What does Circular 230 require if I discover an error on a return I prepared?

Question

AcadiFi · Accepted Answer

When you discover a prior return error, the EA exam answer starts with duty to advise, not duty to secretly fix it for the client.

The source thread was about: Obligation for an error on a return I prepared?. That real practitioner concern maps directly to Circular 230 expectations. On the exam, the representative should promptly tell the client about the error, explain the likely consequences, and recommend corrective action. The EA does not get to ignore the problem simply because the client is uncomfortable or because the error may never be noticed.

A strong exam answer separates three questions: what the error is, what the client must be told, and what the representative can continue to do ethically. If the client refuses to correct a material error, the EA should avoid statements that perpetuate the problem and should reconsider whether continued representation is appropriate. Documentation matters because the exam usually rewards the answer that preserves facts, deadlines, and professional standards at the same time.

The practical workflow is to identify the return year and issue, quantify the effect, tell the taxpayer what the IRS position would likely be, and outline the correction path. That might involve an amended return, a written explanation, or a response to an IRS notice rather than a duplicate filing. The representative should not promise a perfect outcome; the job is to explain risk and the next defensible step.

A good way to study this topic is to tie Circular 230 back to client communication. The right answer is not aggressive or passive. It is informed, documented, and clear about what the taxpayer should do next.

The exam usually rewards the answer that classifies the issue correctly, preserves procedure, and gives the taxpayer or practitioner a controlled next step.

What does Circular 230 require if I discover an error on a return I prepared?

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