Chapter 18 - Questions (Ethics) Flashcards
Where is responsibility in ensuring the tax code is properly applied?
With the tax preparer.
What are some specific situations in which tax preparers must exercise due diligence?
Preparing, reviewing, and filing tax returns and other documents related to IRS matters.
Determining the correctness of oral or written representations the tax preparer makes to the department of the treasury.
Determining the correctness of oral or written representations the tax preparer makes to taxpayers with reference to any matter administered by the IRS.
What fulfills the contemporaneous records?
Immediate documentation of your questions and each taxpayer’s responses.
Is it required to document questions and answers?
It is specifically required for EITC, but should always be done if you think the IRS might question any item on the return.
Are notes taken in the software private to the tax professional?
No, the taxpayer must have access to anything in their file. Write notes in a professional manner.
What is a reasonability check?
When a tax preparer considers the taxpayer’s information before making any conclusions - a reaonability check should be applied to the individual answers and the whole tax picture. Look at the factgs and ask “Does this make sense?”
If a return does not meet your reasonability check what should you do?
Do not sign the return. make sure to complete a thorough interview and document questions and answers about significant issues, especially when includes the EITC.
When is a tax return accurate and complete?
When all income is included and the taxpayer qualifies for all deductions and credits that are claimed.
Is applying due diligence auditing taxpayer records?
No, not auditing. Just a thorough interview.
If a taxpayer gives information to purposely deceive the IRS, what is that?
That is fraud.
If you think a taxpayer is committing fraud, what should you do?
Do not sign a return that is fraudulent. Do not assist in unlawful activity.
What are the main two things a tax preparer may not do ethically?
Sign a tax return that is frivolous (obviously improper or unlawful).
Take a position advising a change on a tax return that does not have a greater than 50% likelihood of being sustained on its merits.
Apply what in order to distinguish between a taxpayer overwhelmed by other responsibilities, and one with an intent to commit fraud?
A reasonability check
What are the confidentiality requirements for tax preparers?
All tax returns and tax info remain confidential. Tax returns, tax information forms, declaration of estimated tax, supporting schedules, attachments, or lists filed with the IRS.
Is a taxpayer being a client a confidential thing?
Yes, even the fact that they are a client must not be disclosed without the taxpayer’s express consent.
What are the two levels of privilege in the field of taxation?
Attorney-client privilege exists between attorneys and their clients.
IRC 7525 privilege applies to communications and information between certain federally authorized tax preparers and their clients. Specifically Attorney, enrolled actuary, certified public accountant, appraiser, enrolled agent.
Does the privilege under 7525 exist for tax preparers?
It is a narrow privilege. Exists between any federally authorized tax preparer and their client. It applies only to tax advice, not to tax return preparation, state tax matters, criminal tax matters, or corporate tax matters.
Under what specific circumstances, may a tax preparer disclose confidential tax return info?
Related party exception
Written Consent Exception
What relationships apply under the Related Party exception for confidentiality
Husband and wife, parent and child, grandchild and grandparent, partner and partnership, trust or estate and beneficiary, trust or estate and fiduciary, corporation and shareholder, or members of a controlled group of corporations.
What is the related party exception
in situations where tax preparers are preparing returns for two or more related parties, they may use information obtained from the first return and disclose it to the second party in the form it appears in order to prepare the second return. If the taxpayers are related parties and the first taxpayer’s interest in the information is not adverse to the second taxpayer and if the first taxpayer has not expressly prohibited the disclosure or use of the information.
What is the written consent exception?
A tax preparer may disclose otherwise confidential information about a taxpayer if he or she obtains written consent. Must be dated and signed by the taxpayer and expressed consent must be one of these situations:
To a third person as directed by the taxpayer
In preparing a tax return for a second taxpayer, not a related party.
To other tax preparers or administrative personnel employed by the same tax preparation firm, to the extent necessary for quality or peer review and processing the return.
Can a tax preparer release a joint return to either or both spouses?
Yes, the return is joint, so belongs to each spouse.
Is there privilege between a taxpayer and a tax preparer who is a Registered Tax Return Preparer?
No priilege exists. A Registered Tax Return Preparer must promptly respond to proper requests for records and information. They must:
Not neglect or refuse to submit available records and info upon a lawful and proper request by the IRS.
Not interfere or attempt to interfere with any proper or lawful efforts of the IRS to obtain information.
If the preparer knows the taxpayer has not complied with a tax law, promptly advise the taxpayer of any noncompliance and the consequence of such.
If requested records or information are not in the tax preparer’s possession, or are outside of his/her control, what must they do?
Promptly notify the IRS. Any available information regarding the identity of the person possessing the records or information must be provided to the IRS.
