance or evasion; and
representing a client at conferences, hearings, and meetings. However, a trio of
court cases over the last 10 years have called into question what constitutes practice
before the IRS.
Pages 7–8
11. Briefly summarize the implications of the Loving, Ridgely, and Sexton cases on
Circular 230.
Answer: The Loving, Ridgely, and Sexton cases called into question the ability of
the IRS to regulate tax professionals providing certain services to clients. In the
Loving case, the U.S. Court of Appeals for the D.C. Circuit affirmed the D.C. District
Court decision holding that “the IRS’s statutory authority under Section 330 cannot
be stretched so broadly as to encompass authority to regulate tax-return preparers.”
The district court held that tax return preparers are not necessarily representatives of
a taxpayer and do not practice before the IRS when they assist in preparing
someone else’s tax return. A 2017 decision by the District Court for Nevada in
Sexton v. Hawkins further calls into question the ability of the Treasury to regulate a
disbarred attorney/tax preparer offering tax advice to a client. In Ridgely v. Lew, the
court held that a contingent fee arrangement was allowed in the case of a CPA who
filed an amended return for refund for a client before the IRS commenced an audit of
the return. The court ruled that under Circular 230, the IRS was limited to regulating
practice and that the preparation of an ordinary refund claim did not constitute
practice before the IRS. The IRS has not amended Circular 230 language since
these cases were decided.
Page 8
12. In order for them to have limited practice rights, the IRS requires noncredentialed tax
return preparers to participate in the IRS Annual Filing Season Program. What does
participation require, and why do you think the IRS has made this change?
Answer: A return preparer must obtain 18 hours of continuing education from an
IRS-approved CE Provider. The hours must include a six credit hour Annual Federal
Tax Refresher course that covers filing season issues and tax law updates. The
© 2025 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 4
website, in whole or in part.
,Solution and Answer Guide: Roby B. Sawyers and Steven L. Gill, Federal Tax Research Edition: 13 2025, 9780357988411;
Chapter 1: Introduction to Tax Practice and Ethics
course must include a knowledge-based comprehension test administered at the
conclusion of the course by the CE Provider.
Limited practice rights allow individuals to represent clients whose returns they
prepared and signed, but only before revenue agents, customer service
representatives, and similar IRS employees.
Page 9 and IRS.gov
13. Briefly summarize the following sections of circular 230:
a. §10.21 Knowledge of Client’s Omission
b. §10.22 Diligence as to Accuracy
c. §10.27 Fees
d. §10.28 Return of Client Records
e. §10.29 Conflicting interests
f. §10.30 Solicitation
g. §10.33 Best practices for tax advisors
h. §10.34 Standards with respect to tax returns and documents, affidavits and other
papers
i. §10.35 Competence
j. §10.37 Requirements for written advice
Answer:
a. §10.21 Knowledge of Client’s Omission: A practitioner who knows of client
noncompliance, error, or omission with regard to the tax laws must advise the
client of that noncompliance, error, or omission.
b. §10.22 Diligence as to Accuracy: A practitioner must exercise due diligence in
preparing and filing tax returns and other documents relating to IRS matters and
in determining the correctness of oral and written representations made to the
IRS, the Treasury, and clients. Preparation of tax returns includes normal
activities such as determining the questions asked and information requested
from clients.
c. §10.27 Fees: In general, fees for tax work must not be contingent or
unconscionable.
d. §10.28 Return of Client Records: In general, a practitioner must, at the request of
a client, promptly return any and all of the client’s records that are necessary for
the client to comply with his or her federal tax obligations. The practitioner may
retain copies of the records returned to a client.
e. §10.29 Conflicting interests: No tax practitioner can represent conflicting interests
before the IRS unless he or she has the express consent of the directly interested
parties.
f. §10.30 Solicitation: A practitioner may not use, in any form of public
communication or private solicitation, false, fraudulent, coercive, misleading, or
deceptive statements or claims.
© 2025 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 5
website, in whole or in part.
