Revised Statements on Standards for Tax Services An E.docx

Revised Statements
on Standards
for Tax Services
An Exposure Draft and
Invitation to Comment
Revised Statements on Standards for Tax Services: An Exposure
Draft and Invitation to Comment | 1
Contents
2 Explanatory memorandum
2 Introduction
3 SSTS revision timeline
4 Description of combined document
4 Request for comments
4 Comment period
5 Part 1: Exposure draft of proposed revisions to the SSTSs
6 Background
7 Explanation of proposed revisions to the SSTSs
23 Effective date

23 Exposure draft
40 Questions for respondents
41 Part 2: Invitation to Comment
42 Introduction
42 Issue description
42 State of quality management in tax
43 Implementation
44 Questions for respondents
45 Contributors
Explanatory memorandum
Introduction
Statements on Standards for Tax Services (SSTSs) are
issued by the AICPA Tax Executive Committee (TEC),
the senior technical body of the AICPA designated to
promulgate standards of tax practice. The General
Standards Rule (AICPA, Professional Standards, ET
secs. 1.300.001 and 2.300.001) and the Compliance
With Standards Rule (AICPA, Professional Standards,
ET secs. 1.310.001 and 2.310.001) of the AICPA Code
of Professional Conduct require compliance with these
standards. Many state boards of accountancy also
incorporate the SSTSs as part of their professional rules

of conduct for CPAs.
The purpose of this combined document is to
solicit feedback, respectively, on:
1. Part 1: Exposure Draft (ED) of proposed
revisions to the AICPA's SSTSs that, if
adopted, will become effective on
Jan. 1, 2024, and
2. Part 2: Invitation to Comment (ITC) on
potential approaches to effectively
introduce quality management in tax.
In September of 2018, the AICPA TEC approved
formation of the SSTS Revision Task Force to update
the SSTSs to (1) better reflect the issues and needs
of members and the tax practices of today and in the
future and (2) ensure the highest ethical standards for
members who support the public’s view that CPAs are
the premier providers of tax services.
As part of those efforts, the task force:
• Developed a new structure to organize the SSTSs
by type of tax work performed,
• Updated the existing standards to better reflect
the current and possible future state of the tax
profession and
• Drafted three new standards surrounding data
protection, reliance on tools and the representation
of clients before taxing authorities.
In addition, the task force explored items that will

require additional research and investigation and held
extensive discussions among its members and multiple
committees to explore what, if any, revisions to the
SSTSs should be made to address issues of quality
management in tax.
Stakeholders are invited to comment on all matters
in this ED and ITC. Specific questions related to the
ED and ITC are included at the ends of Part 1 and
Part 2, respectively.
SSTS revision timeline
The following graphic demonstrates the anticipated timing of
the SSTSs updates and the research and exploration period on
quality management in tax.
*Reorganization; Data Protection; Reliance on Tools; Tax
Representation
ED & ITC
issued
Comment
period
Discuss
comments Approval Effective
date
**Quality Management

August 2022 – May 2023
Comment evaluation period
May 2023
Final draft approval by
Tax Executive Committee
Jan. 1, 2024
Effective date
for Revised SSTSs
Further
exploration
Outcome
TBD
August 2022 – TBD
Additional research
based on comments
August 2022
Exposure Draft
and Invitation
to Comment issued
August 2022–December 2022
Comments received through
Dec. 31, 2022
Invitation
to Comment **
Exposure
Draft*

Description of combined document
This combined ED and ITC presents the findings
and conclusions of the SSTS Revision Task Force as
approved by the TEC. The document is divided into two
separate sections: Part 1: ED and Part 2: ITC.
The ED presents changes the AICPA proposes to make
to the SSTSs. Following consideration of comments
received, the changes outlined in the ED, if adopted,
are expected to be included in a revised SSTSs
document to be approved no later than May 31, 2023,
and effective Jan. 1, 2024.
The ITC presents items for consideration that will
require additional research and investigation regarding
the concept of quality management in tax. Depending
on the nature of the comments received in response
to the ITC, the AICPA will pursue additional research
to determine how and when the SSTSs and/or other
guidance may be provided on quality management in
tax. At this time, it is not known if and when any changes
resulting from the ITC will be implemented.
All comments, whether related to the ED or the ITC, are
due no later than Dec. 31, 2022. See further discussion
below under request for comments.
Request for comments
Respondents are asked to provide comments on the
proposed changes and questions listed in the ED and

