Practices and Procedures · Requirements for Enrolled Agents

Conflict of interest

Circular 230 § 10.29 is a prohibition with an escape hatch, and the escape hatch has three conditions that must all be satisfied. The prohibition is easy to state; the examinable content is in what counts as a conflict, what the waiver requires, and how long the paper has to survive.

The rule

A practitioner shall not represent a client before the Internal Revenue Service if the representation involves a conflict of interest (Circular 230 § 10.29(a)). The section then defines the term, and the definition has two independent branches. A conflict of interest exists if:

1. The representation of one client will be directly adverse to another client (§ 10.29(a)(1)); or
2. There is a significant risk that the representation of one or more clients will be materially limited by the practitioner’s responsibilities to another client, a former client or a third person, or by a personal interest of the practitioner (§ 10.29(a)(2)).

Either branch is enough. The first is the obvious case — two clients on opposite sides of the same matter. The second is broader and catches far more real engagements: it reaches a former client, a third person who is not a client at all, and the practitioner’s own personal interest. A significant risk of material limitation is the trigger; actual adversity is not required.

Notwithstanding a conflict under paragraph (a), the practitioner may represent the client if all three of the following are true (§ 10.29(b)):

• § 10.29(b)(1) — the practitioner reasonably believes they will be able to provide competent and diligent representation to each affected client;
• § 10.29(b)(2) — the representation is not prohibited by law; and
• § 10.29(b)(3) — each affected client waives the conflict of interest and gives informed consent, confirmed in writing by each affected client, at the time the existence of the conflict is known by the practitioner.

The regulation then adds a timing rule inside (b)(3): the confirmation may be made within a reasonable period after the informed consent, but in no event later than 30 days. And a retention rule in § 10.29(c): copies of the written consents must be retained by the practitioner for at least 36 months from the date of the conclusion of the representation of the affected clients, and must be provided to any officer or employee of the IRS on request.

Current figures

How it works in practice

Read the two branches in order, because they do different work.

Direct adversity is a structural test. If the practitioner is arguing a position for one client that, if accepted, defeats a position they are arguing for another client in the same or a related matter, the representation is directly adverse. The classic is the trust fund recovery penalty: the IRS proposes to assert the penalty of IRC § 6672 against two officers of the same corporation, and each officer’s best defence is that the other one was the responsible person who wilfully failed to pay. Each argument that helps one client harms the other. That is § 10.29(a)(1) on its face.

Material limitation is a practical test, and it is where most conflicts actually live. The question is not “will I say something adverse?” but “is there a significant risk that what I owe someone else will constrain how I represent this client?” Three recurring shapes:

• A former client. Duties of confidentiality survive the engagement. If representing the new client would be materially limited by what the practitioner cannot use or disclose from the old one, § 10.29(a)(2) is engaged even though the former client is no longer a client.
• A third person. The person paying the fee is the usual case. Where a corporation pays for the representation of an employee, the practitioner’s relationship with the payer creates the risk that the employee’s representation will be materially limited.
• The practitioner’s own interest. If the position under examination is one the practitioner recommended, prepared, or has a financial stake in, the practitioner’s interest in not being shown to have been wrong is a personal interest under § 10.29(a)(2). This overlaps with the preparer’s own exposure under §§ 10.34 and 10.22.

The escape hatch is not a waiver form. § 10.29(b)(1) requires an independent, objective judgement by the practitioner before any consent is sought: can I actually do this competently and diligently for each affected client? If the honest answer is no, no amount of client consent cures it — a client cannot consent their way past (b)(1), because (b)(1) is not the client’s to waive. Only when (b)(1) and (b)(2) are satisfied does the consent in (b)(3) do any work.

The consent must be informed, which means the client has been told what the conflict is and what representation under it may cost them, and it must be confirmed in writing by each affected client. Oral informed consent at the meeting is permitted so long as the written confirmation follows within a reasonable period, capped at 30 days. Miss the 30 days and the exception in § 10.29(b) is unavailable — which means the representation was prohibited by § 10.29(a) all along.

Note what the retention clock in § 10.29(c) is measured from. It is not 36 months from the consent, and not 36 months from the filing. It runs from the conclusion of the representation of the affected clients. A representation that runs for two years produces a consent that must be kept for those two years plus 36 more.

