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1-40. SSTS No.1 provides that a member should have a good faith belief that a recommended position has a realistic possibility of being sustained if challenged. In addition, a member may recommend a tax return position if the member concludes that there is a reasonable basis for the position and advises the taxpayer to appropriately disclose that position. Thus, a member may prepare or sign a tax return that reflects a position if a member has a reasonable basis for the position and that position is appropriately disclosed.
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1-41. Reasonable grounds for omitting an answer on a return include cases in which:
- The pertinent data are not readily available and are not significant to the determination of taxable income or loss or the resulting tax liability.
- The taxpayer and the member are genuinely uncertain as to the meaning of the question on the return.
- An answer is voluminous; however, assurance should be given on the return that the data can be supplied upon request.
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1-42. In preparing a return, the member may ordinarily rely upon information that the taxpayer has provided. Although an examination of supporting documents is not required, the member should encourage the taxpayer to provide supporting documents, whenever appropriate.
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1-43. A member may prepare tax returns that involve the use of the taxpayer’s estimates, if, under the circumstances, it is impractical to obtain exact data and the estimated amounts appear reasonable to the member. Estimates may be appropriate where the keeping of precise records with respect to numerous items of small amounts is difficult to achieve, where data is not available as of the time for filing the return, or certain records are missing.
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1-44. The selection of the treatment of an item on a tax return should be based upon the facts and the law that is applicable at the time a return is prepared. Unless the taxpayer is bound by the IRS to the treatment of an item in later years, such as by a closing agreement, the disposition of an item in a prior year’s audit does not govern the treatment of a similar item in a later year’s return. Therefore, a member may sign a return that contains a departure from a treatment that was required by the IRS in a prior year return, provided the standards under SSTS No. 1 are adhered to.
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1-45. When a member learns of an error in a previously filed tax return, or the member becomes aware of an error during an administrative proceeding, he or she must advise the taxpayer promptly. This advice should include a recommendation of the appropriate measures that the taxpayer should take. The member is not obligated to inform the IRS of the error and may not do so without the taxpayer’s permission, except as required by law.
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1-46. SSTS No. 7. It states that the member must use judgment that reflects professional competence and serves the taxpayer’s needs.
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1-47. No, under Circular 230 and the SSTSs, advice may be either written or oral. SSTS No. 7 provides information on the form and content of advice to taxpayers for AICPA members and provides a list of factors that members should consider in determining whether the advice is written or oral.
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1-48. No, tax compliance work for an audit client is allowed. It must be approved by the audit committee of the issuer.
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1-49. Neither the ABA Code nor the Model Rules have the force of law. Each was designed to be adopted by the appropriate agencies that govern the practice of law in the various states. In many jurisdictions, the state Supreme Court is charged with policing the practice of law. In other states, the legislature assumes this responsibility.