Case of a Very Important Client

Minmin Zhou

Case of A Very Important Client

1. Identify any tax rules that apply to Jessica’s decision.

    AICPA Statements on Standards for Tax Service

• No.2 States that, “a member should make a reasonable effort to obtain from the taxpayer the information necessary to provide appropriate answers to all question on a tax return.”
• No.3 set fourth the applicable standards for members relating the obligation to examine or verify certain supporting data.  It requires that a member should not ignore the implication of information furnished appears to be incorrect, incomplete, or inconsistent either on its face or on the basis of other facts known to the member.
• No.6 states that a member should inform the taxpayer promptly upon becoming aware of an error in a previously filed return. If a taxpayer face possible exposure to allegation s of fraud or other criminal misconduct, the member should advise the taxpayer to consult with an attorney before the taxpayer takes any action.

Jessica should report

     IRS Circular 230

• Section 10.21 dictates that if a member know that a client has not complied with the U.S, revenue laws or has made an error in, or omission from, any return, affidavit, or other document which the client submitted or executed under U.S. revenue law, member must promptly notify the client and advise the client of the consequence of such an error omission under the code and regulation of that noncompliance, error, or omission.
• Section 10.20 dictates that if a member receive a proper and lawful request for records or information from the IRS/OPR, they must promptly submit the requested information unless in good faith you reasonable believe that it is privileged.
• Section 10.33 defines the best practices for those who provide advice and or assistance in preparing submissions to the IRS. The best Practice Include advising clients whether they may avoid accuracy-related penalties if the client acts in reliance on that person’s advice and acting fairly and with integrity in practice before the IRS.

   The AICPA and State of Texas Code of Professional Conduct

• Conduct 501.73A person in the performance of professional accounting service shall maintain integrity and objectivity, shall be free of conflicts of interest, and shall not knowingly misrepresent facts nor subordinate his or her judgment to other. In tax practice, a person may resolve doubt in favor of his client as long as there is reasonable support for the position.

2. What should Jessica do? Why?

       As a taxpayer, Samuelson has a legal duty within any applicable statue of limitations to pay the correct tax. Samuelson should pay the additional $120,000 plus interest and late payment penalty. Therefore, Jessica should ask Samuelson to file an amended return. If Samuelson declines to file an amended return, he will be poised to commit a future fraud crime.