SEE - Special Enrollment Exam Quiz: Circular 230 Conduct And Client Duties

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Circular 230 Conduct And Client DutiesQuestion 1 of 15

An enrolled agent prepared and filed a married couple's 2025 joint return and gave them a copy; the couple paid the preparation fee in full. Under a separate engagement letter, the agent then helped them respond to an IRS notice proposing changes to the 2025 return. That letter states that the agent may keep the clients' records until all fees are paid. The couple disputes the fee for the notice work, which remains unpaid, and asks the agent to return the Forms W-2 and 1099 they provided and a copy of the filed 2025 return, which they have misplaced, so that a new preparer can finish the notice response. State law does not give practitioners a right to retain client records in a fee dispute.

Which statement is correct regarding the enrolled agent's obligations under Circular 230?

The engagement letter controls, so the agent may keep the records until the fee for the notice work is paid.

The agent must promptly return the Forms W-2 and 1099 and a copy of the filed 2025 return, although the agent may keep copies for the agent's own files.

The agent must return only the Forms W-2 and 1099, because the agent prepared the return and may withhold it while any fee the couple owes is unpaid.

The agent must send the records directly to the couple's new preparer as soon as the new preparer requests them.

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SEE - Special Enrollment Exam Quiz

SEE - Special Enrollment Exam Quiz: Circular 230 Conduct And Client Duties

Practice Circular 230 Conduct And Client Duties in SEE - Special Enrollment Exam with focused quiz questions that help you check what you know, review explanations, and build confidence with test-style prompts.

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This quiz focuses on Circular 230 Conduct And Client Duties, giving you a quick way to practice the rules, question types, and explanations that matter most for SEE - Special Enrollment Exam.

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Question 1

Which statement is correct regarding the enrolled agent's obligations under Circular 230?

The engagement letter controls, so the agent may keep the records until the fee for the notice work is paid.
The agent must promptly return the Forms W-2 and 1099 and a copy of the filed 2025 return, although the agent may keep copies for the agent's own files. (correct answer)
The agent must return only the Forms W-2 and 1099, because the agent prepared the return and may withhold it while any fee the couple owes is unpaid.
The agent must send the records directly to the couple's new preparer as soon as the new preparer requests them.

Explanation: Circular 230 § 10.28. At the client's request, a practitioner must promptly return all records of the client that are necessary for the client's federal tax compliance, even in a fee dispute, and may keep copies. Records of the client include documents the client supplied and a return the practitioner prepared that was presented to the client in a prior representation and is needed for current compliance. A practitioner-prepared document may be withheld only while the fee for that document is unpaid. The decisive facts are that the 2025 return was delivered in the return-preparation engagement, its fee was paid, and the couple needs it to finish the notice response; the unpaid fee is for the later notice work. Choice B is correct. Choice A is wrong because state law gives no retention right here, and a fee clause in an engagement letter cannot displace § 10.28. Choice C is wrong because the withholding exception covers only a document whose own fee is unpaid, not any fee the client owes. Choice D is wrong because the § 10.28 duty arises at the client's request and runs to the client; a request from a third party does not trigger it.

Question 2

While preparing a client's 2025 return in February 2026, an enrolled agent discovers that the client's 2024 return, which the agent prepared, omitted wages shown on a Form W-2 the client never provided. The client now says, "I already spent the refund, so leave it alone and do not tell anyone." The agent suspects the client intentionally withheld the Form W-2.

Which action does Circular 230 require the enrolled agent to take?

The agent must promptly advise the client of the error and its consequences, including the need to file an amended return and the interest and penalties that may apply. (correct answer)
The agent must promptly notify the IRS of the omitted wages because the omission is material and the agent suspects the client acted intentionally.
The agent must refuse to prepare the 2025 return unless the client agrees to file the amended 2024 return within 30 days.
The agent may prepare the 2025 return using the omitted 2024 wages as additional 2025 income so that the understatement is corrected on the current return.

Explanation: Circular 230 §10.21 requires a practitioner who knows of a client's noncompliance, error, or omission in a matter administered by the IRS to advise the client promptly of the fact and of the consequences under the Code and regulations. The duty runs to the client, and the rule does not require the practitioner to report the error to the IRS. Choice B is wrong because disclosure to the IRS is not required, even if the omission appears intentional. Choice C is wrong because §10.21 requires prompt advice, not a 30-day ultimatum, and whether the agent will continue preparing the current return is governed by other standards. Choice D is wrong because wages are includible in the year received; shifting the omitted wages onto the 2025 return would make the current return inaccurate.

