Final answer:
Circular 230 restricts tax practitioners from issuing written advice based on audit likelihoods, which is essential for ensuring ethical tax advice. The enforcement of these regulations coincides with a reduction in IRS audits due to limited resources allocated to tax enforcement actions.
Step-by-step explanation:
The subject question relates to a regulation under Circular 230, which governs the practice of tax professionals before the Internal Revenue Service (IRS). Circular 230 prohibits tax practitioners from providing written advice on federal tax issues purely based on the predicting, considering, or promoting the likelihood of an audit. This is part of a broader set of standards intended to ensure ethical and responsible practice in the tax industry. It's important to understand that this prohibition is in place to prevent practitioners from using audit odds as a marketing tool or as a way to justify aggressive tax positions that might not be supported by the tax law itself.
In recent times, the chances of being audited by the IRS have decreased for US citizens, especially among those with high incomes. This trend is attributed to the federal government's allocation of fewer resources to tax enforcement activities. This reduction in resources has resulted in less comprehensive coverage of audits, which may indirectly influence how tax professionals approach advising on compliance and reporting requirements.