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1-25. According to Circular 230, the best practices rules are aspirational. Thus, a practitioner who fails to comply with best practices will not be subject to discipline by the IRS.
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1-26. Best practices include the following:
- Communicating clearly with the client regarding the terms of the engagement. For example, the advisor should determine the client’s expected purpose for and use of the advice and should have a clear understanding with the client regarding the form and scope of the advice or assistance to be rendered.
- Establishing the facts, determining which facts are relevant, evaluating the reasonableness of any assumptions or representations, relating the applicable law (including potentially applicable judicial doctrines) to the relevant facts, and arriving at a conclusion supported by the law and the facts.
- Advising the client regarding the importance of the conclusions reached, including, for example, whether a taxpayer may avoid accuracy-related penalties under the Internal Revenue Code if a taxpayer acts in reliance on the advice.
- Acting fairly and with integrity in practice before the IRS.
Pages 13–14
1-27. A practitioner must not give written advice if the practitioner:
- bases the written advice on unreasonable factual or legal assumptions (including assumptions as to future events),
- unreasonably relies upon representations, statements, findings, or agreements of the taxpayer or any other person,
- does not consider all relevant facts that the practitioner knows or should know, or
- in evaluating a Federal tax issue, takes into account the possibility that a tax return will not be audited, that an issue will not be raised on audit, or that an issue will be resolved through settlement if raised.
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1-28 This would be considered a conflict of interest and is generally prohibited under the AICPA Code of Professional Conduct. While you can accept the engagement if you disclose to both parties the nature of the relationship and obtain the consent of both parties, before accepting the engagement, you should consider your ability to act with objectivity and independence in discharging your responsibilities.
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1-29 A preparer tax identification number (PTIN) is required of a compensated individual who prepares or assists with the preparation of all or substantially all of a tax return or claim for refund must have a PTIN. Normally, the individual must be an attorney, CPA, EA, or tax return preparer must obtain a PTIN in order to file tax returns for clients
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1-30. Individuals who prepared tax returns for compensation must follow the rules under Circular 230