Question 3

An enrolled agent has prepared joint federal income tax returns for a married couple for the past six years and has represented both spouses in an earlier IRS examination. The couple divorced last year, and the husband has since engaged different counsel for his tax matters. The IRS opens an examination of the couple's final joint return. The wife asks the EA to represent her alone, intending to argue that unreported income on the return belonged to the husband and that she knew nothing about it. The EA believes she can provide competent and diligent representation to the wife, explains the conflict to both spouses, and obtains a signed written waiver from the wife. The husband, through his attorney, refuses to consent to the EA's representing the wife.

Based on these facts, which of the following is correct regarding the EA's representation of the wife?

The EA may represent the wife because the wife has given informed written consent and the EA reasonably believes she can provide competent and diligent representation to the wife.
The EA may represent the wife because the husband is no longer the EA's client, and a former client's consent is not required for the EA to represent the wife.
The EA may not represent the wife because the husband is an affected former client whose informed written consent to the conflict has not been obtained. (correct answer)
The EA may not represent the wife because the conflict arises from a joint representation, and the resulting conflict of interest cannot be waived by the spouses.

Explanation: Authority: Cir. 230 § 10.29(a)–(b). A conflict exists when a practitioner's representation of one client would be materially limited by responsibilities to a former client. The EA's duties arising from years of joint representation, including confidentiality concerning the joint return, would materially limit her representation of the wife, and the wife's position would be directly adverse to the husband's position on the same return. The waiver exception permits representation only if each affected client gives informed written consent after the conflict is disclosed. The husband, an affected former client, refused consent, so the conflict was not waived and the EA may not represent the wife. Choice A is wrong because the wife's consent alone does not waive the conflict with the husband. Choice B is wrong because the conflict rule applies to former clients as well as current clients. Choice D is wrong because conflicts arising from a joint representation may be waived by informed written consent; the obstacle is the husband's refusal, not an absolute bar.

Question 4

An enrolled agent has prepared a client's returns for several years. With the 2022 return, the EA prepared a schedule computing the adjusted basis of the client's rental property and gave the client a copy; the client paid the 2022 fee in full. The client sold the property in 2024, and the IRS is now examining the gain reported on her 2024 return. After disputing the EA's unpaid fee for preparing the 2024 return, the client terminated the EA's services. She cannot find her copy of the basis schedule and demands the bank statements and receipts she provided and a copy of the 2022 basis schedule. State law does not give practitioners a right to retain client records in a fee dispute. The EA offers to return only the bank statements and receipts until the fee dispute is resolved.

Which of the following is correct regarding the EA's obligation to return the records?

The EA may retain the basis schedule, because a document a practitioner prepares is the practitioner's own work product and is never a record of the client.
The EA must return the bank statements and receipts, but may retain the basis schedule because the client already received a copy of it in 2022.
The EA must return the bank statements and receipts, but may retain the basis schedule until the client pays the disputed fee for the 2024 return.
The EA must return the bank statements, the receipts, and a copy of the basis schedule, because the schedule was presented to the client in a prior representation, is needed for the examination, and its fee has been paid. (correct answer)

Explanation: Circular 230 § 10.28. On request, a practitioner must promptly return all records of the client necessary for the client's federal tax compliance, even in a fee dispute. Records of the client include documents the client supplied and any schedule or other document the practitioner prepared that was presented to the client in a prior representation and is needed for current compliance; a practitioner-prepared document may be withheld only while the fee for that document is unpaid. The basis schedule was given to the client with her 2022 return, that fee was paid, and the schedule is needed now because the examination concerns the gain on the sale. Choice D is correct. Choice A is wrong because a practitioner-prepared document presented to the client in a prior representation can be a record of the client. Choice B is wrong because it treats the qualifying fact, delivery of the schedule in 2022, as a reason to withhold it. Choice C is wrong because the unpaid fee is for the 2024 return, not for the schedule, so the withholding exception does not reach the schedule.

