You Found the Error—Now What? Circular 230 §10.21 in Practice

2 IRS CE/CTEC/NASBA CPE

Every experienced practitioner has been there. You're reviewing a client's prior return—maybe one you prepared, maybe one you inherited—and something is wrong. A missed item. A number that doesn't hold up. An omission the client may not even know about.

What happens next is governed by §10.21 of Circular 230, and the rule is both cleaner and more complicated than most practitioners realize.

What §10.21 Actually Says:

The duty under §10.21 is a duty to advise. If you know a client has not complied with the revenue laws, or has made an error or omission on a return or other document submitted to the IRS, you must promptly tell the client—and explain the consequences under the Code and regulations.

That's the obligation. Notice what it is not: it is not a duty to report the error to the IRS. It is not a duty to amend the return. It does not authorize you to disclose the error to anyone other than the client. The practitioner advises. The client decides.

Where It Gets Complicated:

The statute is clean. Practice is not. This program works through the situations that actually arise:
•You discover the error on a return you didn't prepare. Does §10.21 apply the same way?
•The client acknowledges the problem but won't act. You're still engaged. Now what?
•You're mid-filing season and the error is from three years ago. What does "promptly" mean in that context?
•The client disputes that there's an error at all. How do you document your position?
•You've given the advice. The client refuses. Can you—or must you—continue the representation?

The Knowledge Standard

Section 10.21 is triggered by actual knowledge. "Should have known" is not the standard. That distinction matters when you're evaluating your own exposure and when you're advising clients who come to you after a prior preparer relationship. This program addresses where that line sits in practice and how to apply it to the files on your desk.

Documentation

Whatever the client decides, your file needs to reflect that you met your obligation. This program covers what that documentation looks like—what to put in writing, how to frame it, and why a verbal conversation without a follow-up memo creates unnecessary exposure for the practitioner.

Who Should Attend

This program is designed for experienced practitioners—EAs, CPAs, and tax attorneys in small and solo firms—who handle return preparation, representation, or both. If you review client files, inherit prior-year returns, or deal with clients who have compliance gaps, the scenarios in this program are ones you will recognize.

Speaker

John Sheeley, EA is the founder of Tax Practice Pro and an active tax practitioner. He holds IRS Enrolled Agent status and brings a practitioner's perspective to Circular 230 compliance—grounded in what actually happens in small and solo firm practice, not textbook hypotheticals.

Program Details

2 Ethics CE (IRS/OPR)
•Field of Study: Regulatory Ethics (~90% confidence this maps correctly under NASBA for your approval categories—confirm against your NASBA sponsor guidelines)
•Circular 230 reference: Rev. 6-2014 (current version)
•Level: Intermediate
•Prerequisites: Basic Circular 230 familiarity
•Advanced Preparation: None

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*Self-Study recording not available for NASBA CPE credit.

IRS Program #: 7Q3WU-E-00912-26
CTEC Course #: 6248-CE-00260