Flashcards in Professional Responsibilities Deck (15):
What is the authority on tax treatment of an item?
Internal Revenue Code & Statutory provisions
Revenue rulings & U.S. Treasury Department
What is a listed transaction?
A transaction specifically identified by the Secretary of the U.S Treasury Department as a tax AVOIDANCE transaction
More likely than not means?
There is a greater than 50% likelihood of a tax position being upheld in courts
More stringent than substantial authority
What is a reportable transaction?
Information is required to be included in a tax return because these type of transactions have potential to be a tax avoidance (legal) or tax evasion (illegal)
What is substantial authority?
An objective standard. Greater than 33% but less than 50%
Penalty for understatement of taxpayer liability
$1,000....if due to unreasonable position, lacks reasonable basis and should have knowledge of unreasonable positron
$5,000 for willful or reckless (fraud)
When is tax paperer allowed to disclose client information?
Prep of state & local tax returns
Quality peer reviews, computer processing & admin orders
Who is Circular 230 for?
Tax practitioners (attorneys, CPAs, enrolled actuaries and appraisers)
What is a covered opinion?
A written or electronic advice...it is a listed transaction or arrangement the principal purpose of which is fed tax avoidance or evasion.
can be called a reliance or marketed opinon
What is a reliance opinion?
A written advice..more likely than not (greater than 50%) the significant fed tax issue will be resolved in taxpayers favor
What is a marketed opinion?
To promote or market..it is NOT a listed transaction
Requirements for a covered opinion?
Cannot be based upon reasonable assumptions
Opinion must relate to applicable law to the facts
Each significant federal tax issue
Cannot take into account the possibility that it will not be audited or issue raised
What is the role of the State Board of Accountancy?
Sole power to give and revoke license
What is the disciplinary power of the state boards?
After investigation, state board can conduct a hearing and the accountant is required to a due process of law and are subject to a judicial review.