What does Circular 230 regulate?

Circular 230 is a key document issued by the U.S. Department of the Treasury that outlines the regulations governing the practice of tax professionals, including preparers, representatives, and other individuals who assist taxpayers in dealings with the Internal Revenue Service (IRS). This document specifies ethical standards, required behaviors, and obligations that tax professionals must follow in their professional activities, ensuring they conduct their services with competency, integrity, and transparency.

The correct answer reflects the essential focus of Circular 230 on regulating how tax preparers and representatives interact with the IRS, including guidelines such as the filing of accurate returns, provisions on avoiding conflicts of interest, and maintaining client confidentiality. This regulation is crucial for maintaining the professionalism and reliability of tax services, ensuring taxpayers receive appropriate representation and advice.

Other options do not align with the purpose of Circular 230. State taxation laws fall under the jurisdiction of state governments, which are separate from federal regulations like those contained in Circular 230. Federal funding allocations pertain to how the federal government distributes its budget and resources, which is not covered by this circular. International taxation standards involve rules and agreements that govern cross-border taxation, and while they are important in the broader tax context, they are not directly addressed by Circular 230.