REG - Ethics and Responsibilities in Tax Practice Flashcards
Circular 230
Circular 230 contains the IRS’s rules of practice governing CPAs and those who practice before the agency
Practicing entails primarily preparing and filing documents, and communicating/meeting w/IRS representatives on behalf of taxpayers
Who may practice before the IRS?
- Attorneys
- CPAs
- Enrolled agents
- Enrolled actuaries -> their practice is generally limited to issues related to qualified retirement plans
- Enrolled retirement plan agents -> their practice is limited to issues related to employee plans and to IRS forms
*None of these individuals must be under suspension or disbarment
Furnishing information
A practitioner must promptly submit to the IRS any records or information that its agents/officers properly and lawfully
Exception: the practitioner doesn’t have to do the above if he/she believes in good faith and on reasonable grounds that the records or info are privileged
Client’s omission
If your client has not complied w/the laws made or made an error/omission on tax form -> you must promptly notify the client of the error and consequences. However, you do not need to notify the IRS and to do so, you would need client’s permission
a CPA who prepares a federal income tax return for a fee must…
keep a completed copy of the return for a minimum of 3 years
A practitioner may not retain a client’s record for a nonpayment of fees
IRS imposes penalty upon income tax return preparers (TRPs) for…
- failing, w/out reasonable cause, to provide the client w/a copy of an income tax return
- failing, w/out reasonable cause, to sign a client’s tax return as a preparer
- Negotiating a client’s tax refund check when the CPA prepared the tax return
Note, understating a client’s liability due to an error in calculation will not result in a CPA incurring an IRS penalty
in preparing a tax return a CPA may in good faith…
rely upon information furnished by the client or third parties without further verification
Elements of a Breach of Contract Lawsuit
- Existence of an enforceable contract;
- Plaintiff client complied w/contractual obligations
- Defendant accountant breached the contract; and
- Damages were caused by the breach
Examples of breach:
- Accountant failed to complete the tax return as promised
- Accountant filed the tax return late
- Accountant filed the tax return filled w/errors
- Accountant gave faulty tax planning advice to client
preponderance of evidence
plaintiff need only establish that the alleged facts are more likely true (>50%) than not true
To win a negligence case, a plaintiff must prove the following 4 elements by a preponderance of the evidence
- Defendant accountant owed a duty of care to the client plaintiff
- Defendant breached the standard of care
- The breach proximately causes an injury -> proximate cause has 2 parts
- “but for” causation -> courts can say that “but for” the accountant’s breach of the duty of due care, the loss wouldn’t have occurred
- legal “proximate” causation -> the injury was a reasonably foreseeable result of the breach
- Plaintiff client suffers damages
scienter
legal term for intent or knowledge of wrongdoing
the AICPA can’t revoke the right to prepare a tax return