Tax Preparation Regulations and Confidentiality

<p>Advice concerning matters within an individual's authority to practice before the IRS. (C)</p> Signup and view all the answers

<p>$60 per occurrence (C)</p> Signup and view all the answers

<p>Censure, suspension, or disbarment from practice before the IRS. (A)</p> Signup and view all the answers

<p>Dates returns were filed (D)</p> Signup and view all the answers

<p>IRS employees, federal agencies, and state licensing authorities. (B)</p> Signup and view all the answers

<p>A 12-month period beginning on July 1 each year (B)</p> Signup and view all the answers

<p>Noncriminal tax proceedings before the IRS and in federal court. (C)</p> Signup and view all the answers

<p>If all affected parties provide informed written consent within 30 days of knowledge of the conflict, the representation is not against the law, and the practitioner can provide diligent representation. (A)</p> Signup and view all the answers

<p>Only if the new client provides authorization. (C)</p> Signup and view all the answers

<p>When a practitioner's representation of one client is adverse to another client, or when responsibilities to another client or practitioner's personal interests materially limit representation. (D)</p> Signup and view all the answers

<p>Using reasonable care in engaging, supervising, training, and evaluating the person. (C)</p> Signup and view all the answers

<p>Disclose a conflict of interest to the IRS. (D)</p> Signup and view all the answers

<p>The representation cannot be prohibited by law, and the practitioner must reasonably believe that they can provide competent and diligent representation to each client. (D)</p> Signup and view all the answers

<p>A CPA, attorney, or enrolled agent (C)</p> Signup and view all the answers

<p>When the accountant is requested and retained by an attorney to aid in litigation (C)</p> Signup and view all the answers

<p>To document the procedures performed, evidence obtained, and conclusions reached by the accountant (C)</p> Signup and view all the answers

<p>The accounting firm that employed the accountant (A)</p> Signup and view all the answers

<p>When there is a valid subpoena or summons or the client provides consent (B)</p> Signup and view all the answers

<p>Another CPA partner of the same firm (D)</p> Signup and view all the answers

<p>Appropriate precautions such as a written agreement between the seller and the buyer (C)</p> Signup and view all the answers

<p>Both A and B (D)</p> Signup and view all the answers

<p>Base their advice on reasonable assumptions and all facts that are known or should be known. (A)</p> Signup and view all the answers

<p>The advice must be reasonable given the facts and circumstances, and the advisor should not have a conflict of interest. (A)</p> Signup and view all the answers

<p>The position is disclosed but does not have a reasonable basis. (C)</p> Signup and view all the answers

<p>The preparer took an undisclosed position on a tax matter, with no reasonable belief that it would be sustained. (B)</p> Signup and view all the answers

<p>The greater of $1,000 or 50% of the income to be derived. (A)</p> Signup and view all the answers

<p>When the preparer takes the shelter position without a reasonable belief that such positions would more likely than not be sustained. (D)</p> Signup and view all the answers

<p>Direct involvement is not a prerequisite for penalties. Those with supervisory responsibility are also at risk (C)</p> Signup and view all the answers

<p>It must consider all relevant facts that are known or should be known. (A)</p> Signup and view all the answers

<p>To establish a legal contract detailing the services, fees, and terms between a CPA and a client. (C)</p> Signup and view all the answers

<p>Compensatory monetary damages awarded to the injured party. (D)</p> Signup and view all the answers

<p>Third-party beneficiaries of the contract. (D)</p> Signup and view all the answers

<p>Breach of contract (B)</p> Signup and view all the answers

<p>The engagement letter lacked an essential element of a legal contract. (B)</p> Signup and view all the answers

<p>Ensuring the client achieves their business goals. (C)</p> Signup and view all the answers

<p>A private wrong resulting from breaching a duty imposed by society. (A)</p> Signup and view all the answers

<p>The CPA must use positive confirmation as the engagement letter supersedes professional standards. (C)</p> Signup and view all the answers

<p>When the third party is a primary beneficiary, known to receive the financial statements for a specific purpose. (A)</p> Signup and view all the answers

