Practices and Procedures · Requirements for Enrolled Agents
Omission or error on return, document, or affidavit
tax year · reviewed 2026-08-18 · I. Ohu
Section 10.21 is one sentence of duty and it is defined as much by what it does not require. A practitioner who learns of a client’s noncompliance or error must tell the client — the fact of it, and the consequences. There is no duty to tell the IRS, no duty to correct the return, and no duty to withdraw.
The rule
The trigger. A practitioner retained by a client with respect to a matter administered by the IRS, who knows that the client has not complied with the revenue laws, or has made an error in or omission from any return, document, affidavit or other paper the client submitted or executed under the revenue laws (Circular 230 § 10.21).
The duty, in two parts. The practitioner must advise the client promptly of the fact of the noncompliance, error or omission — and must advise the client of the consequences under the Code and regulations of that noncompliance, error or omission.
What is not required. Nothing in § 10.21 obliges the practitioner to disclose to the IRS, to amend or correct the document, or to resign the engagement. The duty runs to the client and stops there.
But other rules pick up where this one ends. A practitioner who goes on to assist the client in continuing the noncompliance is in different territory: § 10.51(a)(7) makes willfully assisting or counselling a client in violating a federal tax law disreputable conduct, and preparing a return the practitioner knows understates liability engages IRC § 6694. And a practitioner who signs a current return knowing it repeats the same error is signing an unreasonable position under § 10.34(a).
Knowledge is the threshold. The section says “knows”. A suspicion is not knowledge — but § 10.22’s diligence obligation and the reasonable-inquiry duty in the § 6695(g) due diligence rules mean a practitioner cannot always retreat behind not having looked.
The rule reaches more than returns. Its words are “any return, document, affidavit, or other paper” the client submitted or executed under the revenue laws — so a false statement in a collection information statement, an affidavit supporting a penalty abatement request, or a Form 433 is inside it just as a Form 1040 is. Practitioners tend to read the section as a return-preparation rule; it is not confined to returns, and it applies to any matter administered by the IRS for which the practitioner has been retained.
How it works in practice
Advise, and record that you advised. The whole of the practitioner’s protection lies in having given the advice and being able to show it. A file note or a letter setting out the error and its consequences discharges § 10.21 and evidences the discharge. Advice given by telephone and not recorded is advice that cannot be proved.
“The consequences” means the real ones. The second limb is not satisfied by mentioning that a correction may be needed. It asks for the consequences under the Code and regulations — the tax, the interest, the failure-to-file or failure-to-pay additions, the accuracy-related penalty where it applies, and where relevant the fraud exposure and the fact that a fraudulent return leaves no assessment limitation period under § 6501(c)(1).
The client decides what happens next, and the practitioner decides whether to stay. If the client refuses to correct a past error, the practitioner has still complied with § 10.21. What the practitioner cannot do is help perpetuate it. The realistic question then becomes whether continuing the engagement means signing something that carries the error forward — and if it does, the answer is not § 10.21 but § 10.34 and § 6694.
The duty is owed once the practitioner is retained on the matter. It does not require that the practitioner prepared the document in question — a practitioner engaged only for a collection matter who discovers an error in a return someone else prepared is squarely within § 10.21.
Confidentiality is not overridden. Disclosing a client’s error to the IRS without authority would breach the practitioner’s obligations, and IRC § 7216 makes unauthorised disclosure or use of return information a criminal matter. Section 10.21 does not create an exception, which is precisely why the duty runs to the client.
The omitted brokerage account
Preparing a client's 2026 return, a practitioner discovers a brokerage account that generated $18,000 of unreported income in 2023 and 2024. Those returns were prepared elsewhere.
Analysis. Section 10.21 is engaged: he knows of an omission from returns the client submitted. He must advise the client promptly of the fact, and of the consequences — the additional tax, interest, the accuracy-related penalty and, if the omission was deliberate, the absence of any assessment limitation period under § 6501(c)(1). He is not required to tell the IRS or to amend anything. He should put the advice in writing.
The client who declines to amend
Advised of the omission, the client says she will not amend and asks the practitioner to prepare the current year's return, which is unaffected.
Analysis. Section 10.21 is satisfied — the advice was given and the client's decision is hers. The current return is not affected by the prior error, so preparing it involves no unreasonable position and no assistance in continuing the noncompliance. Had the same account still been producing income the client wanted omitted, the analysis would be entirely different: § 10.34(a), § 6694 and § 10.51(a)(7) would all engage, and the engagement would have to end.
Reporting it to the IRS
Frustrated by a client's refusal to correct a substantial error, a practitioner considers writing to the IRS to disclose it and protect himself.
Analysis. He should not. Section 10.21 requires him to advise the client, and creates no authority to disclose. Unauthorised disclosure or use of return information is criminal under IRC § 7216 and civil under § 6713. His protection comes from having advised, having documented it, and from declining any further work that would carry the error forward — not from disclosure.
Traps
The duty runs to the client, not to the IRS. There is no disclosure obligation.
Both limbs are required. The fact and the consequences under the Code and regulations.
There is no duty to amend or to withdraw. Those follow from other rules, if at all.
Assisting the continuing noncompliance is a different offence — § 10.51(a)(7), § 10.34(a), IRC § 6694.
Disclosing without authority is criminal. IRC § 7216.
Document the advice. Unrecorded advice cannot be shown to have been given.
How this has changed
Section 10.21 is among the least amended provisions in Circular 230: its text comes from T.D. 9011 (67 FR 48765, 26 July 2002) and the substance predates that by decades. What has changed is the surrounding architecture that determines what a practitioner does after advising. The 2007 rewrite of IRC § 6694 replaced the realistic-possibility standard with the substantial authority and reasonable basis ladder, and § 10.34 was conformed to it, so the point at which continuing an engagement becomes a violation is now defined much more precisely than when § 10.21 was written.
Exam focus
The two limbs — the fact and the consequences — and that both are required. That the duty runs to the client and creates no obligation to inform the IRS, amend the return, or withdraw. The knowledge threshold. Which other provisions take over if the practitioner assists the continuing noncompliance: § 10.51(a)(7), § 10.34(a) and IRC § 6694. Expect a fact pattern where the tempting answer is disclosure to the IRS and the correct one is advice to the client.
Check yourself
1. A practitioner learns a client omitted income from a prior year’s return. Circular 230 requires the practitioner to: (A) Notify the IRS (B) Advise the client promptly of the omission and of its consequences under the Code (C) File an amended return (D) Withdraw from the engagement Answer: B. Section 10.21.
2. The client, properly advised, refuses to correct the error. The practitioner has: (A) Breached Circular 230 (B) Complied with § 10.21; what follows depends on whether continuing would assist the noncompliance (C) A duty to report the refusal (D) A duty to resign immediately Answer: B.
3. Advising the client of “the consequences” means: (A) Mentioning that an amendment may be needed (B) Explaining the consequences under the Code and regulations — tax, interest, applicable penalties, and where relevant the absence of a limitation period (C) Quantifying the exact liability (D) Providing a written opinion Answer: B.
4. A practitioner discloses a client’s uncorrected error to the IRS without authority. This: (A) Is required by § 10.21 (B) Risks criminal liability under IRC § 7216 and civil liability under § 6713 (C) Is protected by Circular 230 (D) Is required only for fraud Answer: B.
5. Which provision engages if the practitioner goes on to help the client continue the noncompliance? (A) Section 10.21 alone (B) Section 10.51(a)(7), § 10.34(a) and IRC § 6694 (C) Section 10.20 (D) Section 10.23 Answer: B.
Change log
- Initial publication from Circular 230 § 10.21.