6/18/2018. Ethics Doing the Right Thing. Ethics- Doing the Right Thing. Ethics Doing the Right Thing. Jean Nelsen, EA NAEA President.

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1 Ethics Doing the Right Thing Jean Nelsen, EA NAEA President Ethics- Doing the Right Thing I think there is an attitude among some of those who do the most sophisticated tax advising that it s all about how cleverly they can parse statutory language to justify whatever the client has asked for. I m not sure when the profession stopped asking itself whether something was the right thing to do, but that concept is clearly missing from many repertoires these days. Karen L. Hawkins, Director OPR, ABA Tax Times, October 2015 Rules Practice Ethics Doing the Right Thing The 30,000 Foot View Who Qualifies as Practicing? Our Government Partners Commissioner IRS Director Return Preparer Office OPR Office of Professional Responsibilities Due Diligence Practice Guide Level of Care You Owe Your Clients 1

2 Rules Circular 230 IRS Definition Circular 230 is the common name given to the body of regulations promulgated (promoted) under the enabling statute found at Title 31, Subtitle A, Part 10. Circular 230 defines practice and who may practice before the IRS; describes a tax professional s duties and obligations; authorizes specific sanctions for violations of the duties and responsibilities; and describes the procedures that apply to administrative proceedings for discipline. Last Revision June 12, 2014 Practice The 30,000-foot View All matters connected with a presentation to the IRS relating to a taxpayer s rights, privileges or liabilities. Includes but not limited to: Preparing Documents Filing documents Correspondence and Communication with IRS Rendering oral or written advice to taxpayers with respect to any entity having a potential for tax avoidance or evasion. Representing clients at hearings, meetings or conferences. Who qualifies as Practicing? Enrolled Agents State licensed Attorneys and Certified Public Accountants Enrolled Retirement Plan Agents Enrolled Actuaries Employee Retirement Security Act (ERISA) Unenrolled annual filing season preparers in connection with returns they prepared and signed Licensed and unlicensed individuals who give written advice which is of a type the IRS determines has a potential for tax avoidance or evasion. Any individual with a power of attorney with limited representation of a taxpayer with respect to a specific matter before the IRS 2

3 Our Government Partners Commissioner - IRS Current IRS Commissioner David J. Kautter (Acting) Possible Future Commissioner Charles P. Rettig (President Trump Nominee) With the confirmation of a new commissioner will there also be an updated circular 230? 3

4 What will the update include? Director Return Preparer Office RPO Return Preparer Office Director Carol Campbell, Long term IRS employee As of February 2012 all processing functions were transferred from OPR to RPO for the following: Enrollment, testing and administrative processing functions associated with: Enrolled agents Annual filing season preparers Enrolled retirement agents Enrolled actuaries Other Duties: PTIN administration for all return preparers including CPA s and Attorneys (approximately 727,000) Is there an age requirement for obtaining a PTIN? 4

5 Will the IRS share your PTIN information? Is there a fee for obtaining or renewing a PTIN? Who would benefit the most from the fee reimbursement? 5

6 OPR Office of Professional Responsibilities Stephen A. Whitlock, Director When I started speaking in mid-2009, the only practitioner group (as a whole) who knew Circular 230 existed and its connection to OPR was the Enrolled Agents. Karen L. Hawkins, OPR Director, ABA Tax Times October 2015 When was OPR created by the IRS? OPR Job Description Ensure that all tax practitioners, tax preparers, and other third parties in the tax system adhere to professional standards and follow the law. 6

7 How many cases a year does OPR receive and how many do they close? In 2017 Received 1,641 Closed 1,781 Case Load Compliance cases of non-filing or non-payment by circular 230 preparers of their own personal or business tax returns Conduct Cases that are unrelated to compliance Hybrid Cases that include both compliance and conduct OPR receive the majority of their referrals for cases that include compliance from? 7

8 Due Diligence Practice Guide Your clients are not your friends. That doesn t mean you don t care about them. Level of Care you owe your Clients Competency. Don t attempt returns that you are not qualified to prepare. Level of Care you owe your Clients Transparency. If you are going to share client information with another professional or colleague, the shared information must be redacted or you must have the clients prior permission. 8