How this has changed

The current text of § 10.29 dates from T.D. 9359, 72 FR 54549, and is applicable on September 26, 2007 (§ 10.29(d)). That amendment is the source of the structure practitioners now work with: the two-branch definition in (a), the three cumulative conditions in (b), the 30-day cap on written confirmation, and the 36-month retention rule in (c). The section has not been renumbered or restructured since.

The 2007 language deliberately tracks the vocabulary of general professional-responsibility rules — “directly adverse,” “significant risk,” “materially limited,” “informed consent, confirmed in writing” — rather than inventing a Treasury-specific formulation. That is useful when reading the section, but it does not import outside commentary: what governs practice before the IRS is the text of § 10.29 itself, and its 30-day and 36-month rules are Circular 230’s own, not borrowed from anywhere.

A violation of § 10.29 is sanctionable under § 10.52(a)(1), which reaches any practitioner who wilfully violates any regulation contained in Part 10 other than § 10.33. Because § 10.29 is not among the sections carved into § 10.52(a)(2) — the reckless-or-gross-incompetence limb, which names §§ 10.34, 10.35, 10.36 and 10.37 — the mental state the IRS must establish for a § 10.29 case is wilfulness.

Exam focus

Expect the question to test the conditions, not the definition. The three most commonly examined points are that all three conditions of § 10.29(b) must be met, that written confirmation is due no later than 30 days, and that consents are retained for 36 months from the conclusion of the representation. Distractors typically offer 30 days measured from the wrong event, 24 or 12 months of retention, or retention measured from the consent date.

Second, know that § 10.29(a)(2) reaches a former client, a third person, and the practitioner’s own personal interest — a question that describes a conflict with a non-client and asks whether § 10.29 applies is testing that branch. Third, know that consent cannot cure a failure of § 10.29(b)(1); that is the single most reliable trap in this section.

Finally, the consents are producible: § 10.29(c) requires them to be provided to any officer or employee of the IRS on request. There is no privilege objection built into the section.

Check yourself

1. A practitioner obtains oral informed consent from both affected clients on 3 March and sends the written confirmations on 8 April. Is the § 10.29(b) exception available? (A) Yes, because consent was obtained before the representation began (B) Yes, if the delay was reasonable (C) No, because the confirmation came later than 30 days after the informed consent (D) No, because oral informed consent is never sufficient Answer: C. Section 10.29(b)(3) permits written confirmation within a reasonable period after informed consent but in no event later than 30 days.

2. Does a conflict arising from the practitioner’s responsibilities to someone who is not and never was a client fall within § 10.29? (A) No, the section applies only between current clients (B) Yes, if there is a significant risk the representation will be materially limited (C) Only if the third person is a party to the same matter (D) Only where the third person pays the fee Answer: B. Section 10.29(a)(2) reaches responsibilities to another client, a former client or a third person, and personal interests of the practitioner.

3. A representation begins in January 2026 and concludes in November 2027. From what date does the 36-month retention period for the written consents run? (A) January 2026, the date of the consents (B) The date the return was filed (C) November 2027, the conclusion of the representation (D) The date the IRS closes the case file Answer: C. Section 10.29(c) measures the period from the date of the conclusion of the representation of the affected clients.

4. Both affected clients sign thorough, fully informed written waivers, but the practitioner privately doubts he can advocate properly for the second client. May he proceed? (A) Yes, the written waivers satisfy § 10.29(b) (B) Yes, if he discloses the doubt in writing (C) No, because § 10.29(b)(1) requires his own reasonable belief that he can represent each client competently and diligently (D) No, because conflicts of this kind are prohibited by law Answer: C. The three conditions of § 10.29(b) are cumulative and (b)(1) is not the clients’ to waive.

5. What mental state must the IRS establish to sanction a practitioner for violating § 10.29? (A) Negligence (B) Recklessness or gross incompetence (C) Wilfulness (D) Strict liability, no mental state required Answer: C. Section 10.52(a)(1) reaches wilful violation of any regulation in Part 10 other than § 10.33; § 10.29 is not among the sections named in the reckless-or-gross-incompetence limb of § 10.52(a)(2).