,Solution and Answer Guide: Roby B. Sawyers and Steven L. Gill, Federal Tax Research Edition: 13 2025, 9780357988411;
Chapter 1: Introduction to Tax Practice and Ethics
g. §10.33 Best practices for tax advisors: This section outlines the best practices that
a tax advisor should provide to their clients. Four specific best practices are
outlined.
h. §10.34 Standards with respect to tax returns and documents, affidavits and other
papers: Provides practitioners with rules pertaining to preparing and signing tax
returns, giving advice to clients, and filing documents, affidavits, and other papers
with the IRS. Under § 10.34(a), a practitioner may not sign a tax return or advise a
taxpayer to take a position on a tax return that he or she knows (or should
reasonably know) contains a position that (1) lacks a reasonable basis, (2) is an
unreasonable position under IRC § 6694(a)(2), or (3) is a willful attempt to
understate a tax liability or an intentional disregard of rules and regulations as
described in IRC § 6694(b)(2). In addition, a client must be informed of any
penalties that are reasonably likely to apply to positions on tax returns or any
document, affidavit, or other paper submitted to the IRS and a client should be
informed about steps that can be taken to avoid such penalties.
i. §10.35 Competence: A practitioner must possess the necessary competence to
engage in practice before the IRS. Competent practice requires the knowledge,
skill, thoroughness, and preparation necessary for the matter for which the
practitioner is engaged.
j. §10.37 Requirements for written advice: This section outlines the rules a
practitioner must follow when giving written advice concerning federal tax matters.
This section also provides standards of review and what defines a federal tax
matter.
Pages 7–15 and Circular 230
14. There are two ways to become an EA. Briefly explain what they are and give the
subpart and section references in Circular 230 where the details of becoming an EA
are found.
Answer: To become an EA an individual can (1) pass a test given by the IRS or (2)
work for the IRS for five years. Circular 230, Subpart A, §§ 10.4 to 10.6.
Page 9
15. EAs are subject to continuing education (CE) requirements. Briefly describe the CE
requirements and give the reference to where the details can be found in Circular
230.
Answer: EAs must complete 72 hours of continuing education every three years (an
average of 24 per year, with a minimum of 16 hours during any year). Circular 230,
Subpart A. § 10.6.
Page 9
16. Regular full-time employees are allowed to represent certain organizations before
the IRS without being a Circular 230 practitioner. Name the organizations that can be
represented by full-time employees, and cite where you found that authority in
Circular 230.
© 2025 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 6
website, in whole or in part.
,Solution and Answer Guide: Roby B. Sawyers and Steven L. Gill, Federal Tax Research Edition: 13 2025, 9780357988411;
Chapter 1: Introduction to Tax Practice and Ethics
Answer: The names of organizations that can be represented by regular full-time
employees are found in Circular 230, § 10.7(c). A regular full-time employee can
represent the employer (individual employer). A regular full-time employee of a
partnership may represent the partnership. Also, a regular full-time employee of a
trust, receivership, guardianship, or estate may represent the trust, receivership,
guardianship, or estate. Furthermore, a regular full-time employee of a governmental
unit, agency, or authority may represent the governmental unit, agency, or authority
in the course of his or her official duties.
Page 10
17. Jane’s mother resides in a nursing home and cannot travel. There is a problem with
the mother’s prior-year tax return, and the IRS needs to discuss the matter with her
at the local IRS office. Is it possible for Jane to handle this matter without having to
hire professional tax representation? Reference your answer to the appropriate part
of Circular 230.
Answer: Yes. Jane can represent her mother according to Circular 230, Subpart A,
§ 10.7(c).
Page 10
18. A practitioner could be suspended from practice before the IRS if the practitioner
employs, accepts assistance from, or shares fees with any person who is under
disbarment or suspension from practice before the IRS. True or false? Explain your
answer. (IRS adapted)
Answer: True. A practitioner may be suspended or disbarred from practice before
the IRS if he or she knowingly helps a suspended or disbarred person practice
indirectly before the IRS.
Page 11
19. A tax practitioner may not advise a client under Circular 230 to take a position on a
document, affidavit, or other paper submitted to the IRS unless the position meets
which standard under Circular 230 § 10.34?
