R5 Ethics and Professional Responsibilites PT2

Question 1

What are the requirements for advertising?

Answer 1

1. No false or misleading advertising
2. Each solicitation must identify the solicitation as such
3. If applicable, identify the source of the information used to choose the recipient.
4. If advertising by radio and/or tv, keep for at least 36 months a recording of the actual broadcast transmission
5. If advertising by direct mail and/or e-commerce keep for 36 months a copy of the communication and a listing of those to whom the communication was sent.

Question 2

What are the requirements for written fee schedules?

Answer 2

If a practitioner publishes a written fee schedule, charge no more than the publish fee for 36 day period following the last date that the fees were published.

Any statement of fee information concerning matters in which fees may be incurred (such as fees for the practioner’s use of a tax return processor) must include a statement disclosing whether clients will be responsible for such costs.

Question 3

What are the “best practices” for tax advisors?

Answer 3

1. Communicate with the client regarding the terms of the engagement.
2. Establishing the facts and arriving at a conclusion supported by the law and the facts.
3. Advising the client about the import of the conclusion reached (for example whether the client will be able to avoid penalties)
4. Making sure that all members, associates, and employees of the firm follow procedures that are consistent with the above.

Question 4

Under what circumstances must the tax practitioner advise the client of penalties reasonably likely to apply?

Answer 4

With respect to penalties reasonably likely to apply for a position taken on a tax return must so advice if the practitioner either:

1. Advised the client with respect to the position or
2. Prepared or signed the tax return

Further, the practitioner must inform the client of any penalties “reasonably likely” to apply with respect to any document submitted to the IRS.

Question 5

Once the tax practitioner has informed the client of penalties reasonably likely to apply, what additional information must the practitioner provide to the client?

Answer 5

Must inform the client of:

1. The opportunity to avoid such penalties if the client so discloses the position taken and
2. The requirements for adequate disclosure.

Question 6

To what extent may the tax practitioner rely upon client-provided information?

Answer 6

General Rule: The practitioner may rely “in good faith without verification” upon client-furnished information.

However, the practitioner cannot ignore contradictory information know to the practitioner.

The practitioner must make reasonable inquires if client-furnished information appears questionable or incomplete.

Question 7

Does the tax practitioner have any obligation to inform the client about the client’s tax return errors or omissions?

Answer 7

Yes. The practitioner must advise the client promptly of any noncompliance, errors, or omissions in tax returns and other documents.

The practitioners must advise the client of the consequences under the law with respect to such noncompliance, errors, or omissions.

Question 8

What is a “covered opinion”?

Answer 8

A covered opinion is any written or electronic advice, other than excluded advice, concerning one or more federal tax issues and arising from:

1. A tax avoidance transaction that the IRS identified in IRS publication as a listed transaction or
2. Any partnership or any other entity, plan or arrangement whose principal purpose is federal tax avoidance or evasion or
3. Any PS or any other entity, plan or arrangement having as a significant purpose federal tax avoidance or evasion if the advice is:

(a) a reliance option
(b) a marketed opinion
(c) subject to conditions of confidentially or
(iv) subject to contractual protection

Question 9

What is a federal tax issue?

Answer 9

A question concerning (i) the federal tax treatment of any item or transaction or (ii) the value of property for Federal tax purpose.

Question 10

What is a SIGNIFICANT federal tax issue?

Answer 10

A federal tax issue for which:

1. The IRS has a reasonable basis for successful challenge, and
2. The resolution of the issue has a significant tax impact under any reasonably foreseeable circumstance

Question 11

With respect to the practitioner’s having procedures in place to assure compliance with Circular 230, when will the IRS institute disciplinary actions?

Answer 11

Failure to have these procedures in place will result in IRS discplinary actions under either of the following circumstances:

1. These procedures are not in place, and the result is a failure to comply or
2. the practitioner (i) knows or should have know, that others in the firm are not complying and (ii) fails to correct the noncompliance.