1 Tax Practice, Regulation, and Ethics  Elements of tax practice  Rules and ethics in tax practice  Circular 230  AICPA Code of Professional Conduct  AICPA Statements on Standards for Tax Services (SSTS)  Sarbanes-Oxley and taxation  Texas State Board of Public Accountancy  Non-regulatory ethical behavior models  Tax research by CPAs

2 SSTS  Statements on Standards for Tax Services (SSTS) issued by AICPA  Intended to supplement AICPA Code of Professional Conduct and Circular 230

3 SSTS  Tax return positions (SSTS 1)  Answers to questions on returns (SSTS 2)  Certain procedural aspects of preparing returns (SSTS 3)  Use of estimates (SSTS 4)

4 SSTS  Departure from a position previously concluded in an administrative proceeding or court decision (SSTS 5)  Knowledge of error: Return preparation (SSTS 6)  Knowledge of error: Administrative proceedings (SSTS 7)  Form and content of advice to clients (SSTS 8)

5 SSTS 1  Should have good-faith belief that position has a realistic possibility of being sustained  Authority does not have to meet IRC §6662 definitionIRC §6662  If standard is not met:  Disclose position in return, and  The position must not be frivolous

6 SSTS 2  Reasonable effort to obtain information to answer all questions  Exceptions  Data not readily available  Meaning of question uncertain  Answer too voluminous Not acceptable on Form 1120

7 SSTS 3  May rely on client information without verification, unless information appears to be incorrect, incomplete, or inconsistent  Not required to examine supporting documents

8 SSTS 4  Use estimates if impractical to obtain exact data and if estimates appear reasonable  Disclosure of estimates may be necessary:  Records destroyed by disaster  K-1’s not received

9 SSTS 5  Prior year disposition may not prevent recommending a different treatment of a similar item in a later year  CPA and IRS not bound to act consistently with previous position, IRS usually is consistent, however

10 SSTS 6  CPA must inform client upon discovery of an error  Recommend appropriate measures for client to take  Not the CPA’s duty to inform the tax authority about error

11 SSTS 7  Request client’s permission to disclose error to the IRS  If client refuses, CPA should consider withdrawing from engagement

12 SSTS 8  Judgement reflects professional competence  Use written communication for complex matters  Oral communication okay for simple matters