The Office of Professional Responsibility sends a Notice of Proposed Sanction to Delgado, an EA. The notice alleges willful failure to file her own 2022 and 2023 returns, fee-splitting with a suspended preparer, and signing a client return claiming a deduction she knew was fabricated. Three Circular 230 violations, four possible sanctions: censure, suspension, disbarment, or monetary penalty. Knowing which conduct triggers which sanction is the difference between "respond and survive" and "lose the credential."
Any practitioner with principal authority and responsibility for overseeing a firm's federal tax practice must take reasonable steps to ensure the firm has adequate procedures in effect for all members, associates, and employees to comply with Circular 230. The duty runs to the supervisor personally.
A supervisor is personally subject to discipline if:
- The supervisor willfully failed to take reasonable steps to ensure compliance procedures
- The supervisor knows or should know a firm member is engaging in a pattern or practice of noncompliance and fails to take prompt action
Common mistakes
- Treating §10.36 as a firm-level duty only. The supervisor is personally sanctioned, not the firm as a faceless entity. Trap answer: "the firm gets fined, the individual is not at risk."
- Limiting §10.52 to willful conduct. §10.52 reaches willful violations of Subpart B and §10.51, plus reckless or grossly incompetent violations of §§10.34, 10.36, 10.37. Trap answer: "only willful conduct is sanctionable."
- Forgetting the 5-year disbarment floor. Practitioners cannot petition for reinstatement until 5 years have passed, and OPR must affirmatively find rehabilitation. Trap answer: "disbarment is permanent" or "disbarment ends at 1 year."
Bottom line
- §10.36 supervisory duty: a practitioner with principal authority must take reasonable steps to ensure firm procedures comply with Circular 230; willful or grossly incompetent failure triggers personal sanction
- §10.51 disreputable conduct: 18 enumerated categories including conviction, false returns, willful nonfiling, theft of client funds, false credentials, and assisting suspended practitioners
- §10.52 sanctionable acts: willful violation of any Circular 230 rule (other than §10.33), plus reckless or grossly incompetent violations of §§10.34, 10.36, 10.37; mere negligence under §10.34 is not enough
- §10.50 sanctions: censure, suspension (1 to 59 months), disbarment (5-year reinstatement floor), monetary penalty up to gross income derived from the conduct; applies to firm and individual
Exam shortcut
"Willful own-return failure" is always sanctionable. Any fact pattern where a practitioner willfully failed to file or pay their own taxes maps to §10.51 disreputable conduct and likely expedited suspension under §10.82. Match the penalty to the standard. §6662 = 20% (negligence). §6663 = 75% (fraud). §6694(a) = $1,000 or 50% of fee (unreasonable position). §6694(b) = $5,000 or 75% of fee (willful or reckless). §6702 = $5,000 (frivolous).
The full lesson (about 2,763 words, 18 min read) adds 2 worked examples, all 6 common mistakes, a self-check, free in the app.
Learning objectives
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