Question 5

A client receives an IRS notice that her 2023 federal income tax return is being examined. Eighteen days later, she asks her enrolled agent to file an amended 2023 return claiming a refund of self-employment tax she overpaid, and to represent her in the examination. The agent expects to file the amended return within the next month. The client proposes to pay the agent 20% of any refund ultimately obtained.

May the enrolled agent charge a contingent fee for these services under Circular 230?

No, because a contingent fee may not be charged for services rendered in connection with any matter before the IRS, regardless of the circumstances.
Yes for the representation, but no for the amended return, because a contingent fee may never be charged for preparing or filing a return.
Yes for the amended return, but no for the representation, because work in an examination must be billed on a non-contingent basis.
Yes for both, because the amended return will be filed within 120 days of the notice and the representation concerns the IRS's examination of an original return. (correct answer)

Explanation: Circular 230 §10.27(b) prohibits contingent fees for services rendered in connection with matters before the IRS, with exceptions: a practitioner may charge a contingent fee for services rendered in connection with the IRS's examination of, or challenge to, an original return, and for services in connection with an amended return or refund claim filed within 120 days of the taxpayer's receipt of a notice of examination or written challenge. Representing the client in the examination falls within the first exception, and the amended return falls within the 120-day exception. Choice A states the general rule and ignores both exceptions. Choice B is wrong because the amended return is a refund claim filed within the 120-day window. Choice C is wrong because representation in an examination of an original return is a permitted contingent-fee matter.

Question 6

A prospective client operates a sole proprietorship and has asked an enrolled agent to prepare her 2025 federal income tax return and to represent her if the IRS examines that return. The client proposes to pay the EA thirty percent of any refund shown on the return and thirty percent of any reduction in tax liability obtained in the examination, with no other compensation.

Which of the following is correct regarding the EA's acceptance of the proposed fee arrangement?

The EA may accept a contingent fee for the examination representation, but may not accept a contingent fee for preparing the original return. (correct answer)
The EA may accept a contingent fee for preparing the return and for the examination representation because both services would be rendered in connection with a matter before the IRS.
The EA may accept a contingent fee for preparing the original return, but may not accept a contingent fee for the examination representation.
The EA may not accept a contingent fee for either service because a contingent fee may not be charged in connection with any matter before the IRS.

Explanation: Authority: Cir. 230 § 10.27(b). A practitioner may not charge a contingent fee in connection with a matter before the IRS except in the circumstances the regulation enumerates. Preparing an original return is not one of those circumstances, so the fee for the 2025 return may not depend on the amount of the refund shown on the return. One enumerated exception, however, covers services rendered in connection with an IRS examination of, or challenge to, an original return, so the proposed fee for the examination representation is permissible. Choice A correctly separates the two services. Choice B is wrong because it treats the return preparation as covered by an exception. Choice C reverses the rule. Choice D ignores the examination exception and applies the general prohibition to both services.

Question 7

A client has signed a Form 2848 authorizing an enrolled agent to receive any refund check. After the client's 2025 return is filed, the IRS mails a paper refund check payable to the client. The client is abroad and asks the agent to endorse the check, deposit it into the agent's trust account, deduct the unpaid preparation fee, and wire the balance to the client.

Under Circular 230, which statement is correct regarding the enrolled agent's handling of the refund check?

The agent may endorse and deposit the check as instructed, because the Form 2848 authorizes the agent to receive the refund.
The agent may endorse the check only to the extent of the unpaid fee and must return the check to the client for the remaining amount.
The agent must not endorse or negotiate the check, even with client authorization, because Circular 230 prohibits negotiating a client's federal tax refund check. (correct answer)
The agent may deposit the check into the client's own bank account if the client's written instructions identify the account and the fee is billed separately.

Explanation: Circular 230 §10.31 prohibits a practitioner from endorsing or otherwise negotiating any check issued to a client by the government in respect of a federal tax liability; the paper refund check is such a check. A Form 2848 may authorize a representative to receive a refund check, but it does not authorize the representative to endorse or negotiate it, and the client's request does not override the prohibition. Choice A incorrectly treats the authority to receive a refund check as authority to endorse and deposit it. Choice B is wrong because endorsing the check even for the fee amount is a prohibited negotiation. Choice D is wrong because the agent would still be negotiating a check payable to the client, and the deposit destination does not cure the violation.

