Post on 31-Dec-2015
EXPECTED LEARNING OUTCOMES
Understand all steps in the research process
Know when additional steps are necessary
Recognize when the research is complete
Appreciate the ethical applicable standards
THE TAX RESEARCH PROCESS
S T E P F O U RC om m u n ica te
S T E P T H R E ES yn th es ize , P on d er, C on c lu d e
S T E P T W OL oca te an d A n a lyze A u th ority
S T E P O N E :W h at a re th e fac ts? W h at is th e Q u es tion ?
CRITICAL ANALYSIS OF AUTHORITY
Always start with the LAW (First) Applicable Treasury interpretations (Second)
• IRS position on issue• How close are facts of rulings & procs.• Confirm Treasury Regulations reflect current statute.
Applicable case law (Last)• What court cases address research question
• All cases not just the ones supporting your position• Appeals v. Court of original jurisdiction• Case still authoritative• If more than one case, which are strongest• Always citate cases
Balancing the two types of authority What if limited treasury guidelines & cases? Go over list on Page 312
SOURCES OF ETHICAL GUIDELINES
All research and critical analysis must be performed under umbrella of legal and ethical guidelines: • Circular 230 (Treasury)• AICPA and ABA (Accounting & Legal
Profession)• Internal Revenue Code (Congress) – Section
6662 (accuracy related penalties) and related regulations
Circular 230
Applies for all that practice before the IRS• CPAs, attorneys, enrolled agents
New rules: tax advisors• Aspire to best practices standards• Act fairly and with integrity• Monetary penalties can apply.
Professional MembershipGuidelines
AICPA• Subject to Code of Conduct:
• http://www.aicpa.org/about/code/index.html
• Statements on Standards for Tax Services (SSTSs)• http://www.aicpa.org/download/tax/
SSTSfinal.pdf
Circular 230
http://www.irs.gov/pub/irs-pdf/pcir230.pdf
Guidelines on • Engaging the client/fact gathering• Researching• Communicating and Advising• Tax Return Reporting
Engaging the Client
Circular 230 – Best Practices• Communicate clearly with the client
regarding terms of engagement• Determine clients expected purpose
for and use of advice• Clear understanding of scope and
form of advice• Risk management of the firm
Fact Gathering
Reasonable Inquiries to check that information is not incorrect, inconsistent or incomplete
Can’t hide behind ignorance of facts or turning a blind eye.
Verify that source documents exist (perhaps view some).
Researching
Due diligence/Realistic Possibility Stndrd - • Sustainable on its merits• Circular 230 and Reg. 1.6694-2(b)• Reasonable and informed analysis• Chance of 33%+ of being sustained.• Audit lottery alone is not realistic stnd.• List on page 323 of where to get info.
If foregoing test not met, can take a position if it is not frivolous.
Position taken must have substantial authority for understatement of income.
Other Limitations
Recognition of limits of current professional competency• Don’t play tax god.• Solicit help from other professionals
Different licenses CPA v. Law• Lawyer for Litigation/Document
review Beware of Firm Shopping
Engagement Letter
Critical document to spell out expectations of client & professional – contract
If engagement changes, issue addendum to letter.
Helps avoid malpractice claims Possibly limit scope of work to prevent
future malpractice claims.
Other Considerations Continued
Avoid conflicts of interests among clients.• If representing conflicting clients get a waiver
spelling out duties. Opinion Letters
• Are you/firm willing and competent to render opinion• Are opinion standards reasonable• What conditions/exceptions do you place on the
persons relying on the opinions• What person will be expressly or implicitly entitled to
rely on the opinions
Passage of Time - Duty to Update and other Issues
Engagement letter should spell out whether you have a duty to update work for changes subsequent to original advice
No hard and fast guidelines here. Avoid too many diverse responsibilities
that may imply fiduciary relationship – esp valuations and with estates
Go over chart on page 333
TAX RESEARCH STANDARDS
Fact gathering “Reasonable inquiries”
Researching “Realistic and Advising possibility”
To avoid $ “Substantial penalties authority”
EXPECTED LEARNING OUTCOMES
Understand the various forms of communication
Appreciate the purpose of an office memo, client letter, and protest letter
Effectively communicate
INTERNAL WRITTEN COMMUNICATION
Office memo: - firm record and road map to research issue• Material facts• Research question/issue• Citation to relevant authority• Conclusion and reasoning
Remember firm attrition accents need for well document file.
WRITING A CLIENT LETTER
Statement re: scope of research Statement re: facts Discussion of opinion (short form or long
form) – go over page 362-363 Summary statement
WRITING A PROTEST LETTER – 30 day letter
Used for T/P to present arguments about the reporting position
Information to include (page 369) Statement of purpose – pursuade taxing authority Statement re: facts Statement of issue Presentation of supporting arguments and
authority (consider alternative arguments) Summary statement – role of client advocate
more pronounced here
WRITING A LETTER RULING
See list on Page 371 Statement of purpose Statement re: facts Statement of issue Presentation of supporting
arguments and authority Summary statement