Prepare fraudulent returns, lose your right to practice before the IRS, right? Every accountant, enrolled agent, and attorney knows that Circular 230 promulgates the rules under which tax preparers are granted (and can lose) their right to practice before the IRS. And violations of its provisions mean you can lose your entire practice. Or so many thought.

Take, for example, Irma M. She was a tax preparer in the Chicago suburbs, whose clients enjoyed the fruits of her labor – specifically, the addition of mileage expenses to their returns. Worked fine until one client was audited and asked about his vehicle mileage. “What mileage?” he asked. “The mileage you claimed for your work on your tax return.” The response was classic: “I don’t drive my car for work.. oh, wait, that. My tax preparer told me I should do that.”

In no time, the IRS lined up 11 similar people, all ready to testify. At the last minute, Irma realized her error, and pleaded guilty. Her sentence? 15 months as a guest of the U.S. Government.

Then there’s Mr. Cruz, the defendant in U.S. v. Cruz, d/b/a Nations Business Center. He and an associate were found to have substantially inflated (large enough to get nailed on various penalties) Schedule C deductions. They closed up shop, and re-opened. The error rate dropped to zero, but the IRS still wanted to disbar him. Surprisingly, the district court disagreed, and allowed him to keep his right to practice before the IRS. But the court did remand the lower court’s denial of the IRS’ request that Mr. Cruz have to notify his clients of his conviction for ‘deceptive practices.’ Looks like he’ll still have to deal with that monster. But at least he’s taking appointments, if you’re looking for someone.

By the way, neither preparer was licensed, but both were still preparing returns as ‘professionals’. Irma claimed to be a CPA in her native country, but that holds little weight here in the U.S.