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