Question 8

An enrolled agent represents both spouses in an IRS examination of their joint return. The examiner proposes a deficiency from unreported income of the husband's sole proprietorship. The wife may qualify for innocent spouse relief and wants to contest the deficiency; the husband wants to concede and pay. Both spouses ask the EA to continue representing them. The EA reasonably believes she can provide competent and diligent representation to both, and the representation is not prohibited by law.

Under Circular 230 §10.29, what additional requirement must be satisfied before the EA may continue?

The spouses must sign a joint statement consenting to the continued representation and stating that they will not assert the conflict in any later proceeding.
The wife, as the spouse whose interests may be adverse, must waive the conflict in writing; the husband's consent is presumed from his request to continue.
The EA must withdraw from representing the husband and may continue to represent the wife, provided the husband's waiver is obtained in writing.
Each spouse must waive the conflict and give informed consent to the continued representation, with the waiver and consent confirmed in writing by each spouse. (correct answer)

Explanation: Governing authority: Cir. 230 § 10.29. Under § 10.29(a), a conflict of interest exists when the representation of one client will be directly adverse to another client or there is a significant risk that it will be materially limited by responsibilities to another client. The wife's potential innocent spouse claim is directly adverse to the husband's wish to concede. Section 10.29(b) permits the representation despite the conflict only if the practitioner reasonably believes she can provide competent and diligent representation to each affected client, the representation is not prohibited by law, and each affected client waives the conflict and gives informed consent, confirmed in writing by each affected client (the confirmation may follow within a reasonable time, but no later than 30 days). The facts establish the first two requirements; Choice D states the third. Choice A imposes a joint statement and a waiver of future claims instead of the informed consent of each affected client. Choice B is wrong because both affected clients must consent in writing; consent is not presumed from a request to continue. Choice C is wrong because § 10.29 does not require withdrawal from one spouse when the paragraph (b) conditions are met.

Question 9

An enrolled agent is asked to prepare and sign a 2025 return. The return contains a taxpayer-favorable position that is not a tax shelter or reportable transaction. The EA determines that the position has a reasonable basis but lacks substantial authority. The client refuses to allow any disclosure of the position on the return. Under Circular 230 §10.34, which statement is correct?

The EA may sign the return if the client signs a written statement acknowledging that an accuracy-related penalty may apply.
The EA may sign the return if the EA reasonably believes there is only a small chance the IRS will select the return for examination.
The EA may not sign the return because the position has only a reasonable basis and is not adequately disclosed to the IRS. (correct answer)
The EA may sign the return because a position with a reasonable basis is not frivolous and therefore satisfies Circular 230 even without disclosure.

Explanation: Circular 230 §10.34 prohibits a practitioner from signing or preparing a return with a position that is not supported by substantial authority and is not adequately disclosed to the IRS. Here the position has only a reasonable basis—a standard below substantial authority—and the client refuses disclosure, so the EA may not sign. For a tax shelter or reportable transaction, a more likely than not standard would apply, but that is not the situation on these facts. Choice A is wrong because a client's written acknowledgment or acceptance of a possible penalty does not cure the absence of substantial authority or adequate disclosure. Choice B is wrong because the likelihood that the IRS will select the return for examination is not a permissible factor in determining whether a return position satisfies Circular 230. Choice D is wrong because a position with a reasonable basis is not frivolous, but non-frivolousness alone is insufficient without adequate disclosure when substantial authority is absent.

Question 10

An EA is the partner with principal authority for overseeing her firm's tax practice. She learns that a CPA associate in the firm has prepared and signed several returns without completing the due-diligence documentation required for the earned income tax credit. The EA tells the associate to correct the files, but does not review whether the corrections were made and takes no other action. In the next filing season, the associate again fails to complete the documentation.

Under Circular 230 §10.36, which statement is correct?

The EA has satisfied her obligations because she gave the associate a direct instruction to correct the files, and the associate's later conduct is outside the EA's control.
The EA may be disciplined because a practitioner with principal authority over a firm's tax practice must take reasonable steps to ensure compliance procedures and must take prompt corrective action after learning of a violation. (correct answer)
The EA is not responsible because she did not personally prepare or sign the deficient returns, and the associate is the practitioner of record for those clients.
The EA is automatically subject to the same sanction as the associate for each deficient return because the firm's compliance procedures are attributed to her.

