A revenue agent asks your client's representative for three years of bank statements. The representative has two of them, knows who holds the third, and stalls. Circular 230 has a rule for exactly that moment.
When an IRS employee working a client's case asks for records, a practitioner can't ignore the request or drag it out. Circular 230 section 10.20 sets the rule on information to be furnished to the IRS: a practitioner must promptly submit records or information properly and lawfully requested by an officer or employee of the Internal Revenue Service (IRS).
Three conditions shape the duty:
- Properly requested: the request comes from an authorized IRS officer or employee, in a matter that falls within that person's job (their function).
- Lawfully requested: the request is within the IRS's legal authority. A demand the IRS couldn't enforce, or one meant to harass, does not trigger the duty.
- Promptly: without unreasonable delay. What counts as prompt depends on how long the requested material actually takes to assemble.
Common mistakes
- Reporting the client's error to the IRS. Section 10.21 requires advising the client of the omission or error on a return, document, or affidavit, and of its consequences. It goes no further. Answer choices that say "notify the IRS" or "file a corrected return" are the planted wrong answers.
- Treating a refusal as an automatic withdrawal trigger. The rule does not require you to resign when the client declines to amend. What it does require is that you not repeat the error going forward, for example on the current-year return.
- Refusing a records request on general confidentiality. A general concern about keeping the file confidential is not enough. Only a good-faith, reasonably grounded privilege belief suspends the duty. Without one, the information furnished to the IRS must go out promptly, and even a "not in my possession" answer still requires naming the believed custodian.
Bottom line
- Section 10.20: promptly submit properly and lawfully requested records unless a good-faith, reasonably grounded privilege claim applies; if you lack them, notify the IRS and identify the believed custodian after inquiring of the client only.
- Section 10.21: on discovering an omission or error on a return, document, or affidavit, advise the client of it and of its consequences. No IRS notification, no unilateral amendment.
- Section 10.25 tiers: permanent bar on matters of personal and substantial participation, 2 years on matters under official responsibility in the final year, 1 year on rules developed.
- Firm screen: a partner may take the matter if the former employee is isolated; the firm keeps a sworn statement of the isolation and gives it to the IRS on request.
Exam shortcut
Read the verb in the answer choice first. For any error-discovery stem, scan for "advise the client" and eliminate every choice containing "notify the IRS," "amend," or "withdraw." That single filter resolves most section 10.21 items without further analysis. For records requests, ask two questions in order: is there a real privilege basis, and do I possess the records?
The full lesson (about 5,056 words, 34 min read) adds 2 worked examples, all 7 common mistakes, a self-check, free in the app.
Learning objectives
- 1A
- 1B
- 1C
- 2
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