Answer: A practitioner may not advise a client to take a position on a document,
affidavit, or other paper submitted to the IRS unless the position is not frivolous.
Circular 230 § 10.34(b).
Pages 13–14
20. May Circular 230 practitioners advertise on television? On the Internet? If so, what
standards are applied to the advertisements?
Answer: Under Circular 230, an attorney, a CPA, or an EA may use mass media
(e.g., T.V. and the Internet) for advertising purposes. Such media may not contain
false, fraudulent, unduly influencing, coercive, or unfair statements or claims.
Attorneys, CPAs, and EAs must also observe any applicable standards of ethical
conduct adopted by the American Bar Association (ABA), the American Institute of
© 2025 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 7
website, in whole or in part.
, Solution and Answer Guide: Roby B. Sawyers and Steven L. Gill, Federal Tax Research Edition: 13 2025, 9780357988411;
Chapter 1: Introduction to Tax Practice and Ethics
Certified Public Accountants (AICPA), and the National Association of Enrolled
Agents (NAEA). Additional standards and listing of items that may be included in
mass media advertising are defined under § 10.30 of Subpart B in Circular 230.
Pages 17–18
21. May a tax practitioner who is a CPA form a CPA partnership with a former IRS agent
who is also a CPA? What limits (if any) would be placed on such a partnership?
Answer: Under § 10.25 of Circular 230, partners of government employees cannot
represent anyone for which the government employee-partner has (or has had)
official responsibility. For instance, a CPA firm with an IRS agent could not represent
any taxpayer who is (or was in the past) assigned to the IRS agent-partner.
Page 12
22. If a tax practitioner finds an error in a prior year’s tax return, what action (if any) must
he or she take under Circular 230? What subpart and section addresses this
situation?
Answer: Under § 10.21 of Circular 230, each attorney, CPA, EA, or enrolled actuary
who knows that the client has not complied with the revenue laws of the United
States or has made an error in or omission from any return, document, affidavit, or
other paper which the client is required by the revenue laws of the United States to
execute shall advise the client promptly of the fact of such noncompliance, error, or
omission.
Page 11
23. Is a tax practitioner required to adhere to the best-practices standard under Circular
230 § 10.33? Explain.
Answer: According to Circular 230, the best practices rules are aspirational. Thus, a
practitioner who fails to comply with best practices will not be subject to discipline by
the IRS.
Page 13
© 2025 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 8
website, in whole or in part.
Important Notes
The file includes the complete test bank, organized chapter by chapter.
A sample of selected pages has been provided for preview.
All available appendices and Excel files (if included in the original resources) are
provided.
We continuously update our files to ensure you receive the latest and most accurate
editions.
New editions are added regularly – stay connected for updates!
✅ Why Buy From Us?
📚 Complete & organized chapter-by-chapter – no missing content, no guessing.
⚡ Instant digital delivery – get your file the moment you pay, no waiting.
📅 Always up to date – we track new editions so you always get the latest version.
💬 Friendly support – real humans ready to help, anytime you need us.
🔒 Safe & secure – thousands of satisfied students trust us every semester.
🛡️Our Guarantees
💰 Money-Back Guarantee: Not satisfied? We offer a full refund – no questions asked.
🔄 Wrong File? No Problem: Contact us and we will replace it immediately with the
correct version, free of charge.
⏰ 24/7 Support: We are always here – reach out anytime and expect a fast response.
Contact Email:
, Solution and Answer Guide: Roby B. Sawyers and Steven L. Gill, Federal Tax Research Edition: 13 2025, 9780357988411;
Chapter 1: Introduction to Tax Practice and Ethics
Solution and Answer Guide
ROBY B. SAWYERS AND STEVEN L. GILL, FEDERAL TAX RESEARCH 13E, ©2025,
9780357988411; CHAPTER 1: INTRODUCTION TO TAX PRACTICE AND ETHICS
TABLE OF CONTENTS
Discussion Questions.................................................................................................................1
Exercises....................................................................................................................................21
DISCUSSION QUESTIONS
1. In a modern, industrial society, the tax system is derived from several disciplines.
Identify the disciplines that play this role in the United States. Explain how each of
them affects the U.S. tax system.