the ITC. Comments are most helpful when they refer
to specific questions asked and include the reasons
supporting the respondent’s view.
When a respondent agrees with
proposals in the ED or ITC, it will be
helpful for the AICPA to be made
aware of this view.
Written comments on the ED and ITC will become
part of the public record of the AICPA and will be
available on the AICPA’s website after Dec. 31, 2022.
The AICPA will consider all responses received on or
before Dec. 31, 2022.
Please submit comments via our online form.
Alternatively, you may email your submission to:
[email protected]
Reponses may be submitted in Word format or directly
in the body of the email with an appropriate signature
(name, firm). Unless the respondent explicitly permits
otherwise, comments will be posted without the
sender’s email address. Respondents may also submit
a PDF version of their response for posting to the
AICPA website.
Comment period
The comment period for this ED and ITC ends
Dec. 31, 2022.
Part 1:

Exposure draft of proposed
revisions to the SSTSs
Background
The SSTSs have their origin in the Statements on
Responsibilities in Tax Practice (SRTPs), which provided
a body of advisory opinions on good tax practice. The
guidelines as originally set forth in the SRTPs became
more important than many members had anticipated
when the guidelines were issued. The courts, the IRS,
state accountancy boards and other professional
organizations recognized and relied on the SRTPs as
the appropriate articulation of professional conduct
in a CPA’s tax practice. The SRTPs became de facto
enforceable standards of professional practice because
state disciplinary organizations and courts regularly
held CPAs accountable for failure to follow the
guidelines set forth in the SRTPs.
The SRTPs were originally issued between 1964 and
1977. The first nine SRTPs and an introduction were
combined and promulgated in 1976; the tenth SRTP
was issued in 1977. The original SRTPs concerning
the CPA’s responsibility to sign the tax return (SRTP
No. 1, Signature of Preparers, and No. 2, Signature of
Reviewer: Assumption of Preparer’s Responsibility)
were withdrawn in 1982 after Treasury Department
regulations were issued adopting substantially the
same standards for all tax return preparers. The sixth
and seventh SRTPs, concerning the responsibility of a
CPA who becomes aware of an error, were revised in

1991. The first interpretation of the SRTPs, Interpretation
No. 1-1, Realistic Possibility Standard, was approved in
December 1990.
Given the level of reliance on the SRTPs by state
disciplinary organizations and courts, the AICPA’s TEC
concluded it was appropriate to issue tax practice
standards that would become a part of the AICPA’s
Professional Standards. At its July 1999 meeting, the
AICPA Board of Directors approved support of the
executive committee’s initiative and placed the matter
on the agenda of the October 1999 meeting of the
AICPA’s governing Council. On Oct. 19, 1999, Council
approved designating the TEC as a standard-setting
body, thus authorizing that committee to promulgate
standards of tax practice. As a result, the original
SSTSs, largely mirroring the SRTPs, were issued in
August 2000. The SSTSs and Interpretation No. 1-1,
Realistic Possibility Standard, of SSTS No. 1, Tax Return
Positions, superseded and replaced the SRTPs and their
Interpretation No. 1-1, effective Oct. 31, 2000.
Although the number and names of the SSTSs, and
the substance of the rules contained in each of them,
remained the same as in the SRTPs, the language
was revised to both clarify and reflect the enforceable
nature of the SSTSs. In addition, because the
applicability of these standards is not limited to federal
income tax practice (as was the case with the SRTPs),
the language was changed to indicate the broader
scope. In 2003, in connection with the tax shelter
debate, SSTS Interpretation No. 1-2, Tax Planning,
of SSTS No. 1 was issued to clarify a member’s
responsibilities in connection with tax planning;
that interpretation became effective Dec. 31, 2003.

