Ethics in tax practice.

• Author: Holub, Steven F.

Editor's note: Mr. Holub is the former chair of the AICPA Tax Division's Tax Practice Management Committee. Mr. Muirhead is the Chair of the AICPA Tax Division's Tax Practice Improvement Committee. The editors thank Valrie Rispoli for her contribution to this column. Ms. Rispoli is a member of the Tax Practice improvement Committee.

For more information about this column, contact Mr. Holub at (813) 222-8555 or stevenh@apcpa.com, or Ms. Rispoli at (956) 544-2706 or vsrispoli@aol.com.

Many tax advisers think they know all there is to know about ethics: do not lie, cheat or steal. They sit through required ethics courses every couple of years, but often feel that the material on independence and objectivity applies only to attest engagements, not to income tax returns. However, the AICPA Code of Professional Conduct (CPC) applies to all members. In fact, the membership adopted it to provide guidance to its members, whether in public practice, government, industry or education, in the performance of professional responsibilities; see www:aicpa.org/ about/code/preamble.htm.

The CPC has two sections--the Principles, which provide the framework--and the Rules--which govern professional service performances; see www.aicpa.org/about/ code/comp.htm. The Rules generally apply to all professional services performed by AICPA members within the U.S. Rulings and interpretations have been added over the years for clarification and further guidance. The CPC is available on the AICPA's website, at www.aicpa.org/members/ div/ethics/index.htm.

Section 52--Article I: Responsibilities

Article I calls on practitioners to recognize their responsibilities to the public, clients and colleagues, and to commit to honorable and ethical behavior, as well as to exercise professional and moral judgment; see www.aicpa.org/about/code/ article1.htm. These responsibilities include maintaining confidentiality of client information and restricting acceptance of contingent fees.

Confidential client information (Rule 301): Generally, CPAs do not disclose confidential information without a client's specific consent. However, this does not prevent them from (1) complying with a validly issued and enforceable summons or subpoena, or a review of their practice under a professional monitoring program or in conjunction with a proposed sale, purchase or merger or (2) cooperating with an ethics investigation; see www.aicpa.org/about/code/ et301.htm. This means that practitioners have to secure a client's written consent before giving copies of returns to bankers, lawyers, stockbrokers, real estate agents, etc. Also, just because a client had no objection to giving his or her banker a copy of last year's return, this does not necessarily apply to the current year.

Practitioners can share confidential information on a "need to know" basis with employees and service bureaus. Their privacy policy and engagement letter should inform clients about these arrangements.

Contingent fees (Rule 302): Practitioners cannot prepare an original or amended return or a refund claim for a contingent fee; see www.aicpa.org/about/code/ et302.htm. A fee cannot depend...