Tax Ethics and Professional Standards Flashcards

Which Treasury Department circular governs the conduct of practitioners before the IRS?

Answer: Circular 230

Treasury Circular 230 sets forth the rules and ethical standards governing attorneys, CPAs, enrolled agents, and other practitioners before the IRS.

Under Circular 230, a tax practitioner must NOT knowingly:

Answer: Submit false or misleading documents or information to the IRS

Circular 230 explicitly prohibits practitioners from knowingly submitting false or misleading documents or information to the IRS.

The AICPA Statements on Standards for Tax Services (SSTS) provide guidance for CPAs on:

Answer: Professional standards for tax practice, including recommendations and return positions

The SSTS provide ethical and professional guidance for CPAs in tax practice, covering areas such as return positions, estimates, and departure from prior-year positions.

A tax preparer who takes an unreasonable position on a tax return that results in an understatement of tax may be subject to which penalty?

Answer: Section 6694 preparer penalty

IRC Section 6694 imposes penalties on tax return preparers who take unreasonable positions resulting in understatements of tax.

What is the standard for a 'more likely than not' tax position in tax practice?

Answer: The position has greater than a 50% chance of being sustained on the merits

'More likely than not' means the position has a greater than 50% probability of being sustained upon examination.

Which action by a tax practitioner constitutes a conflict of interest under Circular 230?

Answer: Representing two clients whose tax interests are directly adverse without proper consent

Representing clients with directly adverse interests simultaneously is a conflict of interest that requires informed written consent from all affected clients under Circular 230.