Expert answer:Tax accounting
Expert answer:See attached file
t_q___6_.pdf
ss__1_.pdf
Unformatted Attachment Preview
Tax Practice and Ethics Homework:
Please cite the portion of the Standards or Circular 230 in your answer. Use Circular 230 and the
Statements on Standards for Tax Services (SSTS) to address the following issues:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
A CPA is preparing a tax return and has reasonable grounds for not answering an applicable
question on a client’s return then the CPA should:
If, during an IRS audit of a client’s tax return, the CPA discovers that the client’s return contains
a mathematical error the CPA should:
A CPA discovers an error on a prior tax return prepared and filed by the CPA. The CPA should:
A client refuses to correct or amend a material error on a prior year’s return. The error is a
significant inventory misstatement that materially impacts the current year numbers. In the
current year the CPA should:
The client tell the CPA that she paid about $500 for office supplies during the year but has lost
her receipts. The client tells the CPA to make up a number like $491 to make the return look
more accurate. The CPA should:
The client is running a little short of cash and the CPA suggests that the client defer making
deposits of “trust Fund” monies withheld from employee paychecks for federal withholding and
FICA taxes.
The CPA was pressed for time at a deadline and neglected to carefully quality control a tax
return. The IRS, on audit, found fraudulent expenses on the tax return.
The CPA helped the client conceal cash receipts in the preparation of a client’s tax return. The
CPA has violated what rule(s) in Circular 230 and the SSTS?
What is the difference between frivolous, a reasonable basis, realistic possibility and more likely
than not? Assign a percentage chance of being upheld in your answer.
A CPA asks a client if the client has any foreign financial assets. The client responds in wiring
that she does not have any foreign financial assets. A disclosure of foreign financial assets is
required on the client’s tax return. The CPA has visited the client at the client’s house in the
Bahamas and knows that the client does business in the Bahamas. Has the CPA violated any
rules in completing a tax return relying on the client’s written representation?
During an audit the CPA discovers an error on the client’s tax return. Should the CPA tell the IRS
that there is an error? If not, what should the CPA do?
The Client, an outside salesperson for a local shoe repair company, tells the CPA that she drove
“about half” of her mileage for business. The client’s does not keep a mileage log. What should
the CPA do?
The client makes aggressive estimates on expenses and when the CPA asks about
documentation the client asks the CPA “what are the chances of getting audited?” How should
the CPA respond?
The client has no records and no reasonable chance of prevailing in an audit. On the day of the
audit the client tells the CPA to cancel the appointment to “hold off the IRS”. What should the
CPA do?
15. What are “Best Practices” and how should a CPA provide tax advice to comply with Best
Practices.?
16. The client has what the CPA believes is a good chance of prevailing in an amendment to the
client’s prior year tax return based on the results of a recent case with similar facts to the
client’s situation. The client wants the CPA to take the matter on a contingency – if the
amendment is successful the CPA makes half of the refund. May the CPA accept the
engagement?
17. The CPA prepares a tax return for a client using client original records delivered to the CPA by
the client. The client signs the authorization and the CPA transmits the return to the IRS
electronically on the due date. The CPA sends the client a bill and the client does not pay the
CPA. The client requests the return of their records and the CPA tells the client: “when I get
your payment then you will get your records.” Has the CPA violated any rules?
18. The CPA has prepared a married filing joint tax return for a couple for many years. Both clients
come to the CPA and tell the CPA that they are divorcing. There is one thing that the couple can
agree on – they want the CPA to handle the “friendly divorce” and prepare the tax returns for
the couple in the best way possible. May the CPA undertake the engagements?
19. One of the divorcing spouses (from the problem above) visits the CPA with a check from the IRS
for $17,000. It does not appear that the couple is entitled to a refund from the IRS. The CPA
tells the client that “it is rare to get money from the IRS so let me (the CPA) hold on to the funds
until we can sort this out” – the CPA deposits the check into the CPA’s own personal checking
account pending some kind of resolution with the IRS.
November 2009
Statements on
Standards for
Tax Services
1–7
Issued by the Tax Executive Committee
®
AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS
Statement on Standards for Tax Services No. 1,
Tax Return Positions
Statement on Standards for Tax Services No. 2,
Answers to Questions on Returns
Statement on Standards for Tax Services No. 3,
Certain Procedural Aspects of Preparing Returns
Statement on Standards for Tax Services No. 4,
Use of Estimates
Statement on Standards for Tax Services No. 5,
Departure From a Position Previously Concluded in
an Administrative Proceeding or Court Decision
Statement on Standards for Tax Services No. 6,
Knowledge of Error: Return Preparation and
Administrative Proceedings
Statement on Standards for Tax Services No. 7,
Form and Content of Advice to Taxpayers
(Supersedes Statement on Standards for Tax Services
Nos. 1–8 effective January 1, 2010.)
Copyright © 2009 by
American Institute of Certified Public Accountants, Inc.
New York, NY 10036-8775
All rights reserved. For information about the procedure for requesting
permission to make copies of any part of this work, please visit
www.copyright.com or call (978) 750-8400.