9 Level of Care you owe your Clients Security- A. Make sure client files are secure. Don t have client files surrounding your desk while you are interviewing a current client. Don t take tax return information out of the office. B. If you have employees, make sure you have written office procedures. Including interview, client contact policies. C. Create a Due Diligence check list policy. D. Carry adequate E and O Insurance. Include cyber coverage. E. Avoid conflicts of Interest. Level of Care you owe your Clients Courtesy. Return Calls and s. Level of Care you owe your Clients Honesty. If you make an error, disclose and correct. 9

10 Doing it Right when it Goes Wrong Data Breach Everyone s worst nightmare Data Breach How do I avoid becoming a victim of a data breach? Keep current with phishing scams that claim they are from the IRS. Don t open attachments from addresses that you are not familiar with. Have all client attachments and information sent to a secure password protected site. Change your passwords for your regularly using numbers and special characters. Data Breach : - How do I know that I have become a victim of a data breach? 10

11 Data Breach It happened, now what do I do? Contact: Your IT expert to determine the scope of the breach Your insurance carrier - both E and O and cyber coverage The IRS criminal investigation division Your state attorney general s office e-crime division All of your current and past clients All business and individuals for whom you prepared third party information forms. Don t panic, your cyber insurance carrier will assist you in resolving the issue. 1 Mary, an enrolled agent hires two paid interns from the accounting program at the local community college to assist during tax season. The interns perform date entry from the tax organizer that the clients complete. They also assemble the documents the clients have submitted with the organizer. The interns will call the clients to gather missing information, but they don t provide advice or answer questions on tax law. They are instructed to refer all questions to Mary, the enrolled agent. Do the interns need to have a PTIN? 2 Mary, the enrolled agent in the previous question, is extremely overworked and her interns are showing a great deal of promise as future enrolled agents. Mary decides to allow the interns to prepare the simpler tax returns but Mary will be the signer on the returns as the owner of the business. Do the interns need a PTIN? 11

12 3 John, a retired enrolled agent has not renewed his license and is in inactive status. He begins to miss filing returns and meeting clients but he doesn t want to go back in business. John has been contacted by his local VITA office and given an opportunity to work as a volunteer. John will be preparing tax returns for low income individuals but will not receive compensation. Does John need to file for a PTIN? 4 Beth has a small payroll preparation business. She is responsible for the preparation of gross to net payroll and the preparation of the payroll reporting forms both federal and her state and local governments. Occasionally her clients ask her questions regarding whether their workers should be classified as employees or independent contractors. Does Beth need a PTIN? 5 Franklin, an enrolled agent, has a tax preparation business with 4 employees. None of his employees are enrolled agents. However, they all prepare tax returns that Franklin signs. Are Franklin s employees required to have a PTIN since they are employed by Franklin and Franklin signs all of the returns? 12

13 6 Ana conspired with others to obtain the personal identifying information of others and use it to file more than 2,300 fraudulent income tax returns. These returns reported fake wages and fraudulently claimed dependents, education expenses and tax credits. The returns sought $9.7 million in refunds, of which the IRS paid $7.5 million. Ana directed the fraudulent refunds checks into bank accounts that she controlled. What statutory maximum penalties and sentencing does Ana face when she is sentenced? 6 What statutory maximum penalties does Ana face when she is sentenced? 1. Life in prison years and monetary penalties. 3. No prison sentence, a period of supervision and monetary penalties. 4. Ten years in prison, a period of supervision and monetary penalties. 5. Three years in prison and monetary penalties. Jean Nelsen, EA I have spent most of my career as the owner of a tax practice in the city of San Francisco, California. My firm began as a one woman shop and grew to include five additional professionals. In addition to managing my firm, I was active in my state professional organization, California Society of Enrolled Agents, (CSEA). I served as President, chair of the Ethics and Professional Conduct Committee, representative to the California Franchise Tax Board Advisory Board and the Internal Revenue Service Practitioners Liaison. I am the 2017 recipient of the CSEA Distinguished Service award. I am President of my national organization, National Association of Enrolled Agents (NAEA). I have previously served as chair of several NAEA committees, including Ethics and Professional Conduct. I am the 2014 co-recipient of the NAEA Excellence in Public Awareness award. I have recently stepped away from the day to day operations of my firm 13