Tax Service - Best Practices for Tax Preparers
Tax Service Practitioner "should provide" their clients with the highest quality representation by adhering to best practices in providing advice, preparing a submission to the IRS, and assisting in preparing a submission to the IRS. The use of the term "should provide" indicates that the goal established by the IRS, as opposed to a requirement that must be met in a disciplinary proceeding.
That said, if best practices are followed by the tax preparer or practitioner, the likelihood of a practitioner being a respondent in a disciplinary proceeding will certainly be less than otherwise. Best practices should be followed not only by the practitioner, but those that assist the practitioner, are employed by the practitioner, and are contractors providing a service for or on behalf of the practitioner.
The element of best practices including, (a) client communications, (b) establishing facts, assumptions, and representations, relating applicable law (including case law) to the facts, and arriving at a conclusion supported by the fact and the law, (c) advising the client as to the consequences of the conclusions, and (d) acting fairly and with integrity.
Tax Practitioners should provide: clear communication, facts and law support conclusion, Inform client or taxpayer of expected outcomes, and ethical standards in representation.
1. Clear Communication - In adhering to best practices, a tax professional must ensure that he or she is communicating effectively with the client. This is true especially with respect to the terms of the engagement. In this regard, best practices would call for the tax professional to document the engagement with an agreement or letter that clearly sets forth the form and scope of the services or advice wich the tax professional will render. Documenting the form and scope of the services or advice should enable both the client and the practitioner to understand what services will be performed, and any exclusion or exceptions.
The engagement agreement or letter also will set forth a fixed price or hourly rates for the services rendered, an equally important aspect of keeping the client fully informed. Practitioner should "determine the client's expected agreement or letter addresses this issue, especially if the client is expecting to use the advice to justify a particular tax treatment that was previously used by the client.
2. Facts and Law Support Conclusion - Practitioners must establish the relevant facts, evaluate the reasonable assumptions or representations, relate applicable law (including case law) to relevant facts, and arrive to a conclusion supported by the facts and the law. This will call for the tax professional to filter irrelevant from relevant factual information, understand applicable tax and case law (and, if necessary, research applicable tax and case law so as to provide with the highest quality representation), and relate the law to the relevant facts.
3. Informing Clients of Expected Results - The tax professional should inform the client of the implications of the conclusions that have been reached. Tax Practitioners should advice the client as to whether the client may rely on the advice to avoid the accuracy-related penalties associated with a particular tax position. By way of reminder, if the practitioner advices the client that the advice cannot be relied upon to avoid accuracy-related penalties, the wise practitioner will document this advice to avoid any later misunderstanding (or claimed misunderstood).
4. Ethical Conduct of Representation - Lastly, practitioners are obligated to act "fairly and with integrity" when practicing before the IRS. White "fairly" is not defined, the clear import of this phrase is that practitioners should act honestly and with the utmost respect for the law, the client, the IRS, and other practitioners. By doing so, tax preparation should be easy for every one.