1.2 - AICPA Standards for Tax Service

Question 1

AICPA Standards for Tax Service

Identify the regulations AICPA members working in tax services roles are required to follow

Answer 1

AICPA standards

Question 2

AICPA Standards for Tax Service

What is the common base for rules of conduct for tax services?

Answer 2

AICPA standards (due diligence and good faith effort)

Question 3

AICPA Standards for Tax Service

Statements on Standards for Tax Services (SSTSs) are enforceable under what???

Answer 3

• the AICPA Code of Professional Conduct
• Justification is required if member departs from standards

Question 4

AICPA Standards for Tax Service

What is a tax return position?

Answer 4

• Inclusion / exclusion of an item as GI or deduction of certain expense

Question 5

AICPA Standards for Tax Service

Define “reasonable” in the case of a reasonable tax return position

Answer 5

• Some level of authority which justifies position taken

Question 6

AICPA Standards for Tax Service

Tax return positions must be????

Answer 6

Reasonable

Question 7

AICPA Standards for Tax Service

What does the “level of authority” depend on?

Answer 7

• Depends on disclosure of position to IRS and whether relates to tax shelter

Question 8

AICPA Standards for Tax Service

What level of authority is needed for ordinary transactions?

Answer 8

Reasonable basis or substantial authority with disclosure

Question 9

AICPA Standards for Tax Service

Define “substantial authority”

Answer 9

• Means 40% chance of succeeding

Question 10

AICPA Standards for Tax Service

What level of authority is needed for tax shelter transactions?

Answer 10

More likely than not

Question 11

AICPA Standards for Tax Service

What level of authority is required to avoid preparer penalties for a tax shelter when the position is disclosed?

Answer 11

reasonable to believe that the position would more likely than not be sustained

Question 12

AICPA Standards for Tax Service

What level of authority is needed for undisclosed positions?

Answer 12

substantial authority

Question 13

AICPA Standards for Tax Service

What are reasonable grounds for omission of tax return information?

HINT; 5

Answer 13

• Info not available
• Uncertainty of question
• Answer is extensive
• Member does not need to provide an explanation for the omission
• Must consider if return would be incomplete

Question 14

AICPA Standards for Tax Service

When are tax preparers required to sign the tax return?

Answer 14

• Must sign return if compensated per Treasury Regulations

Question 15

AICPA Standards for Tax Service

What inquiries are tax return preparers required to make when preparing tax returns?

Answer 15

• not required to make any verifications of informaton
• reasonable inquiries when needed
• consult prior returns if feasible
• must make inquiries about supporting documentation regarding travel and entertainment
• must consider info known from another taxpayer’s return if not violating any rules (ie. husband and wife)

Question 16

AICPA Standards for Tax Service

When are tax preparers allowed to use estimates & who is responsible for providing details or data?

Answer 16

• May use if impracticable to obtain exact data
• Must not imply greater accuracy
• Taxpayer responsible for providing data

Question 17

AICPA Standards for Tax Service

What is a taxpreparer required to do when they discover an error in a taxpayer’s return?

Answer 17

• Inform taxpayer
• Advise of consequences
• Not obligated to inform tax authority unless required by law

Question 18

AICPA Standards for Tax Service

What is a tax preparer required to do when they discover “uncorrected” errors?

Answer 18

• If taxpayer does not correct PY’s error, member should consider whether to withdraw
• Reasonable steps taken to ensure error is not repeated
• Do not consider immaterial items

Question 19

AICPA Standards for Tax Service

When is written tax advice to clients necessary?

Answer 19

• When complex or confusion can occur
• Substantial $ values
• Non-routine transaction or occurrence

Question 20

AICPA Standards for Tax Service

As a tax preparer, what are the duties of being an AICPA member?

Answer 20

• Strive for legal minimum tax
• Be an advocate for entity’s position

Question 21

AICPA Standards for Tax Service

What does it imply when a tax preparer (member) signs the preparer’s declaration?

Answer 21

• Return is not misleading based on all info of which the member has knowledge

Question 22

AICPA Standards for Tax Service

What actions is a member required to take if a taxpayer improperly alters the tax return?

Answer 22

• Member must take no further actions & should consider the implications of taxpayers actions for any future relationships

Question 23

Who is responsible for disclosing the tax position on a tax return?

Answer 23

the taxpayer is responsible for deciding whether and how to disclose