1 2 3 4 5 6 7 8 9 0 TD 0 9
Contents of Statements
Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Ongoing Process. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Statement on Standards for Tax Services No. 1, Tax Return Positions . . . . 9
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Explanation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Statement on Standards for Tax Services No. 2, Answers to
Questions on Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Explanation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Statement on Standards for Tax Services No. 3, Certain
Procedural Aspects of Preparing Returns . . . . . . . . . . . . . . . . . . . . . . . . 15
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Explanation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Statement on Standards for Tax Services No. 4, Use of Estimates . . . . . . 19
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Explanation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Statement on Standards for Tax Services No. 5, Departure
From a Position Previously Concluded in an Administrative
Proceeding or Court Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Explanation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Statement on Standards for Tax Services No. 6, Knowledge of
Error: Return Preparation and Administrative Proceedings . . . . . . . . . 23
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Explanation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Statement on Standards for Tax Services No. 7, Form and
Content of Advice to Taxpayers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Explanation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5
Preface
1. Standards are the foundation of a profession. The AICPA aids
its members in fulfilling their ethical responsibilities by instituting and
maintaining standards against which their professional performance
can be measured. Compliance with professional standards of tax practice also reaffirms the public’s awareness of the professionalism that is
associated with CPAs as well as the AICPA.
2. This publication sets forth enforceable tax practice standards
for members of the AICPA, Statements on Standards for Tax Services
(SSTSs or statements). These statements apply to all members providing tax services regardless of the jurisdictions in which they practice. Interpretations of these statements may be issued as guidance to
assist in understanding and applying the statements. The SSTSs and
their interpretations are intended to complement other standards of
tax practice, such as Treasury Department Circular No. 230, Regulations Governing the Practice of Attorneys, Certified Public Accountants, Enrolled Agents, Enrolled Actuaries, Enrolled Retirement Plan
Agents, and Appraisers before the Internal Revenue Service; penalty
provisions of the Internal Revenue Code; and state boards of accountancy rules.
3. The SSTSs are written in as simple and objective a manner as
possible. However, by their nature, practice standards provide for an
appropriate range of behavior and need to be interpreted to address
a broad range of personal and professional situations. The SSTSs recognize this need by, in some sections, providing relatively subjective
rules and by leaving certain terms undefined. These terms are generally rooted in tax concepts and, therefore, should be readily understood by tax practitioners. Accordingly, enforcement of these rules,
as part of the AICPA’s Code of Professional Conduct Rule 201, General Standards, and Rule 202, Compliance With Standards (AICPA,
Professional Standards, vol. 2, ET sec. 201 par. .01 and ET sec. 202
par. .01), will be undertaken on a case-by-case basis. Members are
expected to comply with them.
6
Statement on Standards for Tax Services Nos. 1–7
History
4. The SSTSs have their origin in the Statements on Responsibilities in Tax Practice (SRTPs), which provided a body of advisory
opinions on good tax practice. The guidelines as originally set forth in
the SRTPs became more important than many members had anticipated when the guidelines were issued. The courts, the IRS, state
accountancy boards, and other professional organizations recognized
and relied on the SRTPs as the appropriate articulation of professional
conduct in a CPA’s tax practice. The SRTPs became de facto enforceable standards of professional practice, because state disciplinary
organizations and courts regularly held CPAs accountable for failure
to follow the guidelines set forth in the SRTPs.
5. The AICPA’s Tax Executive Committee concluded it was
appropriate to issue tax practice standards that would become a part
of the AICPA’s Professional Standards. At its July 1999 meeting, the
AICPA Board of Directors approved support of the executive committee’s initiative and placed the matter on the agenda of the October 1999 meeting of the AICPA’s governing Council. On October 19,
1999, Council approved designating the Tax Executive Committee as
a standard-setting body, thus authorizing that committee to promulgate standards of tax practice. As a result, the original SSTSs, largely
mirroring the SRTPs, were issued in August 2000.
6. The SRTPs were originally issued between 1964 and 1977.
The first nine SRTPs and the introduction were promulgated in 1976;
the tenth SRTP was issued in 1977. The original SRTPs concerning the
CPA’s responsibility to sign the tax return (SRTP No. 1, Signature of
Preparers, and No. 2, Signature of Reviewer: Assumption of Preparer’s
Responsibility) were withdrawn in 1982 after Treasury Department
regulations were issued adopting substantially the same standards for
all tax return preparers. The sixth and seventh SRTPs, concerning the
responsibility of a CPA who becomes aware of an error, were revised
in 1991. The first interpretation of the SRTPs, Interpretation No. 1-1,
“Realistic Possibility Standard,” was approved in December 1990. The
SSTSs and Interpretation No. 1-1, “Realistic Possibility Standard,” of
SSTS No. 1, Tax Return Positions, superseded and replaced the SRTPs
and their Interpretation No. 1-1, effective October 31, 2000. Although
the number and names of the SSTSs, and the substance of the rules
contained in each of them, remained the same as in the SRTPs, the
Preface
language was revised to both clarify and reflect the enforceable nature
of the SSTSs. In addition, because the applicability of these standards
is not limited to federal income tax practice (as was the case with the
SRTPs), the language was changed to indicate the broader scope. In
2003, in connection with the tax shelter debate, SSTS Interpretation
No. 1-2, “Tax Planning,” of SSTS No. 1 was issued to clarify a member’s responsibilities in connection with tax planning; that interpretation became effective December 31, 2003.
