Tax practitioners should observe the highest level of ethical requirements since they are the final individuals who determine the amount of tax the taxpayer will pay to the IRS. They should possess the necessary skills and professionalism that a tax practitioner requires carrying out their functions. The following are some of the ethical guidelines which should be observed by tax practitioners in performing their duties.
Conforming to legal requirements
All the tax practitioners should follow the legal requirements put in place by the IRS during the preparation of tax returns. They should ensure that both their customers and themselves comply with the necessary legal and non-legal requirements. By doing this, they will guarantee the protection of their clients and themselves against litigation issues arising due to lack of adherence to rules and standards of tax practitioners. Tax professionals should ensure that there is the prompt disposition of matters to the IRS. This will enable them to avoid unreasonable delays to the IRS, thereby escaping fines and penalties applicable due to these delays. By Conforming to these legal requirements, they will ensure they provide a good public image to their clients and also the IRS. (AICPA) (Thomsone Reuters)
Confidentiality
IRS imposes criminal penalties on tax practitioners who disclose their clients’ information or use that information illegally or without the prior consent of the customer. The consent from the customer for it to be valid should include the following important aspects, a knowing and voluntary signature and date of the taxpayer with a limited time of one year. The consent should also indicate the purpose of the disclosure and to who the recipient of the disclosed information is. As such, all tax practitioners should adhere to the code of confidentiality except when issued with a court order during a court proceeding to reveal the client information. Nevertheless, all the clients’ information should remain confidential. (AICPA)
Integrity and objectivity
Tax practitioners should subject themselves to the highest form of integrity and objectivity in carrying out their functions. They should ensure that before taking on to represent a client before the IRS that the interests of one client may not be directly adverse to another client who is represented by the same tax practitioner. A tax practitioner may still serve the clients with conflicting interest. The act of serving clients with conflicting interest may still be possible if it is evident that law does not prohibit the representation and that the tax practitioner reasonably believes that he or she can provide competent and diligent services to the affected clients. The affected clients may accept representation from the tax practitioner by waiving the conflict of interest and by giving informed consent and confirmed in writing during the time of existence of the conflict known by the practitioner. The tax practitioner should not knowingly misrepresent information or enforce his or her judgment to others. In observing the issue of integrity, the primary issue discussed in tax services is the issue of conflict of interest between the client and the tax practitioner. A tax practitioner should ensure that before accepting a customer, there is no conflict of interest between him and the client so as for to conduct his work diligently with no repercussions later on. (AICPA) (IRS)
All tax practitioners should observe the concept of due diligence during preparation and submission of tax reports to the IRS. They should take reasonable care and precaution in the preparation of tax returns. In most occasions, tax practitioners usually rely in good faith on the information provided by the client or other third parties in the preparation of tax returns. However, in other situations, the tax practitioner may be required to conduct further inquiries to validate the information collected from third parties or the clients’ records. They should ensure that all matters relating to tax reports do not have misleading information and all computations in the tax report are of accurate nature. Following the concept of due diligence will enable both the tax practitioner and his or her client to avoid litigations against the IRS. (Thomsone Reuters) (AICPA)
Advice to clients
Tax practitioners should ensure that they give accurate advice to their customers and also ensure that they inform customers on the possible penalties which are subjected to for evading taxes or providing misleading information to the IRS. If there is a determination that the Tax Practitioner willfully assisted their client in evading payment of taxes, then the Tax practitioner will face legal charges and if found guilty will be subjected to fines or jail term. (AICPA)
Positions on tax returns
The tax practitioner should ensure that the client he or she represents has sufficient knowledge of all material facts and by those facts, he or she has concluded that it is the most appropriate. A tax practitioner may not willfully or recklessly sign a tax return or claim for refund on a tax position that is unreasonable with an attempt to evade payment of taxes. Some of the knowledge and issues on positions of tax returns includes the type of depreciation and amortization method, type of accounting procedures and type of installment reporting on gains. The tax practitioner should ensure that the advice given to the client is the best position available to the customer and that the advice given does not cause the Taxpayer to evade the payment of taxes which might cause both the tax practitioner and the taxpayer to face legal charges. The above examples are under the AICPA SSTS NO1 and some of them under circular 230 sections 10.34, 10.35 and 10.37. (AICPA) (IRS) (Thomsone Reuters)
Knowledge of errors
During preparation of tax returns, and the tax practitioner discovers an error or an omission from previous tax returns of the client, he or she should advise the customer on the possible consequences of neglecting such an error or omission. The tax practitioner has an obligation to inform the client of the potential consequences, whether the error resulted in underpayment or overpayment of tax. While both Circular 230 and SSTS NO6 require the tax practitioner to advise the customer on the potential consequences of the errors, SSTS NO6 goes even further to advice the tax practitioner to inform the client on ways of correcting those errors and omissions, but Circular 230 does not impose that duty on tax practitioners. (AICPA)
Use of estimates
Tax practitioners may use estimates for the preparation of a tax report if it is evident that use of accurate figures may not be possible or is not prohibited by law. The use of estimates should not provide misleading information on the degree of factual accuracy. Some particular circumstances may require a tax practitioner to issue disclosures so as not to mislead the tax authority. These events include the death of a taxpayer before the filing of tax returns; there is litigation pending that bears on the return or records have been destroyed due to computer failure. (Thomsone Reuters)
Answers to questions on returns
A tax practitioner should ensure all matters on tax return forms are answered. However, AICPA SSTS NO 2 states that there exist reasonable grounds for the omission of response in a tax return form which apply to a taxpayer. Some of these grounds are, the information is not readily available and will not have a significant effect on the filing of returns, and genuine uncertainty exists about the meaning of a question in a particular return. A tax practitioner should not omit answers just because it will prove disadvantageous to the client. (Thomsone Reuters)
Return of clients Records
A tax practitioner has a prior obligation to return all the necessary records that a client needs to meet his tax obligations at the request of the customer. However, he may retain copies of those documents which have been already returned to the client. In case, there is a dispute between the tax practitioner and the client over fees, the obligation of the tax practitioner of returning clients records is not relieved. However, if the state allows, the tax practitioner may retain the clients’ records until his or her fees for services rendered are paid. Nevertheless, the tax practitioner still needs to provide the customer with reasonable access to the files for the client to meet his or her tax obligation. (Department) (IRS)
Fees charged
A tax practitioner may not charge any unreasonable fees for services rendered to the customer in connection with any matter before the IRS. However, he may charge contingent fees in context with the following situations, about judicial proceedings arising under the internal revenue code and also concerning a claim for credit or refund filed after the determination of statutory interest or penalties assessed by the IRS.
The above are some of the ethical guidelines a tax practitioner is required to observe to ensure efficient service delivery to both their clients and the IRS. These guidelines will enable them to keep the highest level of professionalism in delivering of their services to the public.
Works Cited
AICPA. The tax advisor. 21 February 2016 http://www.thetaxadviser.com/issues/2014/feb/tpr-feb2014.html>
IRS. "Circular NO 230." 2014.
Thomsone Reuters. Ethics and responsibilities of tax professionals. Texas: Thomson Reuters, 2016.
