KNOW THE requirements: A Review of Professional Standards for Tax Consulting Services.

• Author: Dauberman, Mark

If you're performing tax or consulting services for your clients, or as an employee holding yourself out as a CPA, are you following the requirements of professional standards? It turns out that many CPAs are not aware, or have forgotten, that the AICPA has published Statements on Standards for Tax Services and a Statement on Standards for Consulting Services.

This could be dangerous, as paragraph .01 of the Compliance with Standards Rule, 1.310.001 of the AICPA Code of Professional Conduct states, "A member who performs audit, review, compilation, management consulting, tax or other professional services shall comply with standards promulgated by-bodies designated by Council."

There's a corresponding rule at 2.310 for accountants working in industry.

The information here is not a comprehensive guide to all requirements of the applicable standards. The purpose is to make practitioners aware of responsibilities they may not have previously been familiar with and to serve as a stimulus to the practitioner to obtain the details and incorporate those that are applicable into their practices.

Statements on Standards for Tax Services (SSTS)

SSTS consists of seven standards, issued in 2009 and effective as of Jan. 1, 2010. The seven standards are:

1. Tax Return Positions

2. Answers to Questions on Returns

3. Certain Procedural Aspects of Preparing Returns

4. Use of Estimates

5. Departure from a Position Previously Concluded in an Administrative Proceeding or Court Decision

6. Knowledge of Error: Return Preparation and Administrative Proceedings

7. Form and Content of Advice to Taxpayers

Tax Return Positions: Applies when recommending a lax position to a client or when signing a client's tax return, provided it does not conflict with written standards of a taxing authority. It requires that recommendations be limited to positions considered reasonably sustainable. The first interpretation cautions that a taxing authority may impose a threshold higher than being "reasonably sustainable," such as being "more likely than not" or "having substantial authority."

A position also may be recommended for which there is a reasonable basis provided it is properly disclosed. The second interpretation expands this by indicating that a reasonable basis for the position must exist, that the preparer recommends appropriate disclosure and there is not a higher standard required by a taxing authority.

The standard also requires that the preparer advise the client of...