practicemanagement

BY KIP DELLINGER , CPA

Taxation recently submitted comments on the AICPA ’ s revised and new Statements on Standards for Tax Services ( SSTSs ).

The AICPA asked for comments on how it might address the issue of quality control in tax practice , which is a necessary element to ensure compliance with both the revised and the new SSTSs .

After consideration of comments from interested parties , the SSTSs are scheduled to become effective Jan . 1 , 2024 . While the SSTSs govern AICPA members , they are recognized by CalCPA as guidelines for its members and are cited by the California Board of Accountancy in enforcement proceedings involving CPA discipline pertaining to the required standard of care when providing tax services to a client .

The proposals retain , virtually intact , the seven existing SSTSs and then add three new standards that address : 1 Data Security 2 . Use of Tools 3 . Representing Taxpayers Before a Tax Authority The existing standards address tax positions , responding to questions on returns , procedural aspects of preparing returns , use of estimates in tax preparation , consideration of findings in an administrative proceeding ; discovery of an error in preparation or an administrative proceeding ; and the form and content of advice to taxpayers .

Reorganization of the Standards The standards are reorganized into a new format intended to make them more userfriendly . They address general standards and applications , as well as the three fundamental activities of tax practice : return preparation , advisory and tax controversy service .

CalCPA Comments on Proposals Find CalCPA ’ s transmittal letter , general

comments and comments on specific provisions at calcpa . org / governmentrelations / advocacy .

In general , it ’ s noted that the SSTSs require a CPA to possess competency to perform tax service undertaken for a client or employer . In describing the competency requirement , the proposals refer to Treasury Department Circular 230 defining of governing practice of CPAs before the IRS . CalCPA ’ s recommendation is that , instead , the reference be to the competency definition contained in the AICPA Code of Professional Conduct ( with which Circular 230 is consistent ) to provide that the CPA profession ’ s conduct standards govern the performance of services rather than those of a third party .

Tax Positions : Statement No . 1.1 In previous versions of the standards , the CPA was generally responsible to be an advocate for the tax client with regard to advising

on tax positions . The proposals remove the requirement , but acknowledge the CPA may advocate for the tax client . We recommended that if the CPA does not intend to function as an advocate , the CPA should affirmatively inform the tax client because we believe that taxpayers have a general expectation that their tax advisor will function as an advocate .

Knowledge of Error : Statement No . 1.2 Regarding the discovery of an error on prior year ’ s returns , we recommended that the SSTSs clarify that the CPA responsibility to address an error be limited to errors of which the CPA becomes aware . This presumably limits the CPA ’ s responsibility to monitor subsequent developments to those of which he or she becomes aware , or to a situation where the CPA is willfully ignorant . It ’ s important to note that under the proposed standard , the CPA ’ s responsibility for informing the tax client of error is limited to situations where the CPA is performing a tax service for the client rather than other services ; for example , audit or non-tax consulting services . It does retain the requirement to inform the tax client of errors on returns prepared by others ( for example prior returns ) if the CPA is performing tax services for the client .

Data Protection : Statement No . 1.3 Several comments were offered regarding data protection requirements , primarily directed to clarification of the terms and to limit the CPA ’ s responsibility for original transmittal and receipt of information to that which is within the control of the CPA . For example , the CPA generally cannot control the way a tax client transmits data to the firm , but www . calcpa . org MARCH / APRIL 2023 CALIFORNIA CPA 15