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Sharpe CPA  /  Tips about taxes  /  The IRS manual and Circular 230

The IRS’s own manual, and the rules for practicing before it.

Two documents every tax practitioner should know where to find: the Internal Revenue Manual, which tells IRS employees how to do their jobs, and Circular 230, which tells us how to do ours.

Use at your own risk. This free tool is provided as is, without warranty, and is not accounting, legal or tax advice. All of the work a CPA performs is subject to that person’s or firm’s judgment. Do your own research and verify that the checklist or protocol you are using is valid and up to date. Built from public sources — see the sources and the terms of use.

The Internal Revenue Manual

How the IRS tells its own people to work.

The Internal Revenue Manual (IRM) is the IRS’s official compilation of the policies, procedures, instructions and guidelines its employees follow — how a return is processed, how an examination is opened and closed, when a revenue officer may file a lien or levy, and when a penalty may be abated. It is organized in numbered parts, chapters and sections, cited like IRM 20.1.1, and each section carries its own effective date.

The IRM is not law. It does not bind the courts or give a taxpayer enforceable rights, and it gives way to the Code, the regulations and published guidance. But it is what the examiner, the collection officer and the Appeals officer are told to do, which makes it the most practical document in a representation: when the IRS departs from its own procedures, the IRM is how you show it.

The IRS updates sections as procedures change, and between revisions it issues interim guidance memoranda and IRM procedural updates. It currently notes that the manual is being revised to comply with recent executive orders and that some pages may not yet reflect those changes. Check the date on the section you cite.

Open the IRM at irs.gov/irm Part 20 — Penalty and Interest
PartTitleWhere a practitioner goes in it
1Organization, Finance, and Management
2Information Technology
3Submission ProcessingHow returns and payments are received and processed
4Examining ProcessExaminations — IRM 4.10 is the examination of returns
5Collecting ProcessCollection — IRM 5.8 offers in compromise, IRM 5.14 installment agreements
6Human Resources Management
7Rulings and AgreementsLetter rulings, determination letters, exempt organizations
8AppealsThe Independent Office of Appeals
9Criminal Investigation
10Security, Privacy, Assurance and Artificial Intelligence
11Communications and Liaison
13Taxpayer Advocate Service
20Penalty and InterestPenalty relief — reasonable cause and first-time abatement are in IRM 20.1.1
21Customer Account ServicesAccount adjustments, transcripts, notices
22Taxpayer Education and Assistance
25Special TopicsStatutes of limitation, fraud, identity theft
30–39Chief Counsel Directives ManualHow Chief Counsel works

Circular 230

Regulations Governing Practice before the Internal Revenue Service.

Treasury Department Circular No. 230 is the set of regulations, at 31 CFR Part 10, that governs everyone who practices before the IRS — attorneys, certified public accountants, enrolled agents, enrolled actuaries and enrolled retirement plan agents, appraisers whose work is submitted in a tax matter, and the unenrolled preparers who take part in the Annual Filing Season Program. It sets the standards of competence, diligence and conduct, and the procedures for discipline.

It is administered by the IRS Office of Professional Responsibility, which has exclusive delegated authority over practitioner conduct and discipline. A violation can lead to censure, suspension or disbarment from practice, and to a monetary penalty — on the practitioner and on the firm.

Circular 230 (PDF, irs.gov) Office of Professional Responsibility 31 CFR Part 10 (eCFR)

Subpart A — Rules governing authority to practice

Subpart B — Duties and restrictions relating to practice

Subpart C — Sanctions for violation of the regulations

Subpart D — Rules applicable to disciplinary proceedings

Subpart E — General provisions

Proposed amendments. On December 26, 2024 Treasury and the IRS proposed changes to Circular 230: technology competence under §10.35, firm-wide procedures under §10.36, contingent fees for preparing original or amended returns and refund claims treated as disreputable conduct, appraisal standards (USPAP or IVS), and a broader definition of a Federal tax matter for written advice. As published they are proposed, not final — check the Federal Register for their status before relying on either version.

Tips

Using them in practice.

The IRM

  • Cite it in a penalty abatement request. The criteria the IRS applies to reasonable cause and first-time abatement are in IRM 20.1.1; quoting them back is often the shortest route to relief. More on penalty abatement.
  • Read the examiner’s procedures before the examination. IRM 4.10 tells you what the examiner is expected to do, request and document — and what closes the case.
  • Collection alternatives have their own rules. Offers in compromise are in IRM 5.8 and installment agreements in IRM 5.14, including the allowable-expense standards the revenue officer will use.
  • Check the date. Look for interim guidance issued after the section’s effective date before relying on it.

Circular 230

  • §10.21 — when you find an error. Tell the client promptly of the noncompliance, error or omission and its consequences. The rule does not require you to tell the IRS.
  • §10.22 and §10.34 — diligence. You may rely in good faith on client information, but not ignore what it implies; make reasonable inquiries when it looks incorrect or incomplete.
  • §10.28 — client records. Return the client’s records on request, even in a fee dispute (state rules may allow you to keep your own work product).
  • §10.29 — conflicts. Get informed consent, confirmed in writing, before representing both spouses or partners with opposing interests, and keep it for 36 months after the engagement ends.
  • §10.36 — if you run the practice. The person with principal authority for the firm’s tax practice must have procedures to make everyone comply.

A summary for convenience, not a substitute for the regulations or the IRM themselves. Links go to irs.gov and the eCFR; check the current text before relying on it.