Addressing Professional Incompetence give them shock and awe

Addressing Professional Incompetence

Addressing Professional Incompetence – there is almost nothing that will make my blood boil faster than misrepresentation of credentials, professional expertise, or experience by at an attorney, accounting or tax professional, or an Enrolled Agent or a self-aggrandizement based claim of being “certified”, or “approved” by a regulatory agency such as the Internal Revenue Service or a self-manufactured claimed of expertise. There are limited options to deal with unlicensed people that engage in that type of conduct.

There is, however, quite a bit that can be done with anyone that falls under the ambit of Circular 230 and the IRS Office of Professional Responsibility. I encountered a situation yesterday where an individual was engaged in exactly that, and when I inquired, they admonished me that there was “not a damn thing I could do about it. They don’t know me very well, so I sat down at the computer and wrote a letter. We can’t share the entire letter, or the specifics of the situation, however, the balance of this post is the text that was contained in my letter in addition to the specific allegations. My speculation is that several weeks from now, said the person is going to go to their mailbox, and find “shock and awe” inside it.

We are going to publish a templated letter should any on my fellow Circular 230 practitioner colleagues share my disgust and have a situation that they believe warrants a similar response.

The areas of concern that observe repeatedly in the cannabis industry that are particularly corrosive to our role as Circular 230 Practitioners include:

Misrepresentation of status as having been “certified” or “approved” by the Internal Revenue Service with respect to particular skills or knowledge[1].

Misrepresentation of education or experience possessed by a practitioner wherein they are not qualified or competent to undertake the professional services which they are attempting to provide[2]. One of the most egregious violations is where an Enrolled Agent that lacks sufficient college-level hours of accounting courses or a CPA certificate which are requisites to become a Revenue Agent undertakes reporting on or evaluation of internal accounting controls or attempts to prepare or provide compilation or review services with respect to a taxpayer’s financial statements.

Incompetence and Disreputable Conduct by a practitioner which includes the usual prohibitions for criminal activity, false or misleading statements [which dovetails with the two items above, personal non-compliance with tax obligations, misappropriation and other acts which demonstrate moral turpitude, grossly negligent or reckless conduct[3].

While we acknowledge that there are many additional responsibilities and obligations under Circular 230 and relevant professional standards , the three which we have identified are particularly corrosive and damaging to the community of Circular 230 Professionals whom are proactively engaged in seeking to establish both the perception and reality of integrity for legal cannabis, a historically illegal activity which unfortunately attracts the animus of both law enforcement and regulatory agencies on a widespread basis. The individuals who have chosen to engage in this conduct undermine the rule of law, compliance within the cannabis industry and tax administration, and we urge OPR to make intelligent and carefully exercised enforcement action within the industry a priority.

[1] Circ. 230 – Sec.10.30(a)(1) provides

“Advertising and solicitation restrictions. (1) A practitioner may not, with respect to any Internal Revenue Service matter, in any way use or participate in the use of any form of public communication or private solicitation containing a false, fraudulent, or coercive statement or claim; or a misleading or deceptive statement or claim. Enrolled agents, enrolled retirement plan agents, or registered tax return preparers, in describing their professional designation, may not utilize the term “certified” or imply an employer/employee relationship with the Internal Revenue Service

Examples of acceptable descriptions for enrolled agents are “enrolled to represent taxpayers before the Internal Revenue Service,” “enrolled to practice before the Internal Revenue Service,” and “admitted to practice before the Internal Revenue Service.” Similarly, examples of acceptable descriptions for enrolled retirement plan agents are “enrolled to represent taxpayers before the Internal Revenue Service as a retirement plan agent” and “enrolled to practice before the Internal Revenue Service as a retirement plan agent.” An example of an acceptable description for registered tax return preparers is designated as a registered tax return preparer by the Internal Revenue Service”

[2] Circ. 230, Sec. 10.35(a) provides

“A practitioner must possess the necessary competence to engage in practice before the Internal Revenue Service. Competent practice requires the appropriate level of knowledge, skill, thoroughness, and preparation necessary for the matter for which the practitioner is engaged. A practitioner may become competent for the matter for which the practitioner has been engaged through various methods, such as consulting with experts in the relevant area or studying the relevant law.”

[3] Circ. 230, Sec. 10.51(a) provides

Incompetence and disreputable conduct. Incompetence and disreputable conduct for which a practitioner may be sanctioned under §10.50 includes, but is not limited to —

(1) Conviction of any criminal offense under the Federal tax laws.

(2) Conviction of any criminal offense involving dishonesty or breach of trust.

(3) Conviction of any felony under Federal or State law for which the conduct involved renders the practitioner unfit to practice before the Internal Revenue Service.

(4) Giving false or misleading information, or participating in any way in the giving of false or misleading information to the Department of the Treasury or any officer or employee thereof, or to any tribunal authorized to pass upon Federal tax matters, in connection with any matter pending or likely to be pending before them, knowing the information to be false or misleading. Facts or other matters contained in testimony, Federal tax returns, financial statements, applications for enrollment, affidavits, declarations, and any other document or statement, written or oral, are included in the term “information.”

(6) Willfully failing to make a Federal tax return in violation of the Federal tax laws, or willfully evading, attempting to evade, or participating in any way in evading or attempting to evade any assessment or payment of any Federal tax.

(7) Willfully assisting, counseling, encouraging a client or prospective client in violating, or suggesting to a client or prospective client to violate, any Federal tax law, or knowingly counseling or suggesting to a client or prospective client an illegal plan to evade Federal taxes or payment thereof.

(8) Misappropriation of, or failure properly or promptly to remit, funds received from a client for the purpose of payment of taxes or other obligations due to the United State

(10) Disbarment or suspension from practice as an attorney, certified public accountant, public accountant, or actuary by any duly constituted authority of any State, territory, or possession of the United States, including a Commonwealth, or the District of Columbia, any Federal court of record or any Federal agency, body or board.

(12) Contemptuous conduct in connection with practice before the Internal Revenue Service, including the use of abusive language, making false accusations or statements, knowing them to be false, or circulating or publishing malicious or libelous matter.

(13) Giving a false opinion, knowingly, recklessly, or through gross incompetence, including an opinion which is intentionally or recklessly misleading, or engaging in a pattern of providing incompetent opinions on questions arising under the Federal tax laws. False opinions described in this paragraph including those which reflect or result from a knowing misstatement of fact or law, from an assertion of a position known to be unwarranted under existing law, from counseling or assisting in conduct known to be illegal or fraudulent, from concealing matters required by law to be revealed, or from consciously disregarding information indicating that material facts expressed in the opinion or offering material are false or misleading.

For purposes of this paragraph (a) reckless conduct is a highly unreasonable omission or misrepresentation involving an extreme departure from the standards of ordinary care that a practitioner should observe under the circumstances. A pattern of conduct is a factor that will be taken into account in determining whether a practitioner acted knowingly, recklessly, or through gross incompetence. Gross incompetence includes conduct that reflects gross indifference, preparation which is grossly inadequate under the circumstances, and a consistent failure to perform obligations to the client.

(14) Willfully failing to sign a tax return prepared by the practitioner when the practitioner’s signature is required by Federal tax laws unless the failure is due to reasonable cause and not due to willful neglect.