Answer: In the United States, the tax system is an outgrowth of the following five
disciplines: law, accounting, economics, political science, and sociology. The
environment for the tax system is provided by the principles of economics, sociology,
and political science, while the legal and accounting fields are responsible for the
system’s interpretation and application.
Each of these disciplines affects this country’s tax system in a unique way.
Economists address such issues as how proposed tax legislation will affect the rate
of inflation or economic growth. Measurement of the social equity of a tax and
determining whether a tax system discriminates against certain taxpayers are issues
that are examined by sociologists and political scientists. Finally, attorneys are
responsible for the interpretation of the taxation statutes, and accountants ensure
that these same statutes are applied consistently.
Page 4
© 2025 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 1
website, in whole or in part.
,Solution and Answer Guide: Roby B. Sawyers and Steven L. Gill, Federal Tax Research Edition: 13 2025, 9780357988411;
Chapter 1: Introduction to Tax Practice and Ethics
2. The elements of tax practice fall into what major categories in addition to tax
research?
Answer: The other major categories of tax practice in addition to tax research are as
follows:
Tax compliance
Tax planning
Tax litigation
Page 5
3. What is tax compliance as practiced in the United States? Give several examples of
activities that can be classified as tax compliance.
Answer: Tax compliance consists of gathering pertinent information, evaluating and
classifying that information, and filing any necessary tax returns. Compliance also
includes other functions necessary to satisfy governmental requirements, such as
representing a client during an Internal Revenue Service (IRS) audit.
Page 5
4. Several groups of individuals do most of the tax compliance work in the United
States. Identify these groups and briefly describe the kind of work that each group
does. In this regard, be sure to define the term enrolled agent.
Answer: Most of the tax compliance work is performed by commercial tax
preparers, enrolled agents (EAs), attorneys, and certified public accountants (CPAs).
Commercial tax preparers often complete noncomplex individual, partnership, and
corporate tax returns. EAs, attorneys, and CPAs usually perform the preparation of
more complex returns. The latter groups also provide tax planning services and
represent their clients before the IRS.
An EA is admitted to practice before the IRS by passing a special IRS-administered
examination, or who has worked for the IRS for five years and is issued a permit to
represent clients before the IRS. CPAs and attorneys are not required to take this
examination and are automatically admitted to practice before the IRS if they are in
good standing with the appropriate professional licensing board.
Page 5 and Circular 230
5. What is tax planning? Explain the difference between tax evasion and tax avoidance
and the role of each in professional tax planning.
Answer: Tax planning is the process of arranging one’s financial affairs to minimize
any tax liability. Much of modern tax practice centers around this process, and the
resulting outcome is tax avoidance. There is nothing illegal or immoral in the
avoidance of taxation as long as the taxpayer remains within legal bounds. In
contrast, tax evasion constitutes the illegal nonpayment of a tax and cannot be
© 2025 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 2
website, in whole or in part.
,Solution and Answer Guide: Roby B. Sawyers and Steven L. Gill, Federal Tax Research Edition: 13 2025, 9780357988411;
Chapter 1: Introduction to Tax Practice and Ethics
condoned. Activities of this sort clearly violate existing legal constraints and fall
outside of the domain of the professional tax practitioner.
Pages 5–6
6. Tax planning falls into two major categories: the “open” transaction and the “closed”
transaction. Discuss each type of transaction and describe how each affects tax
planning.
Answer: In an open tax planning situation, the transaction is not yet complete;
therefore, the tax practitioner maintains some degree of control over the potential tax
liability, and the transaction may be modified to achieve a more favorable tax
treatment. In a closed transaction, however, all of the pertinent actions have been
completed, and tax planning activities may be limited to the presentation of the
situation to the government in the most legally advantageous manner possible.
Page 6
7. What is tax litigation? What type of tax practitioner typically handles tax litigation on a
taxpayer’s behalf?
