Ethics and Professional Responsible
Understatement of taxpayer's liability due to wilful or recklesss conduct of the tax return preparer
a compensated preparer is liable for a penalty if the preparer's understatement of tax liability on a return or claim for refund is due to the preparer's negligent or intentional disregard of rules and regulations
Unreasonable position
a position is ruled unreasonable unless: there is substantial authority for the position and the position does not involve either a tax shelter or a reportable transaction; or the position is disclosed there is a reasonable basis for the position
Competence to provide opinion and reliance on opinions of others
a practitioner must be knowledgeable in all aspects of federal tax law relevant to the opinion being rendered
fees
a practitioner should never charge an unconscionable fee and may only charge a contingent fee in the following three situations before the irs: 1. IRS examination or audit 2. claim solely for a refund of interest and/or penalties or 3. a judicial proceeding arising under the IRC
not always required to obtain supporting documentation
a preparer is not required supporting documentation unless the preparer has reason to suspect the accuracy of the information provided by the taxpayer. however, the preparer must make reasonable inquiries if the information provided by the taxpayer appears incorrect or incomplete
reasonable basis
a relatively high standard of reporting; this standard is significantly higher than not frivolous or not patently improper, the reasonable basis standard is not satisfied by a return position that is merely arguable or that is merely a colorable claim
realistic possibility standard and reasonable basis standard
a tax preparer should recommend a tax return position only if the tax preparer has a good faith belief that the position has a realistic possibility of being sustained administratively or judicialy on hte merits of the position if challenged
Tax return positions
a tax return position is either of the following a position taken on the tax return that the tax preparer has advised the taxpayer to take or a position taken on the tax return that the tax preparer has concluded is appropriate based on all the material facts
Solicitations
advertising, no practitioner may use false or misleading advertising
marketed opinion
advice that will be used to promote, market, or sell a partnership, investment plan, or arrangement
The IRC imposes a civil penalty on any person/entity who
aids, assists in, procures, or advises with respect to, the preparation or presentation of any portion of a return, affidavit, claim or other document
tax return preparer
any person who preparers for compensation or who employs one or more persons to preparer for compensation
return of client records
generally at the request of the client the practitioner must return all client records
wrong disclosure and or use of tax return information
generally each tax return preparer who either discloses information furnished to the preparer or uses the information for any purpose other than to prepare a tax return shall pay a civil penalty of 250 for each such disclosure or use and be guilty of a misdemeanor and fined more than 1,000 and or be imprisoned for not mroe than one year, together with costs of prosecution
certain procedural aspects or preparing returns
generally, no responsibility to verify information provided by taxpayer
More likely than not standard
is met when there is a greater than 50% liklihood of a tax position being upheld by the courts. this standard is more stringent than the substantial authority standard
standards with respect to tax returns and documentions
not frivolous - a practitioner cannot advise a client to take a tax return position unless the position is not frivolous
knowledge of error - return preparation and administrative proceedings
notify taxpayer 1. error in previously filed returns 2. failure to file a return, not allowed to notify taxing authority. if taxpayer does not remedy the situation the member should determine if it is appropriate to continue a professional relationship with the client
use of estimates
tax preparer may use estimates provided by taxpayer, the tax preparer may provide advice regarding estimates
IRS disciplinary actions
1. Criminal penalties 2. civil penalties a IRS may prohibit an accountant from practicing before the IRS b. the iRS may impose fines for various infractions
definition of willful or reckless conduct
1. a willful attempt to understate the tax liability or 2. a reckless or intentional disregard of tax rules and regulations
exceptions to penalty and or find for wrongful disclosure
1. allowable disclosures pursuant to a court order 2. allowable uses, declaration of estimated tax 3. disclosures and uses permitted by U.S. Treasury regulations, peer reviews, computer processing, and administrative orderss
disciplinary power of state boards
1. suspension or revocation of license 2. monetary fines 3. reprimand or censure 4. probation 5. requirement for continuing professional education courses
topics covered in SSTS's
1. tax return positions 2. answers to questions on returns 3. certain procedural aspects of preparing returns 4. use of estimates 5. departure from a position previously conducted in an administrative or court hearing 6. knowledge of an error 7. form and content of advice to taxpayers
joint ethics enforment program
AICPA and 49 state societies use this enforcement of their codes of conduct by means of single investigation and action
Treasury Department Circular 230
IRS publication addresses the practice before the IRS of practitioners with regard to the rules governing the authority to practice before the IRS, the duties and restrictions relating to practicing before the IRS, teh sanctions for violation of the regulations, and the rules applicable to disciplinary proceedings
negotiation of IRS refund check
any tax return preparer who endorses or otehrwise negotiations an IRS refund check issued to a taxpayer other than the tax return preparer shall pay a penalty of $500 with respect to each such check
covered opinion
any written or electronic advice by a practitioner concerning one or more federal tax issues
incompetence and disreputable conduct
being convicted of any criminal offense under federal law, giving false or misleading information, carrying out any solicitation prohiited by circular 230, willfully failing to make a tax return or willfully evading, or attempting to evade, any assessment or payment of federal tax
discplinary action by the AICPA and state cpa socieities
can sanction members, but they cannot suspend or revoke a CPA's license
Securities and Exchange Commission
civil penalties, sarbanes oxley act
the american institute of certified public accountants and state cpa socieitys
code of conduct applies to all members of the AICPA
Consent of Client
confidential client information may be disclosed to any party if the client specifically consents to the release of information
departure from a position previously concluded in an administrative proceeding or court decision
consistency is not require, a tax preparer may recommend a tax position that is different from the treatment as conlcuded in an administrative proceeding or court decision with respect to a previous year's return of the taxpayer, provided the taxpayer is not bound to a specified treatment in the later year
Information to be furnished
practitioners must provide to the IRS any IRS requested information or records unless the practitioner believes in good faith and on reasonable grounds that the information or records are privileged
form and content of advice to taxpayers
professional competence
requirements for a covered opinion
reach an overall conclusion as to the likelihood of the federal tax treatment and provide the reasons for that conclusion or state that the practitioner is unable to reach an overall conclusion and give the reasons for hte inability tos o reach an overall conclusion
answers to questions on returns
reasonable effort to answer all questions on tax returns 2. although not all questions on a tax return are of equal importance, a tax preparer should make a reasonable effort to answer all questions
state board of accountancy - sole poewr to license
residency requirement, educations requirements, experience requirements
AICPA Statements on standards for tax services
set forth the ethical tax practice standards for members of the AICPA, and the AICPA will enforce these SSTS's as part of the AICPA's code of professional conduct rule 201, general standards, and rule 202 compliance with standards
Aiding and abetting understatement of tax liability
the penalty for aiding and abetting understatement of tax liability applies to any person not just to tax return preparers. the IRS has the burden of proof to establish that any person is liable for this civil penalty
knowledge of omission by a client
the practitioner must advise the client promptly of any noncompliance, errors, or omissions in tax returns and other documents. The practitioner must advise the client of the consequences under the law with respect to such noncompliance, errors, or omissioners
substantial authority
the substantial authority standard is an objective standard involving an analysis of the law and application of hte law to relevant facts.
reliance opinion
written advice concluding a confidence level of at least more likely than not greater than 50% likelihood that hte significant federal tax issue would be resolved in the taxpayer's favor