These two interpretations were initially updated in
2010. On Aug. 15, 2011, the TEC adopted the
updated Interpretation 1-1, now titled, Reporting
and Disclosure Standards, and 1-2, Tax Planning,
effective Jan. 31, 2012.
When the original SSTSs were issued, an effort was
made to keep to a minimum any changes in the
language of the SSTSs from that of the predecessor
SRTPs. This was done to alleviate concerns regarding
the enforceability of standards that differed from the
SRTPs under which members had been practicing.
Since the issuance of the original SSTSs, members have
asked for clarification on certain matters, such as the
duplication of the language in SSTS No. 6, Knowledge
of Error: Return Preparation, and No. 7, Knowledge of
Error: Administrative Proceedings. Also, certain changes
in federal and state tax laws have raised concerns
regarding the need to revise SSTS No. 1. As a result,
in 2008, the original SSTS Nos. 1–8 were updated,
effective Jan. 1, 2010. The original SSTS Nos. 6–7 were
combined into the revised SSTS No. 6, Knowledge
of Error: Return Preparation and Administrative
Proceedings. The original SSTS No. 8, Form and Content
of Advice to Taxpayers, was renumbered SSTS No. 7. In
addition, various revisions were made to the language
of the original SSTSs. The last significant updates to the
content of the SSTSs were effective Jan. 1, 2010.
In 2018, changes were made to the SSTSs to bring the
references to the AICPA Code of Professional Conduct

into conformity with the AICPA ethics codification.
In September of 2018, the TEC approved the formation
of a task force to update the SSTSs. The task force is
composed of AICPA Tax Section members representing
diverse interests including small and sole practitioner
firms, Private Company Practice Section (“PCPS”)
members, medium and large CPA firms and academia.
The task force developed and presented the updated
SSTSs to the TEC for their approval.
Explanation of proposed revisions
to the SSTSs
The goals of the revisions of the SSTSs are to ensure
that the standards are better aligned to reflect the
current state of the tax profession and to address the
emerging needs of today’s members. Proposed updates
to the standards include:
• Reorganization of the SSTSs by type of tax
work performed; and
• Promulgation of three new standards
surrounding data protection, reliance on tools
and the representation of tax clients before
taxing authorities.
Reorganization
Included in its efforts to update the SSTSs, the task
force developed a new practice-based organizational
structure for the standards. Under the new
organizational framework:
• Standard 1 includes general tax guidance with
broad applicability (includes new standards on data
protection and reliance on tools)

• Standard 2 includes tax return preparation guidance
• Standard 3 includes guidance specific to
providing tax advice
• Standard 4 includes guidance for members providing
tax representation services
(new standard)
The task force believed that the existing standards were
largely applicable to all types of tax services and were
drafted to be general in nature, to allow for their
use, no matter what type of tax service was being
delivered. At the time of the drafting of the original
standards, most of the tax services being provided
were compliance-oriented and involved tax
return preparation.
This revision project has reorganized the standards
so that most of the existing standards have been
incorporated into either general standards
(Standard 1) or compliance standards (Standard 2).
Because the proposed new standards around data
protection and reliance on tools are applicable to
different types of tax services, they were also included
with the general standards. The existing standard
as related to tax advisory services (Standard 3) and
the new standard related to representation services
(Standard 4) were determined to be unique and have
been separately stated. This alignment is intended to
assist members in applying standards to specific tax
practice situations and to help them understand the
scope and expectations of these standards.
Data protection

