Video: Tax Preparer Responsibilities to Clients and Third Parties

In this lesson, delve into the nuanced world of tax preparer responsibilities with Nick Palazzolo, CPA, who unpacks the ethical and legal obligations towards clients and third parties. Embark on a journey through the protocols of dealing with errors in previously filed returns, the conditions surrounding amended returns, and the strict rules of client confidentiality. Explore the best practices for tax advice, including establishing actual facts and adhering to legal support in a tax memorandum. Nick also discusses the protocols for when a tax preparer doesn't hold necessary records, approaches to handling material noncompliance for new clients, and the significance of due diligence on questionable expenses. Additionally, navigate the complexities of maintaining copies of client records, highlighting the situations where a preparer can properly retain or must return documents, all while ensuring transparency and earning client trust.

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Video Transcript

Instructor: Nick Palazzolo

Nick Palazzolo is head instructor of ExamPrep.ai CPA Review. Nick's teaching style is engaging & upbeat, combining practical Big 4 tax & assurance expertise with years of 1-on-1 coaching. His lessons are concise and emphasize what you need to know to pass. Whether you're a recent grad or working full-time, we’re confident you can conquer your CPA exams with Nick’s review.

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All right, let's talk about tax preparer responsibilities to clients and third parties. Now, this, like I said, has a lot of the same history in auditing. You are doing a job for a client, you got to maintain independence, all that good stuff. Tax preparer responsibilities to clients and third parties. When you're dealing with errors, when a tax preparer discovers an error in a previously filed return, like, hey, what about an audit? If you discover an error in a previously filed audit opinion, hey, similar to that here, they must promptly notify the client of the error. This applies whether the error was made by a former tax preparer or by the current tax preparer themselves. So let's say last year they had someone else do their taxes for them, and then this year you're doing their taxes for them. Even if you discover an error that you didn't make, if you discover the error, then you got to let the client know about it. It's your responsibility to do so. It's important to maintain transparent communication with the client and to address any mistakes as soon as they are identified. Amended returns, a tax preparer cannot prepare an amended return, essentially just a fixed return. You're saying, oh, hey, IRS, you know, we made a mistake, here's an amended return, or we decided to go this route, so here's an amended return without the client's permission. So the client needs to obviously sign off on it and say, yes, I do want to amend my return. It's kind of like filing a tax return on behalf of someone without their approval. That in and of itself also is a big no-no. This means that the client must be informed of the error and agree to the

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Ethics and Responsibilities in Tax Practice

Module: 2 Concepts, 33 Videos

Internal Revenue Code and Tax Return Preparation Regulations Overview

4:17

Introduction to Internal Revenue Code and Tax Return Preparation Regulations

5:20

IRS Tax Forms

5:40

Types of Federal Taxes