The U.S. Treasury Department has introduced proposed regulations to update Circular 230, targeting tax professionals who charge contingent fees for preparing tax returns. Announced Friday, the new rules would classify certain contingent fee arrangements as disreputable conduct and require practitioners to demonstrate technological competency.
Key Changes to Circular 230
The proposed regulations aim to limit contingent fees for services such as preparing original or amended tax returns or refund claims. Tax professionals, including enrolled agents, CPAs, attorneys, and others practicing before the IRS, would be prohibited from charging fees deemed “unconscionable” under the facts and circumstances.
Treasury explained that these arrangements incentivize aggressive tax positions that could lead to evasion or abuse of federal tax laws. By restricting such fees, the rules seek to reduce undue risks to tax compliance.
“This proposal makes substantial changes to the regulation of contingent fees under Circular 230,” Treasury said, replacing prior fee regulations proposed in 2009 that were never finalized.
Expanded Focus on Technology and Data Security
The proposed regulations emphasize technological competency as part of professional standards. Tax practitioners would need to understand the benefits and risks of relevant technologies used to manage client information.