The subject of the protection of taxpayer data has
exponentially grown over time and has gained global
importance as technology now allows for the transfer
and storage of large amounts of confidential financial
information with the simple press of a button. In many
cases, this data is never seen in a hard copy format.
The task force believed it was important to implement
a standard which ensures members adopt reasonable
safeguards to protect taxpayer data, both in electronic
format and otherwise.
The task force also recognized that constant advances
in technology make it challenging to identify any
one set of standards with broad applicability across
all tax practices. The purpose of the new standard
is to expressly state a member’s responsibility to
make a reasonable effort to safeguard confidential
client information. It was broadly written to consider
the variability among member practices as well as
continuingly changing privacy laws and technology.
Reliance on tools
Tax is not a static subject, given regular changes
resulting from various legislative and regulatory
amendments, and judicial decisions. However, over time,
these changes have become more frequent, extensive
and complex, with related authoritative guidance from
the taxing authorities often delayed or incomplete. This
situation often leaves members struggling to (1) provide
clients or firm departments the necessary information
to allow the correct and accurate preparation and filing

of their respective tax returns and (2) plan for future
events to efficiently manage potential tax liabilities.
Members have long relied on tools of various types to
allow them to accurately interpret a particular provision
of the tax code. However, in today’s tax practice
environment, members rely on technology to provide
services more than at any point in history. That trend
will continue with the introduction of artificial
intelligence, data science, quantum computers and
other developing technologies.
Currently, tax professionals do not have a professional
standard relating specifically to reliance on these tools
when providing services. The task force identified
the need for a standard which protects members by
defining when they may reasonably rely on tools of all
types used in the performance of tax services.
Tax representation
As previously noted, the best practices that were the
forerunner of the existing SSTSs were written over
fifty years ago. At that time, tax preparation was
the overwhelming service that was provided by tax
professionals. Since then, tax practices have expanded
to provide a wide variety of services including tax
representation services. The task force believed the
continuing growth in the number of CPA firms providing
tax representation services, in various venues, involving
different types of taxes, obligated the development of
this proposed standard.
Another goal of the task force was to avoid proposing
standards which might appear duplicative of other
existing standards in effect today. While it is true

that CPAs who provide tax services are bound by
existing standards related to representation, including
Circular 230, such rules may be limited in scope
(e.g., Circular 230 only governs representation before
the Internal Revenue Service).
Mapping of current standards to proposed standards
The following table maps the current SSTSs to the reorganized
SSTSs and provides additional details related to the proposed
revisions.
Table Mapping: Current SSTSs to Proposed SSTSs
SSTSs Nos. 1–7
(Effective Jan. 1, 2010, and updated April 30, 2018,
to include revised AICPA Code of Professional
Conduct citations)
Proposed SSTSs No. 1–4
(Effective no earlier than Jan. 1, 2024)
Notes related to proposed changes
Preface Preface (modified) This now includes extant ongoing
process section with revisions.
History The existing history and updates have been relocated
and included
in the background section of the combined ED/ITC document.
Ongoing process This content is revised and relocated into the

preface section.
Definitions (NEW) The definitions section was added at the
beginning as these
terms are used throughout the standards. There is no change to
the existing definition of “taxpayer” or “tax position” from
extant
standards. The definition of “member” is added to reinforce the
applicability of standards.
SSTS No. 1, Tax Return Positions SSTS No. 1, General
Standards for
Members Providing Tax Services (NEW)
This is a new standard specifically addressing general matters
applicable to all tax services. It consolidates into a single
standard
guidance from extant SSTS Nos. 1 and 5 along with adding
proposed new standards on data protection and reliance on
tools.
1.1. Advising on Tax Positions
Introduction Introduction
No. 1 Introduction – ¶1 1.1.1. (modified) This adds reference to
tax positions mentioned in the new
SSTS No. 2. The definition of tax return position and taxpayer
is relocated to the definitions section.
SSTSs Nos. 1–7

Conduct citations)
No. 1 Introduction – ¶2 1.1.2.
No. 1 Introduction – ¶3 1.1.3. (modified) This deletes reference
to signing tax returns since this is now
covered in the new SSTS No. 2.
Statement Statement
No. 1 Statement – ¶4 This is relocated to proposed 1.1.5.
1.1.4. (NEW) This expands on the definition of tax position as
stated in the
definitions section.
No. 1 Statement – ¶5 1.1.5. (modified) This includes extant ¶4
and adds a new reference to written
standards of other taxing authorities. If the position’s likelihood
exceeds the “realistic possibility of success” standard, then
these
other standards should be followed.
1.1.6. (NEW) This adds reference to due diligence and
professional judgement

