Each year more tax practitioners are using the internet to generate business and share ideas with other professionals. This column reviews ethical considerations associated with activities such as advertising on social media, using the cloud to process and store client data, and networking through online business networking platforms.
CPAs' traditional sources of guidelines and rules for ethical behavior, such as Circular 230, Regulations Governing Practice Before the Internal Revenue Service (31 C.F.R. Part 10), the Internal Revenue Code, and the AICPA's Statements on Standards for Tax Services (SSTSs), for the most part do not directly address this paradigm shift from standard brick-and-mortar business practices to the integration of e-business techniques.
Advertising through social media
Social media has become a popular method for CPAs to advertise their services. However, practitioners need to be wary of potential ethical consequences that could easily be overlooked when posting to social media.
Three recent cases heard by the IRS's Office of Professional Responsibility (OPR) highlight some potential traps in social media advertising. OPR is the governing body responsible for interpreting and applying Circular 230. IRS employees are required to refer tax practitioners to OPR in certain situations, including for any violation of Circular 230 (Circular 230, [section]10.53(a)). OPR also receives referrals from state licensing authorities, tax professionals, taxpayers, and other sources.
The first OPR case involved a practitioner who advertised through online video-sharing platforms. The practitioner created video content and posted it online to generate business and help potential clients find the practitioner's firm. OPR deemed some of the content inappropriate because it portrayed IRS agents and officers in a negative light and recommended strategies that would unduly delay IRS proceedings. OPR found that these videos violated Circular 230, Section 10.30(a)(1), which states that a practitioner cannot "in any way use or participate in the use of any form of public communication ... containing a false, fraudulent, or coercive statement or claim; or a misleading or deceptive statement or claim."
In a settlement with OPR, the practitioner received a reprimand and was required to remove the videos from all video-sharing platforms.
The next case involved the use of metadata. Metadata is information contained inside of a website that is not visible without special effort. These data are often used for search engine...