<p>Fraud involves intentional misrepresentation, while negligence is a failure to exercise due care. (A)</p> Signup and view all the answers

<p>If West Bank is considered within the foreseen class of users, and the loan is a similar transaction. (D)</p> Signup and view all the answers

<p>Both compensatory damages to cover losses and punitive damages to punish the intentional act. (B)</p> Signup and view all the answers

<p>CPAs are liable for fraud only if their negligence prevented its discovery, and if following professional standards would have detected the fraud. (A)</p> Signup and view all the answers

<p>A direct contractual relationship between the CPA and the plaintiff. (B)</p> Signup and view all the answers

<p>CPA knowledge on how the information will be used, and if bank B is part of foreseen class of users. (B)</p> Signup and view all the answers

<p>For negligence, a CPA is only liable for compensatory damage. For fraud, both punitive and compensatory damages are possible. (B)</p> Signup and view all the answers

Return preparers must retain copies of returns for 3 years after the return period closes.

Instead of retaining returns, preparers can keep a list with taxpayer names, IDs, tax years, and types of returns.

The return period is a 12-month period starting July 1 each year.

Failure to retain information or documents may lead to a $60 penalty for each occurrence.

Exists if a preparer's client representation is adverse to another client's interests.

Practitioners can represent conflicting interests if all affected clients give informed, written consent.

Diligence is required when preparing and filing returns, relying on others' work necessitates reasonable care.

Practitioners must not delay the prompt settlement of IRS matters; this demonstrates diligence.

Tax preparers need taxpayer authorization to use or disclose their information for purposes beyond IRS matters.

The confidentiality privilege extends to certain nonattorneys in tax-related matters but cannot block disclosures to regulatory bodies other than the IRS.

In noncriminal tax proceedings, taxpayers have common-law protections of confidentiality with federally authorized tax practitioners.

Includes CPAs and others permitted to represent taxpayers before the IRS in matters related to tax advice.

The privilege of confidentiality applies in federal court for noncriminal tax proceedings involving the U.S.

Tax preparers may face censure, suspension, or disbarment for willful violations of Circular 230 regulations.

When a CPA is disbarred from practicing before the IRS, notices are sent to relevant federal and state authorities.

The confidentiality privilege cannot prevent disclosures to regulatory bodies other than the IRS, even for nonattorneys.

Advice about federal tax matters based on reasonable assumptions and relevant facts.

Assumptions based on common sense and facts that can be verified.

Facts that are significant and necessary for providing accurate tax advice.

Using statements known to be incorrect or incomplete as the basis for advice.

Trusting the advice of another practitioner if it is reasonable and well-supported.

Severe consequences faced by tax return preparers for violations of tax laws.

A penalty for taking a position without substantial authority, usually $1,000 or 50% of income.

Failure to act with due care in preparing tax returns, leading to penalties.

A written agreement detailing CPA services, fees, and terms with a client.

Failure to fulfill the terms specified in a legal contract.

A CPA can be held liable to individuals not directly involved in the contract.

An obligation for the CPA to perform services non-negligently and carefully.

The CPA’s duty to make decisions based on their expertise without outside influence.

Legal responsibility of a CPA for damages caused by negligence.

A legal argument that performance is not possible due to unforeseen circumstances.

Regulations and guidelines that govern a CPA's conduct and services.

A party that directly benefits from CPA services, like a lender.

Parties that CPAs anticipate will rely on their work, even if not directly named.

CPAs can be liable to users they foresee will rely on their audits.

CPAs are liable for damages caused by intentional misrepresentation.

CPAs must comply with standards, or they're liable for not detecting fraud.

Plaintiffs must prove five key elements to establish fraud.

A deliberate act to mislead that results in damages.

Auditors must follow standards to avoid liability for failing to detect fraud.

Most states do not recognize privilege for accountant-client communications.

Protects communications between attorneys and accountants for litigation support.

Confidential records documenting an accountant’s engagement performance.

Working papers are considered the property of the accountant.

Third parties may subpoena working papers in states without privilege protections.

AICPA members cannot disclose client information without consent.

Exceptions include legal compliance and professional practice reviews.

CPAs can disclose information for reviews during sales or mergers.