Can the IRS Effectively Regulate Tax Planning Advice?

36 Pages Posted: 21 Dec 2013

See all articles by Michael B. Lang

Michael B. Lang

Chapman University, The Dale E. Fowler School of Law

Date Written: December 19, 2013


This article asks whether tax planning advice can ever be effectively regulated by the IRS. The article first explores whether tax advice differs in kind from other forms of legal advice. Secondly, it looks at the clear regulatory distinction between the treatment of return preparation advice and the treatment of tax planning advice, taking into account historical anomalies and asking if the difference in treatment is justified or misguided. The article then reviews and evaluates efforts to regulate planning advice directly, including earlier attempts to address tax shelter opinions in Circular 230, the current covered opinion rules and written advice rules, and the proposed changes in these sections of Circular 230, Less direct approaches such as flagging certain transactions (reportable transactions) with tax shelter potential for particular focus are noted along with their limitations as is the role of oral tax planning advice. Finally, the article discusses how combining more than one approach (such as retaining the accuracy standard of the covered opinion rules, UTP filing requirements, and competency testing) might be useful in regulating the quality of tax planning advice, but concludes that a magic IRS bullet for monitoring and regulating the quality of tax planning advice has yet to be invented. However, the article notes that reducing the ability of taxpayers to rely on the advice of tax advisors to avoid penalties might force taxpayers to hold their advisors to account through malpractice litigation to a degree that the Service will never be able to do.

Keywords: Tax, advisors, penalties, regulation, taxpayer, tax shelter, tax planning, regulate, IRS, filing requirements, competency testing, covered opinion rules

JEL Classification: K00, K34, H71, A00, B00, D6, H2

Suggested Citation

Lang, Michael B., Can the IRS Effectively Regulate Tax Planning Advice? (December 19, 2013). Chapman University Law Research Paper No. 13-16, Available at SSRN: or

Michael B. Lang (Contact Author)

Chapman University, The Dale E. Fowler School of Law ( email )

One University Drive
Orange, CA 92866-1099
United States

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