Answer: Tax litigation is the process of settling a dispute with the IRS in a court of
law. Typically, a tax attorney handles tax litigation that progresses beyond the final
IRS appeal.
Page 6
8. In tax litigation, what is usually the role of a CPA?
Answer: CPAs typically serve in a support capacity in tax litigation.
Page 6
9. Define tax research. Briefly describe the tax research process.
Answer: Tax research consists of the resolution of unanswered taxation questions.
The tax research process includes the following:
1. Identification of pertinent issues;
2. Specification of proper authorities;
3. Evaluation of the propriety of authorities; and,
4. Application of authorities to a specific situation.
Page 6
© 2025 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 3
website, in whole or in part.
,Solution and Answer Guide: Roby B. Sawyers and Steven L. Gill, Federal Tax Research Edition: 13 2025, 9780357988411;
Chapter 1: Introduction to Tax Practice and Ethics
10. Who issues Circular 230? According to Circular 230, what constitutes practice before
the IRS? Which tax practitioners are regulated by it?
Answer: Circular 230 is issued by the Treasury Department and applies to all who
practice before the IRS. At present, Circular 230 contains the following definition of
practice before the IRS. Practice before the Internal Revenue Service comprehends
all matters connected with a presentation to the Internal Revenue Service or any of
its officers or employees relating to a taxpayer’s rights, privileges, or liabilities under
laws or regulations administered by the Internal Revenue Service. Such
presentations include, but are not limited to, preparing documents; filing documents;
corresponding and communicating with the Internal Revenue Service; rendering
written advice with respect to any entity, transaction, plan or arrangement, or other
plan or arrangement having a potential for tax avoidance or evasion; and
representing a client at conferences, hearings, and meetings. However, a trio of
court cases over the last 10 years have called into question what constitutes practice
before the IRS.
Pages 7–8
11. Briefly summarize the implications of the Loving, Ridgely, and Sexton cases on
Circular 230.
Answer: The Loving, Ridgely, and Sexton cases called into question the ability of
the IRS to regulate tax professionals providing certain services to clients. In the
Loving case, the U.S. Court of Appeals for the D.C. Circuit affirmed the D.C. District
Court decision holding that “the IRS’s statutory authority under Section 330 cannot
be stretched so broadly as to encompass authority to regulate tax-return preparers.”
The district court held that tax return preparers are not necessarily representatives of
a taxpayer and do not practice before the IRS when they assist in preparing
someone else’s tax return. A 2017 decision by the District Court for Nevada in
Sexton v. Hawkins further calls into question the ability of the Treasury to regulate a
disbarred attorney/tax preparer offering tax advice to a client. In Ridgely v. Lew, the
court held that a contingent fee arrangement was allowed in the case of a CPA who
filed an amended return for refund for a client before the IRS commenced an audit of
the return. The court ruled that under Circular 230, the IRS was limited to regulating
practice and that the preparation of an ordinary refund claim did not constitute
practice before the IRS. The IRS has not amended Circular 230 language since
these cases were decided.
Page 8
12. In order for them to have limited practice rights, the IRS requires noncredentialed tax
return preparers to participate in the IRS Annual Filing Season Program. What does
participation require, and why do you think the IRS has made this change?
Answer: A return preparer must obtain 18 hours of continuing education from an
IRS-approved CE Provider. The hours must include a six credit hour Annual Federal
Tax Refresher course that covers filing season issues and tax law updates. The
© 2025 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 4
website, in whole or in part.
,Solution and Answer Guide: Roby B. Sawyers and Steven L. Gill, Federal Tax Research Edition: 13 2025, 9780357988411;
Chapter 1: Introduction to Tax Practice and Ethics
course must include a knowledge-based comprehension test administered at the
conclusion of the course by the CE Provider.
Limited practice rights allow individuals to represent clients whose returns they
prepared and signed, but only before revenue agents, customer service
representatives, and similar IRS employees.
