Ethics play a crucial role in the field of tax preparation, as pros are entrusted with handling sensitive financial information and making critical decisions that significantly impact individuals and businesses.

By following ethical principles, you demonstrate your commitment to tax compliance while still acting in the best interests of your clients and the public.

Below, you’ll find a few of the top questions from a recent webinar on the topic and their corresponding answers. If you choose to attend the on-demand version of this webinar, you can access the full recording and the entire list of Q&As.   

Q: What should you do if you decide you do not want to work with a client?

A: Although not codified in a specific section of Circular 230, the IRS encourages the following steps when disengaging. 1) notify the client in writing, preferably with an explanation (without breaching confidentiality), 2) revoke any active powers of attorney with IRS Form 2848, Power of Attorney and Declaration of Representative, or by written notice to the IRS, 3) return all relevant records per Circular 230, § 10.28, return of client’s records, and 4) document your reasoning for withdrawal in case of a complaint or regulatory inquiry.

Q: Under Circular 230, §10.3, who can practice? Registered tax return preparers (RTRPs) were not mentioned. Are RTRPs still recognized under Circular 230, §10.3?

A: The proposed regulations removed references to RTRPs. As of July 2025, RTRPs are no longer recognized as a distinct category authorized to practice before the Internal Revenue Service (IRS) under Circular 230, §10.3.

Q: Did the proposed regulations revise the rules on contingent fees?

A: Yes, the proposed regulations significantly revised the rules governing contingent fees in tax practice. They include a provision that prohibits the Treasury Department and the IRS from regulating, prohibiting or restricting contingent fee arrangements in connection with the preparation of the original returns, amended returns or refund claims.

Q: What if you have married clients who file separately only to lower student loan payments? Does a conflict of interest exist, and should each spouse sign a separate engagement letter?

A: Yes, a potential conflict of interest under Circular 230 can arise even if the sole reason a married couple files married filing separate (MFS) is to reduce student loan payments. Per Circular 230, §10.29, a practitioner must not represent a client if the representation involves a conflict of interest unless 1) the practitioner reasonably believes they can provide competent and diligent representation to each affected client, 2) the representation is not prohibited by law, and 3) each affected client gives informed consent in writing. Yes, ideally, each spouse should sign a separate engagement letter or a joint one that explicitly states 1) each spouse is a separate client, 2) the nature of the tax filing choice and the reasons for it, and 3) disclosure and waiver of any potential conflicts of interest.

To learn more about ethics and due diligence requirements of tax prep, you can watch our on-demand webinar. NATP members can attend for free, depending on membership level! If you’re not an NATP member and want to learn more, join our completely free 30-day trial.