1. What do you do? What do you say?
ETHICS 2017
What do you do?
What do you say?

2. Ethics 2017 Circular 230 Section 10.21 Section 10.34 Go over examples
Discuss
“What would you do?”
“What would you say?”
Ethics 2017

3. § 10.21
Knowledge of client’s omission
Circular 230

4. A practitioner who, having been retained by a client with respect to a matter administered by the Internal Revenue Service
knows that the client has not complied with the revenue laws of the United States or has made an error in or omission
Circular 230 § 10.21

5. A taxpayer has financial problems and bankruptcy won’t take care of tax issues for various reasons.
So you consult
Ethics 2017

6. Ethics 2017 During the consultation, it is mentioned, they
are paying their son some income, but
are not reporting it on his tax return
are they taking the expenses
NO!!!
Ethics 2017

7. Standards with respect to tax returns and documents, affidavits and other papers.
(1) A practitioner may not willfully, recklessly, or through gross incompetence
(ii) Advise a client to take a position on a tax return or claim for refund, or prepare a portion of a tax return or claim for refund containing a position, that
Circular § 10.34

8. Circular 230 § 10.34 (A) Lacks a reasonable basis;
(B) Is an unreasonable position as described in section 6694(a)(2) of the Code (including the related regulations and other published guidance); or
(C) Is a willful attempt by the practitioner to understate the liability for tax or a reckless or intentional disregard of rules or regulations by the practitioner as described in section 6694(b)(2) of the Code (including the related regulations and other published guidance).
Circular § 10.34

9. What do you do? What do you say?
DISCUSS
What do you do? What do you say?

10. Ethics 2017 Interesting stat
Very few taxpayers go to jail for tax evasion.
In 2015, the IRS indicted only 1,330 taxpayers out of 150 million for legal-source tax evasion
Ethics 2017

11. Ethics 2017 Tax evasion cases mostly start with taxpayers who:
Misreport income, credits, and/or deductions on tax returns
Don’t file a required tax return
The IRS doesn’t pursue many tax evasion cases for people who can’t pay their taxes.
However,
if you conceal assets and income that you should use to pay your back taxes, that’s a different story
Ethics 2017

12. EVADE VS AVOID Evade: to escape from by trickery or cleverness:
to evade one's pursuers.
to avoid doing or fulfilling:
to evade an obligation
Synonyms:
Avoid, bypass, circumvent, conceal, deceive, dodge, elude etc.
EVADE VS AVOID

13. EVADE VS AVOID Avoid to keep away from; keep clear of; shun:
to avoid a person; to avoid taxes; to avoid danger.
2. to prevent from happening:
to avoid falling
Synonyms:
Avert, bypass, dodge, escape, evade, fend off, shun
EVADE VS AVOID

14. Ethics 2017 A recently widowed taxpayer
Husband has passed away and all kinds of letters and IRS correspondences are discovered and more letters are coming in.
Ethics 2017

15. She has discovered years of unpaid taxes and quarterly CivPens assessed jointly and separately.
During consultation, it is revealed the husband was embezzling from company
Ethics 2017

16. What do you say? What do you do?
The spouse pick up the company without knowing of the actual state of financial status.
In addition, the widowed spouse is going through medical treatments for cancer after taking care of her ailing husband
What do you say? What do you do?

17. What do you say? What do you do?
An IA/DD detail letter was unearthed denying a proposed monthly amount and a higher amount was countered
When asked if the amount can be managed, she said
“I can’t, but the company can”
What do you say? What do you do?

18. What do you say? What do you do?
DISCUSS
What do you say? What do you do?

19. Circular 230 § 10.34 (a) Tax returns
(1) A practitioner may not willfully, recklessly, or through gross incompetence —
i) Sign a tax return or claim for refund that the practitioner knows or reasonably should know contains a position that —
(A) Lacks a reasonable basis;
(B) Is an unreasonable; or
(C) Is a willful attempt to understate the liability for tax or a reckless or intentional disregard of rules or regulations
Circular § 10.34

20. Twin Falls, Idaho: Preparer Mary Galan, 66 owner and operator of Galan Accounting
From 2012 through 2014, Galan and her co-conspirators prepared 187 tax returns for 165 clients claiming $342,901 in education credits from the College of Southern Idaho.
The returns claimed $787,630 in qualified expenses from the school
Ethics 2017

21. But, the college records show that of the $787,630, only $8,905 in qualified expenses for only six students were paid.
Galan also prepared returns directing the IRS to deposit refunds into personal bank accounts belonging to her and her co-conspirators. In total, Galan received direct deposits of taxpayer client refunds of $219,490.
Ethics 2017

22. Ethics 2017 Galan pleaded guilty to one count of conspiracy
She has received two years in prison to be
Followed by three years of supervised release and been
Ordered to pay $336,926 in restitution to the IRS for conspiracy to defraud the U.S
Ethics 2017

23. Ethics 2017 Taxpayer comes to you to prepare current year tax return.
They have prepared their own, but since they sold their home, they want someone else to do this complicated task.
Upon delving into it you realized it was a rental with depreciation that first stated off as ACRS.
Ethics 2017

24. Ethics 2017 Needless to say, records are hard to find.
There are many ways to handle it, but what is best and what do you tell or advise the client?
What do you do?
Ethics 2017

25. What do you say? What do you do?
Discuss
What do you say? What do you do?

26. The IRS is sending Letter 5025-H to preparers who completed returns claiming the Earned Income Tax Credit for taxpayers reporting income they received as household employees but didn’t include a W-2 to substantiate the income.
These preparers may not have met their EITC due diligence requirements, according to the IRS.
The letters are part of the agency’s “tiered” outreach and educational efforts to specific preparers. “We look at the number of returns with a high likelihood of EITC errors completed by the same preparer,” reads the IRS EITC page on “Reaching Out to Preparers.”
In addition there are letters with suffixes “C” for self-employed, “Q” for questionable children,
Ethics 2017

27. Ethics 2017 Circular 230 Gone over examples “What would you do?”
Section 10.21
Section 10.34
Gone over examples
Discuss
“What would you do?”
“What would you say?”
Ethics 2017

28. The End
Ethics 2017