Ethical Standards & Professional Conduct Flashcards

Under Circular 230, a tax practitioner who discovers a client made an error on a prior year return must:

Answer: Promptly notify the client of the error and its consequences

Circular 230 §10.21 requires practitioners to promptly advise the client of the error and the consequences of not correcting it.

A CTP is approached by a client who wants to claim a deduction the practitioner believes has no legal basis. The practitioner should:

Answer: Explain the lack of legal basis and decline to claim it unless there is at least a reasonable basis

Practitioners may not claim positions that lack at least a reasonable basis, per Circular 230 §10.34.

Which action constitutes 'practice before the IRS' under Circular 230?

Answer: Corresponding with the IRS on behalf of a taxpayer

Communicating or corresponding with the IRS on behalf of a taxpayer constitutes practice under Circular 230.

A tax professional who charges a contingent fee for preparing an original tax return is:

Answer: Prohibited under Circular 230

Circular 230 §10.27 generally prohibits contingent fees for preparing original tax returns.

A practitioner's duty of confidentiality under IRC §7525 applies to:

Answer: Tax advice given by practitioners authorized to practice before the IRS in non-criminal proceedings

IRC §7525 extends a limited privilege to federally authorized tax practitioners for non-criminal tax advice proceedings.

Under the AICPA's Statements on Standards for Tax Services, a tax practitioner should:

Answer: Use judgment to ensure positions have at least a realistic possibility of being sustained

AICPA SSTS require practitioners to use professional judgment and recommend positions with a realistic possibility of being sustained.

A CTP who is suspended from practice before the IRS may still:

Answer: Prepare tax returns (but not represent taxpayers before the IRS)

Suspension bars representation before the IRS but does not automatically prevent preparing tax returns.