What Are the Ethical Issues of a Tax Preparer?

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A tax preparer often finds himself in a tricky situation. The government's tax collector, the Internal Revenue Service (IRS), obviously expects a full, by-the-code accounting of all client taxes owed, while the preparer's client is eager to exploit the slightest amount of wiggle room to his own advantage. Complicating matters further is the fact that some areas of codified tax law appear to be slightly gray in color, creating different interpretations for different eyes. The result is a regularly recurring set of ethical issues for the tax professional.

Errors and Omissions

  • No one, not even the IRS, expects that there will never be mistakes made when filing a tax return. Numbers can be easily transposed or certain facts misconstrued based on the veracity of a particular client. Mistakes from another preparer in earlier years can accidentally be carried forward. While the IRS places a statutory burden on the taxpayer to remit an accurate tax return, the applicable language from the code only states that they "should" file an amended return if errors are discovered. Ultimately, the taxpayer is responsible for his own tax bill but the IRS places the burden on the tax professional to inform a client immediately upon discovering an error and counseling him about the possible consequences of ignoring it.

Statutes

  • The National Association of Tax Consultants (NATC) makes it clear that members should obey "...all laws governing the practice of tax preparation as regulated by the legislative bodies of the members state and federal government." This makes the issue of ethics fairly straightforward. Obey all legal laws. If a legitimate question arises, the IRS is only a phone call away and will be glad to provide clarification. The NATC goes on to require that members maintain the utmost standards in honesty and integrity. Once again, the expectation of complete integrity is unquestioned. Any problems that arise are likely due to ethical issues within the tax professional's own conscience rather than a cloudy issue of law.

Pressure

  • Probably the most frequent area of ethical concern in the tax profession is when a client encourages the preparer to fill out the return with bogus information that reduces the tax burden, then put his professional reputation on the line by signing off on the document. The signature attests to the fact that the preparer has taken all reasonable precautions to ensure the numbers are a fair and accurate reflection of the situation. While it might seem an easy matter to simply refuse the entreaty, sitting in a private office with a high-powered client asking for a fudging of the facts can raise a serious ethical issue.

References

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