Explanation: Circular 230 §10.36 requires a practitioner with principal authority for overseeing a firm's tax practice to take reasonable steps to ensure the firm has procedures for compliance and to take prompt corrective action when the practitioner knows of a violation by a firm member. The EA's direction to correct, without follow-up or any change in procedures, is not the required reasonable and prompt response; discipline may follow if the failure is willful, reckless, or grossly incompetent. Choice A overstates the effect of a bare instruction. Choice C is wrong because personal preparation or signature is not required for responsibility under §10.36. Choice D is wrong because §10.36 does not impose automatic or strict vicarious discipline; it requires reasonable steps and prompt corrective action.

Question 11

Under Circular 230 §10.27, which of the following is correct regarding contingent fees?

A practitioner may charge a contingent fee for services in connection with an IRS examination of an original return or a judicial proceeding under the Internal Revenue Code, but not for preparing the original return. (correct answer)
A practitioner may charge a contingent fee for preparing an original return if the fee is based on the amount of tax saved rather than on the amount of any refund shown on the return.
A practitioner may charge a contingent fee for preparing an amended return or claim for refund whenever it is filed before the IRS has sent the taxpayer any written notice of an examination of the original return.
A practitioner may charge a contingent fee in any matter before the IRS if the client approves the fee arrangement in writing after full disclosure of the nature and scope of the services.

Explanation: Governing authority: Cir. 230 § 10.27(b). Section 10.27(b)(1) generally prohibits a contingent fee for services rendered in connection with any matter before the IRS. The exceptions are services in connection with the IRS's examination of, or challenge to, an original return, or an amended return or refund claim filed within 120 days after the taxpayer receives a written notice of examination or challenge of the original return (§ 10.27(b)(2)); a refund claim filed solely for statutory interest or penalties (§ 10.27(b)(3)); and any judicial proceeding arising under the Internal Revenue Code (§ 10.27(b)(4)). Preparing an original return is not excepted. Choice A states the rule. Choice B misstates the definition: under § 10.27(c)(1) a fee based on a percentage of the taxes saved is a contingent fee, so it is barred for preparing an original return. Choice C misstates the timing of the amended-return exception: it covers an amended return or claim filed within 120 days after the taxpayer receives written notice of an examination, not one filed before any notice. Choice D is wrong because client consent cannot override the prohibition outside the listed exceptions.

Question 12

An enrolled agent prepared a client's 2025 Form 1040 but has not yet filed it or delivered any part of it to the client when the client terminates the engagement. The client demands return of the original W-2s and 1099s she provided, a depreciation schedule the EA prepared for that return, and the EA's internal memo analyzing whether a deduction is available. The client has not paid the EA's $2,000 invoice for preparing the 2025 return, including the depreciation schedule.

Under Circular 230 §10.28, which statement is correct?

Return the W-2s, 1099s, and depreciation schedule, but not the internal memo; unpaid fees do not justify withholding client records.
Withhold the W-2s and 1099s until the fee is paid, but return the depreciation schedule because it was prepared for the client's return.
Return the W-2s and 1099s; the EA may keep the depreciation schedule, which was never delivered and whose fee is unpaid, and the internal memo, which is not a client record. (correct answer)
Return all four items, including the internal memo, because the client cannot comply with federal tax obligations without the EA's work product.

Explanation: Governing authority: Cir. 230 § 10.28. On request, a practitioner must promptly return all records of the client that are necessary for the client to comply with federal tax obligations, and a fee dispute generally does not excuse that duty. Under § 10.28(b), records of the client include everything the client supplied (the W-2s and 1099s). A return, schedule, or other document the practitioner prepared is a client record only if it was presented to the client in a prior representation and is needed for current compliance, and it is not a client record while the practitioner withholds it pending payment of the fee for that document. The depreciation schedule was never delivered and its fee is unpaid, so the EA may keep it. The internal memo was never given to the client and is not a client record. Choice C states this result. Choice A treats the undelivered, unpaid-for schedule as a client record that must be returned. Choice B permits withholding the client's own W-2s and 1099s over the fee, which § 10.28 does not allow. Choice D treats the internal memo, and the unpaid-for schedule, as client records.

Question 13

A practitioner is providing written advice about a proposed transaction. The advice states: 'The position has substantial authority. Even if an accuracy-related penalty were otherwise possible, the likelihood that your return will be selected for audit is low.'

