FederalTTaxTResearch,T11thTEditio PageT1-1
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CHAPTER 1
AN INTRODUCTION TO TAX PRACTICE AND ETHICS
,FederalTTaxTResearch,T11thTEditio PageT1-2
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DISCUSSIONTQUESTIONS
1-1.
InTtheTUnitedTStates,TtheTtaxTsystemTisTanToutgrowthTofTtheTfollowingTfiveTdisciplin
es:Tlaw,Taccounting,Teconomics,TpoliticalTscience,TandTsociology.TTheTenvironmentTforTth
eTtaxTsystemTisTprovidedTbyTtheTprinciplesTofTeconomics,Tsociology,TandTpoliticalTscience,
TwhileTtheTlegalTandTaccountingTfieldsTareTresponsibleTforTtheTsystem'sTinterpretationTandT
application.
EachTofTtheseTdisciplinesTaffectsTthisTcountry'sTtaxTsystemTinTaTuniqueTway.TEconomistsTa
ddressTsuchTissuesTasThowTproposedTtaxTlegislationTwillTaffectTtheTrateTofTinflationTorTeco
nomicTgrowth.TMeasurementTofTtheTsocialTequityTofTaTtax,TandTdeterminingTwhetherTaTtaxT
systemTdiscriminatesTagainstTcertainTtaxpayers,TareTissuesTthatTareTexaminedTbyTsociologi
stsTandTpoliticalTscientists.TFinally,TattorneysTareTresponsibleTforTtheTinter-
TpretationTofTtheTtaxationTstatutes,TandTaccountantsTensureTthatTtheseTsameTstatutesTareTap
pliedTconsistently.
PageT4
1-2. TheTotherTmajorTcategoriesTofTtaxTpracticeTinTadditionTtoTtaxTresearchTare:
taxTcompliance
taxTplanning
taxTlitigation
T PageT5
1-3.
TaxTcomplianceTconsistsTofTgatheringTpertinentTinformation,TevaluatingTandTclas
sifyingTthatTinformation,TandTfilingTanyTnecessaryTtaxTreturns.TComplianceTalsoTinclud
esTotherTfunctionsTnecessaryTtoTsatisfyTgovernmentalTrequirements,TsuchTasTrepresentin
gTaTclientTduringTanTIRSTaudit.
PageT5
1-4.
MostTofTtheTtaxTcomplianceTworkTisTperformedTbyTcommercialTtaxTpreparers,Tenro
lledTagents,Tattorneys,TandTCPAs.TNoncomplexTindividual,Tpartnership,TandTcorporateTta
xTreturnsToftenTareTcompletedTbyTcommercialTtaxTpreparers.TTheTpreparationTofTmoreTco
mplexTreturnsTusuallyTisTperformedTbyTenrolledTagents,Tattorneys,TandTCPAs.TTheTlatterTg
roupsTalsoTprovideTtaxTplanningTservicesTandTrepresentTtheirTclientsTbeforeTtheTIRS.
AnTenrolledTagentTisToneTwhoTisTadmittedTtoTpracticeTbeforeTtheTIRSTbyTpassingTaTspecialT
IRS-
administeredTexamination,TorTwhoThasTworkedTforTtheTIRSTforTfiveTyears,TandTisTissuedTaT
permitTtoTrepresentTclientsTbeforeTtheTIRS.TCPAsTandTattorneysTareTnotTrequiredTtoTtakeTthi
sTexaminationTandTareTautomaticallyTadmittedTtoTpracticeTbeforeTtheTIRSTifTtheyTareTinTgoo
dTstandingTwithTtheTappropriateTprofessionalTlicensingTboard.
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PageT5TandTCircularT230
1-5.
TaxTplanningTisTtheTprocessTofTarrangingTone'sTfinancialTaffairsTtoTminimizeTanyTta
xTliability.TMuchTofTmodernTtaxTpracticeTcentersTaroundTthisTprocess,TandTtheTresultingTo
utcomeTisTtaxTavoidance.TThereTisTnothingTillegalTorTimmoralTinTtheTavoidanceTofTtaxa-
Ttion,TasTlongTasTtheTtaxpayerTremainsTwithinTlegalTbounds.TInTcontrast,TtaxTevasionTconsti
tutesTtheTillegalTnonpaymentTofTaTtaxTandTcannotTbeTcondoned.TActivitiesTofTthisTsortTclear
lyTviolateTexistingTlegalTconstraintsTandTfallToutsideTofTtheTdomainTofTtheTprofessionalTtaxT
practitioner.
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1-6.
