Chapter 1, Problem 37DQ

CPAs understand – far better than most clients do, in fact – that the IRS real-ly audits very few tax returns, so the odds of any particular return being selected for audit are (abysmally) low. According to SSTS No. 1, of what relevance, if any, is that knowledge as to what kind of tax return-related advice a CPA should give a client?

A tax accountant is told by his superior to take a position on a tax matter that is not supportable by the facts in order to make the client happy. This is a common practice in the firm and the likelihood of the IRS questioning it is remote. Would you go along with your supervisor?

According to the Acts Discreditable Rule for accountants in public practice, which of thefollowing is not a “discreditable act”?a. Withholding a client’s sales records.b. Failing to file or remit tax payments.c. Failing to follow requirements of the PCAOB during the audit of an SEC client.d. Advertising that indicated the firm can reduce IRS penalties.

Taxpayers face the risk of the 20% accuracy-related penalty when they take return positions that are too aggressive or otherwise problematic...   (a)  Section 6662 itself contains no escape mechanisms whatsoever, so a tax-payer’s only available defense against the penalty is “good faith and reasonable cause” per § 6664(c).     (b)  Section 6662 contains two stated triggers, “negligence” and “substantial understatement,” and the IRS cannot assert the penalty unless both are present.   (c)  Unless a taxpayer ultimately wins with respect to the underlying tax issue(s) (the asserted tax deficiency), it is impossible to win on the penalty issue.   (d)  If a taxpayer does win with respect to the underlying tax issue(s), the penalty assertion becomes moot.

The Taxpayer Advocate Service (TAS) can help taxpayers with what type of assistance? As a first step, rather than dealing with the IRS, when the taxpayer believes there are unusual circumstances involved. When the taxpayer feels the resolution applied by the IRS is unreasonable. If there is a financial difficulty, emergency, or hardship and the IRS needs to move faster than normal. When an audit results in a significant change and the deadline for appeal has passed.   Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.