Comments Regarding Proposed Amendments to the Regulations
Governing Practice Before the Internal Revenue Service
(Title 31, Code of Federal Regulations, Subtitle A, Part 10)
April 23, 2001

Section 10.28  Return of client’s records.

The Section is concerned that the imposition of an obligation on a practitioner to return all of a clients’ records upon request, regardless of a dispute over fees, may conflict with ethical and common law rules that vary from state to state. This provision should not be included in Circular 230.

Further, the obligation set forth in section 10.28 to return all documents is excessively broad because a practitioner may have possession of client records relating to both tax and non-tax matters. For example, a practitioner may have possession of a client’s corporate or real estate records relating to a corporate or real estate transaction. It is not appropriate for Circular 230 to attempt to regulate a practitioner’s conduct with respect to such non-tax matters. Accordingly, the obligation imposed by this provision should be limited to "tax-related" records.

Finally, there is an issue of whether a tax return prepared by the practitioner is a record of the client or a record of the practitioner. The Section believes that the tax return should be considered a record of the practitioner because it is created by, and reflects the work of, the practitioner. Of course, the client’s records on which the return is based belong to the client and, in the event of a dispute, the client can simply use those records to have a another return prepared by another practitioner. The Section believes that section 10.28 should specify that the tax return is not a record of the client.