AICPA tax standards strengthened.

• Author: Stromsem, William R.

REVISED AICPA STATEMENTS ON STANDARDS for Tax Services (SSTS) became effective on January 1, 2010, and provide high, enforceable ethical responsibilities for CPAs in providing tax services. The SSTS were updated for changes in external standards and clarified for points raised by practitioners about the prior SSTS.

The statements provide guidance to CPAs as to good standards of tax practice and assurance to the public of the high self-regulatory standards to which CPAs hold themselves. CPAs need to follow the SSTS or face potentially severe sanctions. Failure to follow the SSTS can result in disciplinary action under the AICPA Code of Professional Conduct Rules 201 (general standards) and 202 (technical standards), with possible sanctions up to termination of AICPA membership. A CPAs state licensing authority can also review any violation for termination of the right to practice. Even before the SSTS were binding under the Code of Professional Conduct, the predecessor Statements of Responsibilities in Tax Practice were cited in civil liability cases as the professional guidelines of good practice.

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Seven statements provide guidance on various aspects of tax practice in all jurisdictions where CPAs practice:

* Statement No. 1 describes the level of authority needed to prepare or sign any tax return or recommend a tax return position;

* Statement No. 2 addresses the level of effort required from CPAs in answering all questions (broadly defined) in a tax return, including situations in which an answer may be omitted;

* Statement No. 3 discusses when CPAs may rely, without verification, on information furnished by the taxpayer when preparing a return;

* Statement No. 4 covers CPAs using taxpayer estimates in preparing tax returns;

* Statement No. 5 deals with recommending positions that are contrary to an administrative proceeding or court decision with respect to the taxpayer's prior return;

* Statement No. 6 sets forth actions that a CPA should take upon becoming aware of an error in a prior return or of the failure to file a required return; and

* Statement No. 7 deals with the form and content of advice to be provided to taxpayers and considers the circumstances in which a member should communicate with a taxpayer about the effect of subsequent...