Tax preparers and accountants are subject to discipline at the federal level by IRS for misconduct. When investigating tax practitioners, in conduct cases (possible misconduct other than tax non-compliance), the Internal Revenue Service Office of Professional Responsibility (“OPR”) will typically send a pre-allegation notice letter, which notifies the practitioner of the investigation and invites the practitioner to submit any relevant information. If the practitioner’s information does not resolve the matter, OPR sends an allegation letter specifying suspected violations of Circular 230 (the rules governing the OPR and IRS representation).
This allegation letter is not a formal complaint that initiates formal disciplinary proceedings. Instead, it provides the practitioner with written notice of the facts and laws that will be in the complaint if not resolved at this stage. The practitioner is then provided the opportunity to dispute the facts, provide additional facts or mitigating circumstances, and to make arguments against the legal points raised in the letter. The practitioner has three options for presenting this information. The practitioner can provide the information in writing, they can request a conference (typically via telephone) to present the information, or they can choose to do both- provide a written response and request a conference. When we represent clients before OPR, we recommend doing both, prepare a written response and participate in a conference. The conferences tend to be more concerned with establishing accurate facts and rehabilitation. In other words, the focus is often on whether the alleged incident(s) happened and if the issue has been resolved. For example, if the OPR is disciplining for a revoked state license of an accountant or tax preparer, OPR seems to be less interested in why the license was revoked and more interested in whether the license has been reinstated. If the license has been reinstated or the problem has been otherwise remediated, OPR can be willing to overlook the underlying action in favor of the obvious rehabilitation.
The matter may be resolved at either of these stages (pre-allegation or allegation notice). The OPR may offer a reprimand, a censure, suspension, or disbarment to resolve the matter. If a matter is not resolved at these stages, OPR sends the matter to the Office of the Associate Chief Counsel for representation in a formal disciplinary proceeding.
The Chief Counsel will typically offer the practitioner one more chance to accept discipline (sanction, disbarment, etc) prior to drafting the complaint. If a resolution is not reached, the Chief Counsel will serve a complaint (it will contain the laws violated and the facts to support those violations). If the practitioner files a timely answer, the matter will be set for hearing before an administrative law judge (ALJ). Under federal administrative law, a prehearing conference is set with typically the filing of formal briefs, and then an administrative hearing is conducted before an ALJ.
Following hearing, the ALJ has 180 days to issue a decision. Unless appealed to the Secretary of the Treasury, within 30 days, the ALJ’s decision becomes the final decision.
IRS OPR disciplinary matters involve complex federal administrative procedures, and careful preparation and presentation of factual and legal arguments. Our firm is pleased to offer federal administrative hearing defense as part of our portfolio of licensing and administrative law services. More information about our federal administrative law practice is available on our federal license defense website.