Standards Overview for Written Tax Advice

Tax Professionals' Resource
March 12, 2013 — 1,585 views  
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It is critical that all people who represent tax payers and formulate tax returns are professional and honest. There are standards which help to ensure that people comply with these practices and accountants and tax practitioners maintain their professional standards while also complying with the law.

When tax planning and preparation services are being provided by CPA’s, accountants and the like, there are many things to deal with, such as organizations, employers, clients, and government agencies. All these different bodies and people have their own risk preferences and goals, which give rise to many ethical conflicts in the process.

Actions That Are Required By Tax Professionals

Tax professionals must return all records to the client or to the person whom it originally belongs to. The clients should also be given a copy of all tax returns. Any records that are requested by the IRS should be submitted in a timely and organized manner.

In order to avoid being penalized, all returns related to non-frivolous tax positions should be disclosed. All tax returns should be signed when they are prepared. Clients should always be advised about omissions or errors of the client in any matter related to tax. This should be done on time. Best practices should be used in all aspects of the profession and due diligence should be exercised.

Other Requirements for Tax Advisers

Apart from the points mentioned above, the professionals giving out tax advice are required to follow certain rules while giving advice. Tax advice could comprise of ‘covered opinion, oral advice or written advice.

A taxpayer could expect a covered opinion from an enrolled or licensed tax adviser to evade certain penalties. With some exceptions, a covered opinion includes written tax advice that is not renounced in the advice. The disclaimer should state that the advice cannot and was not intended to be used in order to avoid penalties by the taxpayer. There are standards that are applicable for covered opinions, these include

  • Required disclosures
  • Requirement to include all laws that are applicable
  • The degree to which the professional should gather facts and the extent to which assumptions and facts should be relied on
  • A requirement that enables law to be applied to facts

Actions That Are Prohibited

Professionals that prepare tax returns cannot cash IRS checks to clients for whom returns are prepared. Clients who have conflicting interests cannot be represented by tax professionals. It is prohibited in any case to delay timely disposition of matters before the IRS.

Using false statements to solicit businesses is also against the law. Professionals should not take a position on tax returns unless a realistic possibility of that position sustaining on its merits exists. Tax return positions that are frivolous are prohibited on all accounts.

Tax professionals are also not allowed to charge any unconscionable fee to the client in order to represent them. It is vital for all these standards to be adhered to, and if they are breached, serious legal implications will follow. 

Tax Professionals' Resource