Question 1: The governing sources of guidance used in tax practice include the following; the AICPA enforceable tax ethics, the Internal Revenue Code, the Circular 230 and state licensing boards. The guidance offered apply to every individual that prepares tax returns as the information obtained in these governing sources of guidance is used to provide guidance on matters dealing with tax ethics and all the professional standards that are applicable for all tax practitioners.
Question 2: The ethical duties that are outlined in the Statements on Standards for Tax Services (STSS) and that deal with issues concerning tax return preparation, taxpayer representation and tax advice being given include the following: Carrying out investigations on clients, ensuring all the information obtained is preserved as confidential, to ensure all the positions involved with the tax transaction have adequate authority. Other ethical duties include; conclusive and proper stress on both oral and written communication and finally all research must be documented.
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Question 3: The AICPA Code contains rules and regulations that are enforceable and that govern every AICPA member in both public practice and the industry. However, when it comes to the Internal Revenue Service’s (IRS) Circular 230, it applies and covers all CPAs involved with federal tax practice. Some of the elements obtained in the IRS’s Circular 230 that are not located in the STSS include; the rules that are applied during disciplinary proceedings and sanctions dealing with any violation of the regulations.
Question 4: When the taxpayer’s information appears to be different/ incomplete or incorrect, the tax preparer is expected to immediately inform the taxpayer on the known error or mistake. The tax preparer is also expected to advise the taxpayer on the consequences of the error or mistake that has been done in regards to the Code and regulations.
Question 5: A fiduciary relationship refers to a relationship between two individuals that is composed of trust and confidence and brings about honesty and forthrightness. This type of relationship involves a greater degree of care and responsibility from the party that has been trusted. A fiduciary refers to any individual or organization that owes another the duties that are made up of trust and good faith. The fiduciary is expected to act in a manner that involves considering the other party’s best interest. Every Certified Public Accountant (CPA) is classified as a fiduciary. An example of a fiduciary relationship includes that of a testator and a trustee but in terms of an accountant the relationship can be between an investment fiduciary.
Question 6: The advantages that are involved when setting up a trust include; the assets that the individual has can be properly managed, the assets that the individual has can be protected from creditors or issues like breakdowns during marriages, the trust can be used as a means of controlling distributions and finally trusts help one’s assets to avoid probate matters this is because assets held in trusts are secluded and separated from one’s estate (Cestnick, 2014).
Question 7: The legal consequences that involve being a fiduciary are that one is expected to act in a manner that portrays the best interest of the customer or client, the fiduciary is also expected to manage the assets allocated in such a manner that the benefits gained are not directed to the fiduciary but to the owner of the assets. This is also referred to as a prudent person standard of care. These legal consequences would cause one to hesitate to take up a role as a fiduciary because of the aspect of acting only in a manner that puts the client first.
Question 8: The fiduciary issues that are related to tax practices include; the practices that are prudent for investment actors, this deals with the tax consultant providing investment advice to the client. The other issue deals with the prudent practices for stewards that are in investment; this deals with management of decision making in terms of investments.
References
Cestnick, T. (2014, February 12). The top 10 reasons to set up a trust . Retrieved August 25, 2017, from The Globe and Mail: https://www.theglobeandmail.com/globe-investor/personal-finance/taxes/the-top-10-reasons-to-set-up-a-trust/article16832572/ .
