Tax practice responsibilities.

• Author: Purcell, Thomas J., III

ARE CPAs PREPARING TAX RETURNS SUBject to preparer penalties under the Internal Revenue Code when they prepare a Form 990 for a nonprofit organization? If a preparer gives gratuitous advice to a neighbor about the proper form to use to report a transaction on a tax return, could the IRS penalize him or her if that advice is erroneous? When could preparers be subject to AICPA ethical actions if they do not ask clients for additional clarifying information in completing tax returns? How can CPAs reconcile their tax practice responsibilities under the Code, the regulations, and professional ethics requirements?

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These and other questions are considered by the AICPA Tax Division's Tax Practice Responsibilities Committee (TPRC). There are 15 tax committees and technical resource panels in the Tax Division and numerous task forces. Members of these groups are appointed for one-year terms following an application and selection process. (For information about service, visit http://volunteers.aicpa.org/.)

This quarterly column provides an overview of the three areas of jurisdiction that address the tax practice responsibilities part of CPA tax professionals' practice. The objective of this and future columns is to provide information that will enable practitioners to become better informed about and meet their legal, regulatory, and ethical responsibilities as professionals.

Roles and Responsibilities of the TPRC

The two primary functions of the TPRC are to:

* Monitor and make recommendations on internal (AICPA Statements on Standards for Tax Services) and external (Circular 230; statutory preparer and practitioner penalties) rules regulating the conduct of tax practice; and

* Maintain relations with the IRS director, Office of Professional Responsibility, who has authority to discipline practitioners in their practice before the IRS.

The TPRC is composed of volunteer members representing a wide set of constituencies within the AICPA. Members come from Big Four firms, large national firms, local and regional firms, industry, and education. Many of the members coordinate or participate in overseeing tax practice matters within their firms.

Recent Changes in the Tax Practice Environment

Tax practice oversight efforts by Congress, the IRS, and the AICPA are not stagnant. In the past several years there have been major statutory changes governing tax preparers, with related regulatory activity. In response to the perceived need for greater oversight of the tax preparation part of tax practice, in 201 0 the IRS expanded its scope of and processes for regulating tax return preparers. As the environment has evolved, the AICPA has responded by revising its ethical standards to address the increasingly complex professional practice of taxation.

The most important point to note is these changes affect any covered practitioner who engages in tax practice, not just those individuals who might specialize in or devote a significant portion of their professional practice to tax services. Since the scope of the changes is broad, it is important for all practitioners who might engage in any tax services to...