Page 9 and IRS.gov
13. Briefly summarize the following sections of circular 230:
a. §10.21 Knowledge of Client’s Omission
b. §10.22 Diligence as to Accuracy
c. §10.27 Fees
d. §10.28 Return of Client Records
e. §10.29 Conflicting interests
f. §10.30 Solicitation
g. §10.33 Best practices for tax advisors
h. §10.34 Standards with respect to tax returns and documents, affidavits and other
papers
i. §10.35 Competence
j. §10.37 Requirements for written advice
Answer:
a. §10.21 Knowledge of Client’s Omission: A practitioner who knows of client
noncompliance, error, or omission with regard to the tax laws must advise the
client of that noncompliance, error, or omission.
b. §10.22 Diligence as to Accuracy: A practitioner must exercise due diligence in
preparing and filing tax returns and other documents relating to IRS matters and
in determining the correctness of oral and written representations made to the
IRS, the Treasury, and clients. Preparation of tax returns includes normal
activities such as determining the questions asked and information requested
from clients.
c. §10.27 Fees: In general, fees for tax work must not be contingent or
unconscionable.
d. §10.28 Return of Client Records: In general, a practitioner must, at the request of
a client, promptly return any and all of the client’s records that are necessary for
the client to comply with his or her federal tax obligations. The practitioner may
retain copies of the records returned to a client.
e. §10.29 Conflicting interests: No tax practitioner can represent conflicting interests
before the IRS unless he or she has the express consent of the directly interested
parties.
f. §10.30 Solicitation: A practitioner may not use, in any form of public
communication or private solicitation, false, fraudulent, coercive, misleading, or
deceptive statements or claims.
© 2025 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 5
website, in whole or in part.
,Solution and Answer Guide: Roby B. Sawyers and Steven L. Gill, Federal Tax Research Edition: 13 2025, 9780357988411;
Chapter 1: Introduction to Tax Practice and Ethics
g. §10.33 Best practices for tax advisors: This section outlines the best practices that
a tax advisor should provide to their clients. Four specific best practices are
outlined.
h. §10.34 Standards with respect to tax returns and documents, affidavits and other
papers: Provides practitioners with rules pertaining to preparing and signing tax
returns, giving advice to clients, and filing documents, affidavits, and other papers
with the IRS. Under § 10.34(a), a practitioner may not sign a tax return or advise a
taxpayer to take a position on a tax return that he or she knows (or should
reasonably know) contains a position that (1) lacks a reasonable basis, (2) is an
unreasonable position under IRC § 6694(a)(2), or (3) is a willful attempt to
understate a tax liability or an intentional disregard of rules and regulations as
described in IRC § 6694(b)(2). In addition, a client must be informed of any
penalties that are reasonably likely to apply to positions on tax returns or any
document, affidavit, or other paper submitted to the IRS and a client should be
informed about steps that can be taken to avoid such penalties.
i. §10.35 Competence: A practitioner must possess the necessary competence to
engage in practice before the IRS. Competent practice requires the knowledge,
skill, thoroughness, and preparation necessary for the matter for which the
practitioner is engaged.
j. §10.37 Requirements for written advice: This section outlines the rules a
practitioner must follow when giving written advice concerning federal tax matters.
This section also provides standards of review and what defines a federal tax
matter.
Pages 7–15 and Circular 230
14. There are two ways to become an EA. Briefly explain what they are and give the
subpart and section references in Circular 230 where the details of becoming an EA
are found.
Answer: To become an EA an individual can (1) pass a test given by the IRS or (2)
work for the IRS for five years. Circular 230, Subpart A, §§ 10.4 to 10.6.
Page 9
15. EAs are subject to continuing education (CE) requirements. Briefly describe the CE
requirements and give the reference to where the details can be found in Circular
230.
Answer: EAs must complete 72 hours of continuing education every three years (an
average of 24 per year, with a minimum of 16 hours during any year). Circular 230,
Subpart A. § 10.6.
Page 9
16. Regular full-time employees are allowed to represent certain organizations before
the IRS without being a Circular 230 practitioner. Name the organizations that can be
represented by full-time employees, and cite where you found that authority in
Circular 230.
© 2025 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 6
website, in whole or in part.
