oldfart
Older than dirt
I am in a regulated profession where there is a continuing education requirement and an approved sponsor of continuing education. There is a 2-hour per year ethics component. I'm putting together my fall seminar schedule and updating my material. I usually discuss content with other professionals, but for the ethics section I thought I would solicit a wider set of views.
The regulated profession is that of enrolled agent, tax specialists regulated by the US Treasury. Basically enrolled agents double up as tax preparers during tax season, but the good money is in representing taxpayers in examinations, appeals, and collections actions. So I am asking your opinion on a common ethics situation.
I. RISK TOLERANCE.
Much of the public thinks of taxation as an all black-or-white set of rules. The return is either right or it is wrong. But in the real world clients come to us with stories and documents which we collect a fee for transforming into a (hopefully) defensible tax return. In a lot of cases there are more than one return that could reflect the same set of facts and documents. Suppose that a client is in one of these situations and the difference in tax liability is substantial, say $15,000 or so.
Now if the IRS examines the return, the may very well contest the position taken on the return. In such a case they most probably would assess an additional 20% penalty on the taxpayer. If a knowledgeable tax practitioner would honestly believe that the chances of prevailing in appeals/Tax Court were less than one in three, the practitioner would be subject to some large monetary fines as well. So taking an aggressive filing position is not riskless for either the taxpayer or the practitioner.
The school answer is that the practitioner is obligated under Circular 230 to inform the taxpayer of the likelihood of prevailing if the return is contested, and the consequences of losing an examination and subsequent appeal. But this is a little too cute.
How vigorously should a practitioner advocate a position with an estimated 70% or so chance of success to a risk-averse taxpayer?
I'm mainly interested in the reasoning here, so follow your gut and let me know what you think. If you have any questions, I'll try to clarify the example. Thanks.
Jamie
The regulated profession is that of enrolled agent, tax specialists regulated by the US Treasury. Basically enrolled agents double up as tax preparers during tax season, but the good money is in representing taxpayers in examinations, appeals, and collections actions. So I am asking your opinion on a common ethics situation.
I. RISK TOLERANCE.
Much of the public thinks of taxation as an all black-or-white set of rules. The return is either right or it is wrong. But in the real world clients come to us with stories and documents which we collect a fee for transforming into a (hopefully) defensible tax return. In a lot of cases there are more than one return that could reflect the same set of facts and documents. Suppose that a client is in one of these situations and the difference in tax liability is substantial, say $15,000 or so.
Now if the IRS examines the return, the may very well contest the position taken on the return. In such a case they most probably would assess an additional 20% penalty on the taxpayer. If a knowledgeable tax practitioner would honestly believe that the chances of prevailing in appeals/Tax Court were less than one in three, the practitioner would be subject to some large monetary fines as well. So taking an aggressive filing position is not riskless for either the taxpayer or the practitioner.
The school answer is that the practitioner is obligated under Circular 230 to inform the taxpayer of the likelihood of prevailing if the return is contested, and the consequences of losing an examination and subsequent appeal. But this is a little too cute.
How vigorously should a practitioner advocate a position with an estimated 70% or so chance of success to a risk-averse taxpayer?
I'm mainly interested in the reasoning here, so follow your gut and let me know what you think. If you have any questions, I'll try to clarify the example. Thanks.
Jamie
