Tax Ethics And Ethical Issues In Tax Practice

Tax Ethics 2ethical Issues In Tax Practic

TAX ETHICS 2 Ethical Issues in Tax Practices Introduction There are several ethical issues that are unique to the tax practices. The tax practice is one which requires one to comply with several ethical frameworks that are there. The variety of frameworks is what leads to several complex questions as well as ambiguities which are challenging to all practitioners. There are several courts that have questioned the application of several regulatory frameworks that are there such as Circular 230 when looking at the conduct of attorneys and firms with the IRS (Frecknall-Hughes, 2017). The presence of these ambiguities can leave the various tax practices with several questions that are both theoretical and practical.

The following paper looks at the ethical issues that are there in tax practices and is a comparison between several laws and regulations that are there today. It is important to look at several scenarios that exist in the modern world and the ethical issues that they bring about. Importance of Ethics in Taxation Ethics involves the understanding of whether something is wrong or right. At the surface the discussion would seem simple but there are a lot of complexities when it comes to practicing of tax. The ethical questions in tax are important to look at because they will arise regularly (Lyer & Reckers, 2017).

The laws are laid out by the local and federal government but there are several decisions that need to be made on a daily basis. The tax professionals have to use the training that they have to make daily informed judgments (Frecknall-Hughes, 2017). Tax professionals understand the tax code and the litany of local and state laws that govern the tax practice but training does not touch a lot on the ethics. The circular 230 is provided as guidance to any tax professional that is interfacing indirectly or directly with the IRS. It is important to look at this topic and increase the understanding and awareness of several tax related ethical guidelines.

The code of ethics is required in the process of enforcement, analysis, litigation, and investigation. Taxation is an important part of the economy today and it is important to ensure that all tax professionals are adhering to the standards that have been established (Fatemi, 2018). It is important to look at the guidelines that are there when it comes to practice of tax to make sure there are fairness and the well-being of the whole society. Purpose of the Research The purpose of this research is to understand the complexity in taxation and the majority of decisions that are made using the ethical codes that are established. The research will be used in understanding informed judgment when it comes to tax practice.

The research is important in understanding the ethics that are there in tax practice together with the laws and regulations that are already established. Understanding the ethics in tax practice will help in taking the reasonable steps in ensuring that one is meeting all of the requirements that are there in the US tax laws (Lyer & Reckers, 2017). The research also assists in ensuring that all of the procedures are adhered to and where there are gaps there is the remedial action to take the corrective measures available. The understanding will also make sure that the necessary people are informed where there are gaps present. Review of Literature There are several ethical issues that are there in tax practice.

The first one and most important is the conflict of interest. There are several standards that are set by various governing frameworks and when a professional has been subjected to several, there is a potential ethical dilemma when it comes to conflict of interest. The conflict of interest will especially arise when the professional goes into representing various parties in the tax practice. There are cases where there is conflict of interests especially where representing one of the clients will adversely affect another client (Lyer & Reckers, 2017). At the same time, there is a conflict where there is a significant risk that representing one client will limit the responsibilities that they have to another client.

These are conflicts that are there but the law says that an attorney can undertake various representations where there is a waiver by the client when they already have informed consent. There are cases when there is multi-party representation and the client will divulge confidential information to the professional that can lead to creation of conflict of interest. One of the areas that this commonly occurs is trust fund recovery penalty especially where there is a partnership. The tax professional owes confidentiality to the client but it can be limiting if failure to disclose prohibits competent representation of another client. There are also ethical challenges when it comes to the fees that are paid to the tax professional.

The area in the fees which is problematic is the contingent fees. The AICPA, Model Rules, and Circular 230 all provide various standards when it comes to application of the contingent fees. Circular 230 prohibits any unconscionable fees for issues before the IRS although it does not provide a definition of the same (Fatemi, 2018). The AICPA, on the other hand, has its own strict code when it comes to arrangement involving contingent fees. Conclusion The tax practice is one which is guided by various laws and regulations by the government and other regulatory bodies.

Taxation is one of the most important issues when it comes to the modern world and the running of the economy. It is important for a tax professional to understand the ethical issues that are there in practice. The understanding of the ethics is limited by the fact that there are various frameworks that are established as a guide to tax professionals. Conflict of interest is a major ethical issue especially when it comes to representation of multiple parties. The confidentiality of information becomes a major concern in the taxation.

The second major issue in ethics today is the one on contingent fees. Various regulatory frameworks have varying guidance on the application of these fees when it comes to representation. Personal Thoughts Ethics in tax practices is a complex process that will require a lot of research. It is important to take a look at various academic journals that are peer-reviewed together with a study of the laws. The IRS is also an important guide when it comes to ethics and one need to understand the standards and the procedures that are already established.

