Regarding the retention of client records under Circular 230, which of the following statements is correct when a client requests the return of their records but has not paid the practitioner's fees?

The practitioner may withhold all records, including client-provided documents, until the fee is paid.

The practitioner must return the client's records necessary for the client to comply with federal tax obligations, but may withhold the practitioner's own work product if permitted by state law.

The practitioner must return all records and all work product immediately, regardless of fee status.

The practitioner is required to destroy the records if the client terminates the engagement without paying.