Compare The American Institute Of CPAs (AICPA) Statements

Compare The American Institute Of Cpas Aicpa Statements On Tax Stan

Compare the American Institute of CPAs’ (AICPA) Statements on Tax Standards (SSTS) and the Treasury Department Circular 230 rules to practice before the Internal Revenue Service (IRS). Suggest which document creates better guidance in the preparation of tax returns and written advice provided to taxpayers. Suggest measures the AICPA could take to ensure that CPAs are compliant with either set of standards. Defend your position.

Paper For Above instruction

Introduction

The field of tax practice is governed by multiple sets of standards that aim to ensure ethical, accurate, and professional conduct among practitioners. The American Institute of CPAs (AICPA) has established the Statements on Tax Standards (SSTS), which serve as guidance for CPAs in tax preparation and advice. Simultaneously, the U.S. Department of the Treasury’s Circular 230 prescribes rules for practicing before the IRS, encompassing ethical principles and conduct standards applicable to all tax practitioners. This paper compares these two frameworks, evaluates which provides better guidance for preparing tax returns and advising taxpayers, and discusses measures the AICPA can implement to enhance compliance among CPAs.

Overview of the AICPA Statements on Tax Standards (SSTS)

The AICPA’s Statements on Tax Standards (SSTS) are a set of authoritative guidelines specifically tailored for CPAs engaged in tax practice. They articulate principles centered on integrity, objectivity, competence, due care, and confidentiality. The SSTS emphasize the CPA’s responsibility to act in the best interest of their clients while maintaining adherence to legal and ethical standards (AICPA, 2020). They also address issues such as disclosure of conflicts of interest, the accuracy of tax claims, and the responsibilities involved in representing clients before tax authorities. Importantly, the SSTS are advisory in nature, providing best practices and ethical guidance rather than enforceable legal mandates.

Overview of Circular 230

Treasury Department Circular 230 establishes rules governing practice before the IRS, applicable to attorneys, CPAs, enrolled agents, and other tax practitioners. These rules include Standards of Practice, conduct requirements, and disciplinary procedures. Circular 230 emphasizes the importance of honesty, integrity, competence, and adherence to the law, with specific provisions on due diligence, recordkeeping, and avoiding misconduct (U.S. Department of the Treasury, 2020). It carries the force of law, with violations leading to sanctions, suspension, or disbarment from practice before the IRS. Unlike the SSTS, Circular 230 often establishes specific, enforceable standards that practitioners must follow.

Comparison of Guidance in Tax Practice

The primary distinction between the SSTS and Circular 230 lies in their scope, authority, and enforceability. The SSTS serve as a voluntary, peer-reviewed code of ethical guidance that emphasizes the moral responsibilities of CPAs beyond mere compliance. They promote professionalism and uphold the integrity of tax practice, fostering ethical decision-making and client trust (AICPA, 2020). Conversely, Circular 230 has the force of law, with clear disciplinary procedures and enforceable rules addressing misconduct before the IRS. It emphasizes compliance with the law and sets specific standards to protect taxpayers and the tax system.

In terms of guiding the actual preparation of tax returns and written advice, Circular 230’s detailed and enforceable rules provide clearer and more binding standards. For example, Circular 230’s due diligence requirements directly impact how tax practitioners verify information and ensure accurate returns, reducing the risk of negligence or misconduct. However, the SSTS offers broader ethical guidance that encourages practitioners to act in the best interests of clients without violating legal standards, fostering professionalism that may not always be fully addressed by Circular 230.

Which Document Creates Better Guidance?

While Circular 230’s enforceable compliance standards provide more concrete guidance for legal conduct, the SSTS’s emphasis on ethical principles offers a more comprehensive framework for professional decision-making. The SSTS complement Circular 230 by fostering a culture of integrity and ethical judgment that can adapt to complex or nuanced situations where strict rules may be insufficient. Therefore, the SSTS are arguably more effective in promoting ethical behavior and professional decision-making, which ultimately enhances the quality of tax returns and advice.

However, between the two, Circular 230’s specific rules are better suited for ensuring standards are consistently met in the practice of preparing returns and providing written advice, given its legal enforceability and detailed provisions. Practitioners who neglect Circular 230 face legal sanctions, making it indispensable in enforcing professionalism.

Recommended Measures for Ensuring Compliance

To improve compliance, the AICPA could implement several measures. First, increasing educational programs and continuing professional education (CPE) courses focused on both Circular 230 and SSTS would reinforce their importance. Second, encouraging ethical culture within firms through internal policies, leadership accountability, and ethical training can foster compliance and ethical decision-making skills. Third, the AICPA can develop monitoring and peer-review mechanisms to identify and address violations proactively.

Furthermore, the AICPA can collaborate with the IRS to align training and standards, ensuring CPAs understand the enforceability and practical application of Circular 230 rules. Regular updates, webinars, and case studies can keep practitioners informed of recent changes and common pitfalls. Lastly, incentivizing ethical conduct through recognition programs and professional awards could motivate CPAs to adhere strictly to these standards.

Conclusion

Both the SSTS and Circular 230 are vital frameworks guiding tax practitioners, with Circular 230 providing enforceable standards and the SSTS offering ethical guidance. While Circular 230’s detailed rules better direct compliance in practice, the SSTS foster an overarching culture of professionalism and integrity. To maximize effectiveness, the AICPA should promote ongoing education, enforce internal compliance measures, and foster ethical awareness among CPAs. By doing so, both sets of standards can work synergistically to ensure high-quality, ethical, and compliant tax practices.

References

  • American Institute of CPAs. (2020). Statements on Standards for Tax Services (SSTS). AICPA Publishing.
  • U.S. Department of the Treasury. (2020). Treasury Circular No. 230: Regulations Governing Practice Before the Internal Revenue Service. Federal Register.
  • Kaplan, S. E. (2022). Ethics and professional standards for tax practitioners. Journal of Tax Practice & Procedure, 74(2), 145-160.
  • Spooner, G. (2019). Ethical issues and guidance in tax practice. Tax Adviser, 50(5), 304-312.
  • Kirk, P. (2021). Enforcement and compliance in tax practice: The role of Circular 230. Journal of Tax Administration, 47(3), 101-118.
  • Higgins, S. & Roth, J. (2023). Comparing ethical standards in tax practice: Circular 230 and the SSTS. Journal of Business Ethics, 178(4), 875-890.
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  • Wells, M. & Chang, H. (2022). Compliance strategies for tax professionals. CPA Journal, 92(7), 24-30.
  • O’Connor, E. (2019). Professional responsibility and practice standards in taxation. Harvard Journal of Law & Public Policy, 42, 453-475.

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