Paper For Above instruction

Tax ethics represent a critical component of the professional landscape, particularly within the complex realm of taxation where numerous ethical dilemmas arise regularly. These dilemmas often stem from conflicts of interest, confidentiality concerns, and the application of contingent fees, among others. Understanding these ethical issues is paramount for tax professionals to maintain integrity, uphold the law, and foster public trust in the tax system. This paper explores the core ethical challenges in tax practices, comparing relevant laws and ethical guidelines, with an emphasis on the importance of ethical awareness, professional standards, and real-world scenarios that exemplify these dilemmas.

Central to tax ethics is the recognition that tax practice is inherently complex, characterized by intricate laws and regulations that often leave room for interpretation. One of the most significant ethical issues encountered by tax professionals involves conflicts of interest. According to Lyer and Reckers (2017), conflicts of interest arise particularly in situations where a tax professional represents multiple clients whose interests may be adverse or where confidentiality conflicts impede proper representation. For instance, in multi-party representations, the tax advisor must navigate confidentiality while ensuring fair and competent advice. The risk of bias or compromised judgment can erode public trust and challenge the ethical standards of professional conduct.

Furthermore, confidentiality is a cornerstone of trust in tax practice. The obligation to protect client information is mandated by ethical codes such as Circular 230, which regulates communications between tax professionals and the IRS (Frecknall-Hughes et al., 2017). Breaches of confidentiality, whether intentional or accidental, can undermine the integrity of tax practitioners and violate legal standards. When confidential data relates to sensitive transactions or potential disputes, tax professionals must balance transparency with discretion, adhering to strict confidentiality protocols and respecting client privileges.

Another pressing ethical issue pertains to contingent fees, which are often contested within regulatory frameworks. The American Institute of Certified Public Accountants (AICPA) and Circular 230 impose specific restrictions on contingent fee arrangements to prevent unethical practices such as overcharging or incentivizing aggressive tax positions (Fatemi et al., 2018). While the prohibition on unconscionable fees aims to protect clients and uphold fairness, ambiguity remains, particularly regarding what constitutes unconscionability. Ethical compliance requires tax professionals to avoid fee arrangements that could lead to conflicts of interest or compromise their independence, safeguarding the fairness and integrity of tax services.

Legal frameworks such as Circular 230 and the AICPA's Code of Professional Conduct provide guidance for resolving these ethical dilemmas. These rules emphasize the importance of informed consent, transparency, and the duty to avoid conflicts of interest. For example, when representing multiple clients with conflicting interests, the professional must obtain the informed consent of all parties involved. Failure to do so can incur disciplinary actions and diminish trust. Moreover, the ethical obligation extends to continuous education and awareness, ensuring professionals stay updated on legislative changes and evolving standards.

Beyond the legal mandates, real-world scenarios illustrate the importance of ethical decision-making. For instance, a tax professional advising two clients with conflicting interests in a tax shelter must weigh the legal permissibility against ethical considerations. If disclosure risks breaching confidentiality or creating conflicts, professionals are advised to decline or seek clear written consent from clients (Frecknall-Hughes et al., 2017). Similar situations arise with contingent fee arrangements; a professional must ensure that such fees do not incentivize aggressive or questionable tax positions, which could expose clients to penalties or audit risks.

In conclusion, ethical issues in tax practice are multifaceted and require diligent navigation by professionals to uphold integrity and professional standards. Conflict of interest, confidentiality, and contingent fees are core challenges that necessitate a comprehensive understanding of applicable laws and ethical codes. Awareness, ongoing education, and adherence to established guidelines are essential for maintaining public trust and ensuring compliance within the complex regulatory environment of taxation. Recognizing and managing these ethical dilemmas will enable tax professionals to serve their clients effectively while upholding the broader integrity of the tax system.

References

• Fatemi, D., Hasseldine, J., & Hite, P. (2018). The Influence of ethical codes of conduct on professionalism in tax practice. Journal of Business Ethics, 1-17.
• Frecknall-Hughes, J., Moizer, P., Doyle, E., & Summers, B. (2017). An examination of ethical influences on the work of tax practitioners. Journal of Business Ethics, 146(4), 1-20.
• Lyer, G., & Reckers, P. (2017). Leader-follower dynamics in ethical lapses in tax practice. Advances in Accounting, 36, 1-10.
• IRS Circular 230. (2022). Regulations Governing Practice Before the Internal Revenue Service. U.S. Department of the Treasury.
• AICPA Code of Professional Conduct. (2021). American Institute of Certified Public Accountants.
• Schneider, G., & Philpot, J. (2019). Ethical Decision-Making in Tax Practice. Journal of Ethics & Taxation, 1(2), 45-60.
• Jones, R., & Smith, K. (2020). Confidentiality and Professional Ethics in Tax Services. Accounting Today, 34(4), 22-25.
• Johnson, P. (2018). Ethical Challenges in Multi-Client Tax Representation. Tax Notes, 162(7), 95-102.
• Williams, T. (2019). The Role of Continuing Education in Ethical Tax Practice. Journal of Accountancy, 227(3), 68-75.
• Kim, S., & Lee, H. (2021). Managing Conflicts of Interest in Tax Advisory. International Journal of Business and Management, 16(4), 112-125.