A CPA is representing a client in an IRS examination. The client has requested that the CPA not provide certain documents to the Revenue Agent, claiming they are irrelevant. The CPA determines that the documents are indeed relevant and not privileged. Under Circular 230, which of the following is the CPA's required course of action?

Answer options:

The CPA must immediately withdraw from the engagement and notify the IRS of the withdrawal.

The CPA must submit the records to the IRS unless the CPA believes in good faith and on reasonable grounds that the records are privileged.

The CPA must notify the IRS that the client is withholding records but cannot produce them without client consent.

The CPA should provide the documents to the IRS only if served with a summons.

How to approach this question

Focus on Circular 230 §10.20 regarding information to be furnished. The key exception is privilege.

Full Answer

B.The CPA must submit the records to the IRS unless the CPA believes in good faith and on reasonable grounds that the records are privileged.✓ Correct

Circular 230 §10.20 states that a practitioner must, on a proper and lawful request by a duly authorized officer or employee of the Internal Revenue Service, promptly submit records or information in any matter before the Internal Revenue Service unless the practitioner believes in good faith and on reasonable grounds that the records or information are privileged.

Common mistakes

Confusing the duty to submit records with the duty to notify the client of an error (§10.21).

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