Under Circular 230 §10.37, this written advice is:

Permissible, because audit risk is a relevant factor to a taxpayer deciding whether to take a position that has been adequately disclosed.
Permissible, if the practitioner also advises the client that the IRS could audit the return and that the advice is not a guarantee.
Permissible, because the advice is based on substantial authority and does not concern a tax shelter or reportable transaction.
Prohibited, because written tax advice may not take into account the possibility that the return will not be audited or that the issue will not be raised on audit. (correct answer)

Explanation: Governing authority: Cir. 230 § 10.37(a)(2)(vi). In giving written advice, a practitioner may not, in evaluating a federal tax matter, take into account the possibility that a tax return will not be audited or that a matter will not be raised on audit. Advice that relies on a low chance of audit violates the rule regardless of the strength of the position. Choice D states the rule. Choice A incorrectly treats audit risk as a permissible factor, even for a disclosed position. Choice B is wrong because a disclaimer cannot cure reliance on a prohibited factor. Choice C is wrong because substantial authority and the absence of a tax shelter do not make the prohibited audit-risk analysis permissible.

Question 14

An enrolled agent has been representing both spouses in an IRS examination of their joint return. The examiner proposes to treat the husband's unreported self-employment income as taxable. The wife now asks the agent to represent her in seeking innocent spouse relief, and the husband asks the agent to continue representing him in the examination. The agent reasonably believes she can represent both clients competently and diligently. Both spouses tell the agent orally that they are comfortable with the continued representation.

What is required for the enrolled agent to continue representing both spouses?

The agent may continue because the agent reasonably believes the representation can be competent and diligent, and both spouses have already consented.
Each spouse must give informed consent after full disclosure, confirmed in writing (within a reasonable time, no later than 30 days), and the agent must retain the written confirmations. (correct answer)
The agent may continue without written consent because innocent spouse relief and the examination are separate procedures before the IRS.
The agent must immediately withdraw from representing both spouses because dual representation when one spouse seeks innocent spouse relief is always prohibited.

Explanation: Circular 230 §10.29 permits a practitioner to represent clients whose interests conflict only if the practitioner reasonably believes the representation can be competent and diligent, the representation is not prohibited by law, and each affected client waives the conflict and gives informed consent, confirmed in writing, at the time the conflict is known; under § 10.29(b)(3) the written confirmation may follow within a reasonable period, but no later than 30 days, and under § 10.29(c) the practitioner must retain the confirmations for at least 36 months after the representation ends. The facts satisfy the competence condition, but the spouses' oral comfort, given without full disclosure of the conflict and without written confirmation, is not enough. Choice B is correct. Choice A is wrong because it omits informed consent after full disclosure and the written confirmation. Choice C is wrong because the requests arise from the same examination and the spouses' interests are adverse; different procedural labels do not eliminate the conflict. Choice D is wrong because §10.29 does not make this dual representation automatically prohibited; it may proceed with informed consent confirmed in writing.

Question 15

A CPA prepared and e-filed a client's 2025 individual income tax return in March 2026. In September 2026, while assembling information for the current year, the CPA learns that the client sold stock in 2025 and intentionally omitted the capital gain from the 2025 return. The client tells the CPA that the return is 'close enough' and refuses to discuss an amended return. The CPA remains engaged to prepare the 2026 return.

Under Circular 230, what is the CPA required to do?

Advise the client in writing that the CPA must report the omission to the IRS and cannot continue preparing returns until an amended return is filed.
Promptly advise the client of the omission and the consequences provided by the Code and regulations; the CPA has no separate duty under Circular 230 to report the omission to the IRS. (correct answer)
Prepare the 2026 return without reference to the omission because the 2025 return is no longer subject to change once it has been filed and processed.
Notify the IRS of the omission and withdraw from the engagement if the client refuses to authorize the CPA to file an amended return.

Explanation: Circular 230 §10.21 requires a practitioner who knows of a client's noncompliance, error, or omission in a return to advise the client promptly of that fact and of the consequences provided under the Code and regulations. It does not require the practitioner to report the matter to the IRS or to withdraw solely because the client declines to file an amended return. Choice A adds a written-report and return-preparation condition not found in §10.21. Choice C ignores the continuing duty to advise; the return's having been filed and processed does not eliminate the obligation. Choice D misstates the duty by requiring IRS notification and withdrawal, which §10.21 does not impose.