Circular 230 and due process: what tax pros should know

Ethical practice and professional credibility are central to a successful tax career. The IRS Office of Professional Responsibility (OPR) oversees practitioner conduct under Circular 230, which governs who may practice before the IRS and how that practice must be conducted. A January 2026 OPR alert highlights how OPR enforces these rules and the due process protections available to tax professionals when concerns arise. 

Circular 230 applies to attorneys, certified public accountants, enrolled agents, enrolled retirement plan agents, enrolled actuaries and others with practice privileges before the IRS. It sets standards for competence, diligence, communication, conflicts of interest and integrity. Violations can result in sanctions ranging from reprimands to suspension or disbarment from practice before the IRS.

How OPR referrals begin

OPR referrals can originate from many sources. IRS employees, taxpayers, state licensing boards, TIGTA and other federal agencies may refer potential misconduct. Once a referral is received, OPR first determines whether it has jurisdiction and whether the alleged conduct falls under Circular 230.

Not every referral leads to discipline. If the conduct described is not sanctionable or does not warrant further action, OPR may close the matter without contacting the practitioner. This initial screening helps ensure that only appropriate cases move forward.

The soft letter process

When a referral raises concerns but may not justify formal discipline, OPR may issue a soft letter. A soft letter notifies the practitioner of the issue and allows a written response within 60 days. It is confidential and not a formal charge.

Many matters are resolved at this stage. The soft letter process gives practitioners an opportunity to clarify facts, correct misunderstandings or demonstrate compliance. For tax pros, responding thoughtfully and timely can often prevent escalation.

Formal investigations and practitioner rights

If OPR determines that a referral involves potentially sanctionable conduct, it initiates a formal investigation and provides written notice of the alleged violations. At this stage, practitioners have important rights, including the ability to retain representation, submit a written response and request relevant case file materials as permitted by law.

Practitioners may also request a conference with OPR staff. These conferences allow for discussion of the facts and issues before a formal complaint is filed. The process is designed to promote fairness and transparency while protecting the integrity of tax administration.

Deferred discipline and early resolution

Not all investigations result in formal disciplinary proceedings. In some cases, OPR and the practitioner may agree to a Deferred Discipline Agreement (DDA). This approach may include conditions such as additional education, monitoring or a probationary period. If the practitioner satisfies the conditions, the matter may be closed without further action.

Early resolution is another option when facts are clear and both parties agree on an outcome. These alternatives allow issues to be addressed efficiently while maintaining professional standards.

Formal proceedings and appeals

When a case cannot be resolved informally, OPR may file a formal complaint. Disciplinary cases are heard by an administrative law judge under the Administrative Procedure Act. Both sides present evidence and arguments, and the judge issues a decision.

Either party may appeal the decision to the Treasury Appellate Authority. If no appeal is filed, the decision becomes final. A practitioner who disagrees with a final agency decision may seek review in U.S. district court based on the administrative record.

Common Circular 230 risk areas

OPR guidance highlights several areas that frequently lead to discipline. These include failure to exercise due diligence, lack of competence in advising clients, improper handling of client refund checks, conflicts of interest and misleading statements to clients or the IRS. Staying current on tax law changes and documenting advice and decisions are key risk management tools.

Why this matters for tax pros

Circular 230 enforcement affects more than compliance. It can impact a practitioner’s ability to earn a living and serve clients. Understanding how OPR operates and what rights are available helps tax professionals respond calmly and strategically if questions arise.

Staying compliant and informed

The IRS provides extensive Circular 230 and OPR resources on IRS.gov, including explanations of practitioner responsibilities and enforcement procedures. Reviewing these materials regularly and incorporating them into firm policies and training can reduce risk and reinforce professional standards. A proactive approach to ethics, documentation and continuing education helps protect your practice and strengthens trust with clients in an increasingly complex tax environment.