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Tax Practice, Regulation, and Ethics

Tax Practice, Regulation, and Ethics. Elements of tax practice Rules and ethics in tax practice Circular 230 AICPA Code of Professional Conduct AICPA Statements on Standards for Tax Services (SSTS) Sarbanes-Oxley and taxation Texas State Board of Public Accountancy

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Tax Practice, Regulation, and Ethics

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  1. Tax Practice, Regulation, and Ethics • Elements of tax practice • Rules and ethics in tax practice • Circular 230 • AICPA Code of Professional Conduct • AICPA Statements on Standards for Tax Services (SSTS) • Sarbanes-Oxley and taxation • Texas State Board of Public Accountancy • Non-regulatory ethical behavior models • Tax research by CPAs

  2. SSTS • Statements on Standards for Tax Services (SSTS) issued by AICPA • Intended to supplement AICPA Code of Professional Conduct and Circular 230

  3. SSTS • Tax return positions (SSTS 1) • Answers to questions on returns (SSTS 2) • Certain procedural aspects of preparing returns (SSTS 3) • Use of estimates (SSTS 4)

  4. SSTS • Departure from a position previously concluded in an administrative proceeding or court decision (SSTS 5) • Knowledge of error: Return preparation (SSTS 6) • Knowledge of error: Administrative proceedings (SSTS 7) • Form and content of advice to clients (SSTS 8)

  5. SSTS 1 • Should have good-faith belief that position has a realistic possibility of being sustained • Authority does not have to meet IRC §6662 definition • If standard is not met: • Disclose position in return, and • The position must not be frivolous

  6. SSTS 2 • Reasonable effort to obtain information to answer all questions • Exceptions • Data not readily available • Meaning of question uncertain • Answer too voluminous • Not acceptable on Form 1120

  7. SSTS 3 • May rely on client information without verification, unless information appears to be incorrect, incomplete, or inconsistent • Not required to examine supporting documents

  8. SSTS 4 • Use estimates if impractical to obtain exact data and if estimates appear reasonable • Disclosure of estimates may be necessary: • Records destroyed by disaster • K-1’s not received

  9. SSTS 5 • Prior year disposition may not prevent recommending a different treatment of a similar item in a later year • CPA and IRS not bound to act consistently with previous position, IRS usually is consistent, however

  10. SSTS 6 • CPA must inform client upon discovery of an error • Recommend appropriate measures for client to take • Not the CPA’s duty to inform the tax authority about error

  11. SSTS 7 • Request client’s permission to disclose error to the IRS • If client refuses, CPA should consider withdrawing from engagement

  12. SSTS 8 • Judgement reflects professional competence • Use written communication for complex matters • Oral communication okay for simple matters

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