Question

Give the Circular 230 position for three of the following situations that are sometimes encountered in the tax profession: Taking an aggressive pro-taxpayer position on a tax return. Not having a quality review process for a return completed by a partner of the tax firm. Purposely delaying compliance with a document request received from the IRS. Not keeping up with changes in the tax law. Charging $1,500 to complete a Form 1040-EZ. When representing a taxpayer in a Federal income tax audit, charging a fee equal to one-third of the reduction of the tax proposed by the IRS agent. Representing both the husband and wife as to tax matters when negotiating their divorce. Advertising on the Web for new tax clients and including Se habla español in the text of the ads. Respond to at least two of your classmates’ posts. Be sure to include a comparison of the conclusions reached in your analysis versus those reached in your initial response (to the extent that the topics chosen by your classmate were similar).

Answer 1

a. Taking an aggressive pro-taxpayer position on a tax return.

Acceptable, as long as the position is not frivolous. If there is no substantial authority for the position being upheld in court upon a later review, it must be disclosed on the return using Form 8275.

b. Not having a quality review process for a return completed by a partner of the tax firm.

Unacceptable. The tax professional is required to apply best industry practices in preparing returns.

c.   Purposely delaying compliance with a document request received from the IRS.     

Unacceptable. The tax professional must provide information to the IRS in a timely fashion and cooperate in the proceeding.

d.    Not keeping up with changes in the tax law.     

Unacceptable. The tax professional must exercise due diligence in preparing and filing tax returns. This includes maintaining a satisfactory level of continuing education.

e.Charging $1,500 to complete a Form 1040-EZ

Unacceptable. The tax professional may not charge an unconscionable fee.

f. When representing a taxpayer in a Federal income tax audit, charging a fee equal to one-third of the reduction of the tax proposed by the IRS agent.        

Acceptable. Contingent fees are allowed for a tax professional’s services as to audited and amended returns, but not for preparing the original returns.

g. Representing both the husband and wife as to tax matters when negotiating their divorce.

Probably unacceptable, as the parties are likely to have a conflict of interest.

f. Advertising on the Web for new tax clients and including Se habla espanol in the text of the ads.

Acceptable, as long as the assertion about the second language is accurate.