7. When the original SSTSs were issued, an effort was made to
keep to a minimum any changes in the language of the SSTSs from
that of the predecessor SRTPs. This was done to alleviate concerns
regarding the enforceability of standards that differed from the SRTPs
under which members had been practicing. Since the issuance of the
original SSTSs, members have asked for clarification on certain matters, such as the duplication of the language in SSTS No. 6, Knowledge of Error: Return Preparation, and No. 7, Knowledge of Error:
Administrative Proceedings. Also, certain changes in federal and state
tax laws have raised concerns regarding the need to revise SSTS No. 1.
As a result, in 2008, the original SSTS Nos. 1–8 were updated, effective January 1, 2010. The original SSTS Nos. 6–7 were combined into
the revised SSTS No. 6, Knowledge of Error: Return Preparation and
Administrative Proceedings. The original SSTS No. 8, Form and Content of Advice to Taxpayers, was renumbered SSTS No. 7. In addition,
various revisions were made to the language of the original SSTSs.
7
8
Statement on Standards for Tax Services Nos. 1–7
Ongoing Process
8. The following SSTSs and any interpretations issued thereunder reflect the AICPA’s standards of tax practice and delineate members’ responsibilities to taxpayers, the public, the government, and
the profession. The statements are intended to be part of an ongoing
process of articulating standards of tax practice for members. These
standards are subject to change as necessary or appropriate to address
changes in the tax law or other developments in the tax practice
environment.
9. Members are encouraged to assess the adequacy of their
practices and procedures for providing tax services in conformity with
these standards. This process will vary according to the size of the
practice and the nature of tax services performed.
10. The Tax Executive Committee promulgates the SSTSs and
their interpretations. Acknowledgment is also due to the many members who have devoted their time and efforts over the years to developing and revising the AICPA’s standards.
9
Statement on Standards for
Tax Services No. 1, Tax Return
Positions
Introduction
1. This statement sets forth the applicable standards for members when recommending tax return positions, or preparing or signing
tax returns (including amended returns, claims for refund, and information returns) filed with any taxing authority. For purposes of these
standards
a. a tax return position is (i) a position reflected on a tax return
on which a member has specifically advised a taxpayer or (ii) a
position about which a member has knowledge of all material
facts and, on the basis of those facts, has concluded whether
the position is appropriate.
b. a taxpayer is a client, a member’s employer, or any other
third-party recipient of tax services.
2. This statement also addresses a member’s obligation to advise
a taxpayer of relevant tax return disclosure responsibilities and potential penalties.
3. In addition to the AICPA, various taxing authorities, at the
federal, state, and local levels, may impose specific reporting and disclosure standards with regard to recommending tax return positions
or preparing or signing tax returns.1 These standards can vary between
taxing authorities and by type of tax.
1
A member should refer to the current version of Internal Revenue Code Section 6694, Understatement of taxpayer’s liability by tax return preparer, and other relevant federal, state,
and jurisdictional authorities to determine the reporting and disclosure standards that are
applicable to preparers of tax returns.
10
Statement on Standards for Tax Services Nos. 1–7
Statement
4. A member should determine and comply with the standards,
if any, that are imposed by the applicable taxing authority with respect
to recommending a tax return position, or preparing or signing a tax
return.
5. If the applicable taxing authority has no written standards with
respect to recommending a tax return position or preparing or signing
a tax return, or if its standards are lower than the standards set forth in
this paragraph, the following standards will apply:
a. A member should not recommend a tax return position or
prepare or sign a tax return taking a position unless the member has a good-faith belief that the position has at least a realistic possibility of being sustained administratively or judicially on its merits if challenged.
b. Notwithstanding paragraph 5(a), a member may recommend
a tax return position if the member (i) concludes that there
is a reasonable basis for the position and (ii) advises the taxpayer to appropriately disclose that position. Notwithstanding
paragraph 5(a), a member may prepare or sign a tax return
that reflects a position if (i) the member concludes there is
a reasonable basis for the position and (ii) the position is appropriately disclosed.
6. When recommending a tax return position or when preparing
or signing a tax return on which a position is taken, a member should,
when relevant, advise the taxpayer regarding potential penalty consequences of such tax return position and the opportunity, if any, to
avoid such penalties through disclosure.
7. A member should not re …
Purchase answer to see full
attachment
How it works
- Paste your instructions in the instructions box. You can also attach an instructions file
- Select the writer category, deadline, education level and review the instructions
- Make a payment for the order to be assignment to a writer
- Download the paper after the writer uploads it
Will the writer plagiarize my essay?
You will get a plagiarism-free paper and you can get an originality report upon request.
Is this service safe?
All the personal information is confidential and we have 100% safe payment methods. We also guarantee good grades