SSTS # 4: Use of Estimates

Question 1

This statement sets forth the applicable standards for members when using:

Answer 1

the taxpayer’s estimates in the preparation of a tax
return.
A member may advise on estimates used in the preparation of a tax return, but the taxpayer has the responsibility to provide the estimated data.
*** Appraisals or valuations are not considered estimates for purposes of this statement.

Question 2

Unless prohibited by statute or by rule:

Answer 2

a member may use the taxpayer’s estimates in the preparation of a tax return if it is not practical to obtain exact data and if the member determines that the estimates are reasonable based on the facts and circumstances known to the member.
*** estimates should be presented in a manner that does not imply greater accuracy than exists.

Question 3

Some examples of unusual circumstances that require disclosure include the following:

Answer 3

a. A taxpayer has died or is ill at the time the return must be filed.
b. A taxpayer has not received a Schedule K-1 for a pass-through entity at the time the tax return is to be filed.
c. There is litigation pending (for example, a bankruptcy proceeding) that bears on the return.
d. Fire, computer failure, or natural disaster has destroyed the relevant records.