,Solution and Answer Guide: Roby B. Sawyers and Steven L. Gill, Federal Tax Research Edition: 13 2025, 9780357988411;
Chapter 1: Introduction to Tax Practice and Ethics
Answer: The names of organizations that can be represented by regular full-time
employees are found in Circular 230, § 10.7(c). A regular full-time employee can
represent the employer (individual employer). A regular full-time employee of a
partnership may represent the partnership. Also, a regular full-time employee of a
trust, receivership, guardianship, or estate may represent the trust, receivership,
guardianship, or estate. Furthermore, a regular full-time employee of a governmental
unit, agency, or authority may represent the governmental unit, agency, or authority
in the course of his or her official duties.
Page 10
17. Jane’s mother resides in a nursing home and cannot travel. There is a problem with
the mother’s prior-year tax return, and the IRS needs to discuss the matter with her
at the local IRS office. Is it possible for Jane to handle this matter without having to
hire professional tax representation? Reference your answer to the appropriate part
of Circular 230.
Answer: Yes. Jane can represent her mother according to Circular 230, Subpart A,
§ 10.7(c).
Page 10
18. A practitioner could be suspended from practice before the IRS if the practitioner
employs, accepts assistance from, or shares fees with any person who is under
disbarment or suspension from practice before the IRS. True or false? Explain your
answer. (IRS adapted)
Answer: True. A practitioner may be suspended or disbarred from practice before
the IRS if he or she knowingly helps a suspended or disbarred person practice
indirectly before the IRS.
Page 11
19. A tax practitioner may not advise a client under Circular 230 to take a position on a
document, affidavit, or other paper submitted to the IRS unless the position meets
which standard under Circular 230 § 10.34?
Answer: A practitioner may not advise a client to take a position on a document,
affidavit, or other paper submitted to the IRS unless the position is not frivolous.
Circular 230 § 10.34(b).
Pages 13–14
20. May Circular 230 practitioners advertise on television? On the Internet? If so, what
standards are applied to the advertisements?
Answer: Under Circular 230, an attorney, a CPA, or an EA may use mass media
(e.g., T.V. and the Internet) for advertising purposes. Such media may not contain
false, fraudulent, unduly influencing, coercive, or unfair statements or claims.
Attorneys, CPAs, and EAs must also observe any applicable standards of ethical
conduct adopted by the American Bar Association (ABA), the American Institute of
© 2025 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 7
website, in whole or in part.
, Solution and Answer Guide: Roby B. Sawyers and Steven L. Gill, Federal Tax Research Edition: 13 2025, 9780357988411;
Chapter 1: Introduction to Tax Practice and Ethics
Certified Public Accountants (AICPA), and the National Association of Enrolled
Agents (NAEA). Additional standards and listing of items that may be included in
mass media advertising are defined under § 10.30 of Subpart B in Circular 230.
Pages 17–18
21. May a tax practitioner who is a CPA form a CPA partnership with a former IRS agent
who is also a CPA? What limits (if any) would be placed on such a partnership?
Answer: Under § 10.25 of Circular 230, partners of government employees cannot
represent anyone for which the government employee-partner has (or has had)
official responsibility. For instance, a CPA firm with an IRS agent could not represent
any taxpayer who is (or was in the past) assigned to the IRS agent-partner.
Page 12
22. If a tax practitioner finds an error in a prior year’s tax return, what action (if any) must
he or she take under Circular 230? What subpart and section addresses this
situation?
Answer: Under § 10.21 of Circular 230, each attorney, CPA, EA, or enrolled actuary
who knows that the client has not complied with the revenue laws of the United
States or has made an error in or omission from any return, document, affidavit, or
other paper which the client is required by the revenue laws of the United States to
execute shall advise the client promptly of the fact of such noncompliance, error, or
omission.
Page 11
23. Is a tax practitioner required to adhere to the best-practices standard under Circular
230 § 10.33? Explain.
Answer: According to Circular 230, the best practices rules are aspirational. Thus, a
practitioner who fails to comply with best practices will not be subject to discipline by
the IRS.
Page 13
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website, in whole or in part.