InTanTopenTtaxTplanningTsituation,TtheTtransactionTisTnotTyetTcomplete,Ttherefore,Tth
eTtaxTpractitionerTmaintainsTsomeTdegreeTofTcontrolToverTtheTpotentialTtaxTliability,TandTth
eTtransactionTmayTbeTmodifiedTtoTachieveTaTmoreTfavorableTtaxTtreatment.TInTaTclosedTtra
nsactionThowever,TallTofTtheTpertinentTactionsThaveTbeenTcompleted,TandTtaxTplanningTacti
vitiesTmayTbeTlimitedTtoTtheTpresentationTofTtheTsituationTtoTtheTgovernmentTinTtheTmostTle
gallyTadvantageousTmannerTpossible.
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1-7.
TaxTlitigationTisTtheTprocessTofTsettlingTaTdisputeTwithTtheTIRSTinTaTcourtTofTlaw.TTy
pically,TaTtaxTattorneyThandlesTtaxTlitigationTthatTprogressesTbeyondTtheTfinalTIRSTappeal.
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1-8. CPAsTserveTisTaTsupportTcapacityTinTtaxTlitigation.
PageT6
1-9.
TaxTresearchTconsistsTofTtheTresolutionTofTunansweredTtaxationTquestions.T
TheTtaxTresearchTprocessTincludesTtheTfollowing:
1. IdentificationTofTpertinentTissues;
2. SpecificationTofTproperTauthorities;
3. EvaluationTofTtheTproprietyTofTauthorities;Tand,
4. ApplicationTofTauthoritiesTtoTaTspecificTsituation.
PageT6
1-10.
CircularT230TisTissuedTbyTtheTTreasuryTDepartmentTandTappliesTtoTallTwhoTpractice
beforeTtheTIRS.
T
PageT7
, FederalTTaxTResearch,T11thTEditio PageT1-4
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1-11.
InTadditionTtoTCircularT230,TCPAsTmustTfollowTtheTAICPA'sTCodeTofTProfessi
onalTConductTandTStatementsTonTStandardsTforTTaxTServices.TCPAsTmustTalsoTabideT
byTtheTrulesTofTtheTappropriateTstateTboard(s)TofTaccountancy.
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1-12. ATreturnTpreparerTmustTobtainT18ThoursTofTcontinuingTeducationTfromTanTIRS-
approvedTCETProvider.TTheThoursTmustTincludeTaT6TcreditThourTAnnualTFederalTTaxTR
efresherTcourseT(AFTR)TthatTcoversTfilingTseasonTissuesTandTtaxTlawTupdates.TTheTAF
TRTcourseTmustTincludeTaTknowledge-
basedTcomprehensionTtestTadministeredTatTtheTconclusionTofTtheTcourseTbyTtheTCETPro
vider.
LimitedTpracticeTrightsTallowTindividualsTtoTrepresentTclientsTwhoseTreturnsTtheyTprepare
dTandTsigned,TbutTonlyTbeforeTrevenueTagents,TcustomerTserviceTrepresentatives,TandTsimi
larTIRSTemployees.
PageT10TandTIRS.gov
1-13.
False.TOnlyTcommunicationTwithTtheTIRSTconcerningTaTtaxpayer'sTrights,Tprivile
ges,TorTliabilityTisTincluded.TPracticeTbeforeTtheTIRSTdoesTnotTincludeTrepresentationTb
eforeTtheTTaxTCourt.
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1-14. SectionT10.2TofTSubpartTATofTCircularT230TdefinesTpracticeTbeforeTtheTIRSTasTincluding:
mattersTconnectedTwithTpresentationTtoTtheTInternalTRevenueTServiceTorTanyTofTits
TofficersTorTemployeesTrelatingTtoTaTclient'sTrights,Tprivileges,TorTliabilitiesTunderT
lawsTorTregulationsTadministeredTbyTtheTInternalTRevenueTService.TSuchTpresenta
tionsTincludeTtheTpreparationTandTfilingTofTnecessaryTdocuments,Tcorrespondence
Twith,TandTcommunicationsTtoTtheTInternalTRevenueTService,TandTtheTrepresentati
onTofTaTclientTatTconferences,Thearings,TandTmeetings.
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1-15.
ToTbecomeTanTEnrolledTAgentTanTindividualTcanT(1)TpassTaTtestTgivenTbyTtheTIR
STorT(2)TworkTforTtheTIRSTforTfiveTyears.TCircularT230,TSubpartTA,TSecs.T10.4TtoT10.6.
PageT9
1-16.
EnrolledTAgentsTmustTcompleteT72ThoursTofTContinuingTEducationTeveryTthreeTye
arsT(anTaverageTofT24TperTyear,TwithTaTminimumTofT16ThoursTduringTanyTyear.).TCircula
rT230,TSubpartTA.T§10.6.
PageT9
1-17.
True.TAsTaTgeneralTrule,TanTindividualTmustTbeTanTenrolledTagent,Tattorney,TorTCP
ATtoTrepresentTaTclientTbeforeTtheTIRS.TThereTareTlimitedTsituationsTwhereTothersTmayTrep
resentTaTtaxpayer;Thowever,TthisTfactTpatternTisTnotToneTofTthem.TSinceTLeighTdidTnotTsig
