SSTS

Question 1

Reasonable basis =

Answer 1

> 20% chance

Question 2

Realistic possibility =

Answer 2

> 33% chance

Question 3

Under what circumstances can a CPA recommend a tax position to a tax client?

Answer 3

• There’s a realistic possibility it will be sustained or

- There’s a reasonable basis, and it is disclosed.

Question 4

What things should a CPA never tell a tax client?

Answer 4

• This isn’t right, but the IRS never checks.

- This isn’t right, but we’ll use it to bargain the IRS down.

Question 5

What format should a tax preparer’s advice to a client be given in?

Answer 5

No standard format required.

Question 6

When are written communications with the client preferable?

Answer 6

They are preferable for complicated or important matters.

Question 7

What is the tax preparer’s responsibility to inform the IRS of an error in a prepared tax return?

Answer 7

The member need not, and may not, do so without client’s permission, except where required by law.

Question 8

What is the responsibility of a CPA regarding errors contained in a previously filed tax return?

Answer 8

Advise a client of errors contained in a previously filed tax return.

Question 9

In what situations is it impractical for a taxpayer to obtain exact data for the preparations of tax returns?

Answer 9

Ex.)

• Numerous transactions involve very small amounts.
• Records are missing/precise information is unavailable.

Question 10

When can estimates be used on a tax return?

Answer 10

When:

• Obtaining exact figures would be excessively expensive or impractical
• The estimate is reasonable given known facts
• The estimates do not imply greater accuracy than exists.

Question 11

List the circumstances in which use of estimates on a tax return must be disclosed.

Answer 11

• Taxpayer has died/is ill at the time of filing.
• Taxpayer has not received a K-1 for a flow-through entity at the time of filing.
• Litigation bearing on the return is pending.
• Relevant records have been destroyed.

Question 12

In what situation are inquiries by the tax preparer appropriate?

Answer 12

Inquiries should be made if there is a need to determine that a specifically required condition by the IRC or other legislation, such as maintaining books and records or substantiating documentation, has been satisfied and to obtain information when the material furnished appears to be incorrect, incomplete, or inconsistent.

Question 13

What is a preparer’s obligation regarding verifying information provided by the tax payer.

Answer 13

A preparer should not ignore the implications of information furnished and should make reasonable inquires if the information furnished appears to be incorrect, incomplete, or inconsistent either on its face or on the basis of other facts known to the tax preparer. Further, a member should refer to the taxpayer’s returns for on or more prior years whenever feasible.

Question 14

What does SSTS No.3 of the AICPA state?

Answer 14

A member may in good faith rely without verification upon information furnished by client or third parties, provided the member’s obligations are met.

Question 15

What is the rationale for SSTS No. 2 of the AICPA?

Answer 15

• Omission tends to detract from the quality of the return.

- Member must sign the preparer’s declaration stating that the return is true, correct, and complete.

Question 16

What does SSTS No. 2 of the AICPA state?

Answer 16

“A member should make a reasonable effort to obtain from the taxpayer the information necessary to provide appropriate answers to all questions on a tax return before signing as preparer.”

Question 17

List the grounds on which a CPA can omit an answer on a tax return?

Answer 17

• Information not readily available and the answer is not significant in terms of liability.
• There is genuine uncertainty as to meaning of the question in relation to a particular return.
• The answer is voluminous and the return states that data will be supplied upon examination.