Tax Ethics
The Internal Revenue Service urges and encourages voluntary compliance with tax laws. Today, approximately half of the tax returns are filed under the assistance with tax professionals so it is essential that these tax practitioners aware of their responsibilities in supporting Internal Revenue Service with the goal of acceptance and voluntary compliance with tax laws.
To be a tax preparers, the person must have enough knowledge of the rules and regulations of tax and it is essential that tax prepares are in compliance with these rules. Even though a tax preparer is not responsible for the audit of the taxpayers information, it is essential that the tax return must be correct, true and complete. Although the tax preparer may not necessarily perform audit tests such as confirmation, the tax preparers can examine the tax returns of prior years. For example, a review of the prior year may find out that certain capital expenditures were treated as deductible and the attempt of depreciating the capital assets would be improper. The tax preparer should let the taxpayer aware of such improper attempts and if the tax preparer continues doing this without the regard of the tax rules and regulations, it will be a violation of Code Section 6694 and will be subject to a penalty under Section 6694. Also, the tax preparer should ask for additional documents if there are questions about the transaction or the treatment on tax return, especially the transactions which create tax shelters. Tax prepares should be sensitive enough to be aware of certain tax shelters created such as those stated in Section 6662 “a partnership or other entity”; “any investment or arrangement”; “any other plan or arrangement”. The tax preparers role in assisting taxpayers should be help taxpayers find out problems concerning these tax shelter issues instead of helping them figure out ways to avoid federal income taxes from these tax shelters.
While assisting taxpayers with tax returns, tax preparers should keep track of all files and be in compliance with the requirements for tax preparers about these files as stated in the Section 6695 “the failure to furnish copy to taxpayer”; “the failure to furnish identifying number to taxpayer”; “the failure to retain copy or list” and “the failure to file correct information returns”. Although these requirements are not related to the professional knowledge of filing tax returns, it is very important for taxpayers to have these copies and lists on file and that the tax prepares take responsibilities if there are any mistakes concerning the tax return. Tax preparers are paid by assisting the filing of tax returns and at the same time are required to “perform due diligence in determining eligibility for earned income tax credit” as stated in Section 6695. Also, tax preparers would get paid for regular compensation of providing services, however,