when advising on tax positions.
No. 1 Statement – ¶8 1.1.7. (modified) This deletes reference
indicating that the member has a
responsibility to be an advocate for a taxpayer.
Explanation Explanation
No. 1 Explanation – ¶9 1.1.8. (modified) This deletes reference
to signing returns but keeps the rest of
extant paragraph. This also relocates extant paragraph with
reference to signing returns to proposed 2.1.10.
No. 1 Explanation – ¶10 This is relocated to proposed 2.1.11.
SSTSs Nos. 1–7
Conduct citations)
No. 1 Explanation – ¶11 1.1.9.

SSTS No. 2, Answers to
Questions on Returns
2.2. Tax Return Questions
Statement Statement
No. 2 Statement – ¶2 2.2.2. (modified) This adds reference to
acts required before signing as a preparer.
SSTSs Nos. 1–7

Conduct citations)
No. 2 Explanation – ¶6 2.2.6. (modified) This adds the
requirement to advise a client if an omission of
an answer may cause the return to be incomplete or result in
penalty assessment.
SSTS No. 3, Certain Procedural Aspects
of Preparing Returns
2.3. Reliance on Information from Others
Statement Statement
No. 3 Statement – ¶2 2.3.2.
No. 3 Statement – ¶3 2.3.3. (modified) This deleted the
reference to the example, “such as taxpayer
maintenance of books and records or substantiating
documentation to support the reported deduction or tax
treatment.”
other sources including, but not limited to,
the tax return of another taxpayer.

SSTSs Nos. 1–7
Conduct citations)
SSTS No. 4, Use of Estimates 2.4. Use of Estimates
No. 4 Introduction – ¶1 2.4.1. (modified) This added that
responsibility of the data lies with the taxpayer.
Statement Statement

No. 4 Statement - ¶2 2.4.2. (modified) This added reference to
estimates provided by others but
authorized by the taxpayer.
No. 4 Explanation - ¶3 2.4.3.
No. 4 Explanation - ¶4 2.4.4.
No. 4 Explanation - ¶5 2.4.5. (modified) This adds reference
that a member should inform a taxpayer of his
or her duty to maintain records that support the return.
SSTSs Nos. 1–7
Conduct citations)
SSTS No. 5, Departure from a Position
Previously Concluded in an Administrative

Proceeding for Court Decisions
2.5. Departure from Previous Positions
Statement Statement
No. 5 Statement – ¶4 2.5.4. (modified) This added reference to
tax return positions in proposed 2.1.
No. 5 Explanation – ¶5 2.3.5. (modified) This added a statement
regarding “unless the taxpayer is
contractually bound to a particular tax treatment.”
SSTS No. 6, Knowledge of Error: Return
Preparation and Administrative Proceedings
1.2. Knowledge of Errors

SSTSs Nos. 1–7
Conduct citations)
1.2.4. (NEW) This references that taxing authorities may
impose specific
standards in connection with errors discovered during tax
engagements.
Statement Statement
errors in an administrative filing. This
formally references proposed 3.1.2. related to form advice to
be provided.
prior year returns.

1.2.8. This repeats extant ¶4 and reinforces the need to review
the
continuance of the client relationship if the client refuses to
correct a previously discovered error.
1.2.9. This is relocated from extant ¶6.
No. 6 Explanation – ¶7 1.2.10. This formally references
proposed 3.1.2. related to form advice
to be provided and adds extant ¶14.
1.2.13. (NEW) This references a member’s responsibility to
both the taxpayer
and tax system.
SSTSs Nos. 1–7
Conduct citations)

1.3. Data Protection (NEW) This is a new standard regarding
making reasonable efforts to
safeguard taxpayer data.
Introduction This states responsibilities for data protection
while performing
taxpayer services.
1.3.1.
1.3.2.
1.3.3.
Statement Efforts were made to have statements as limited as
possible to
make them reasonable but still enforceable.
1.3.4.
1.3.5.
Explanation Multiple examples are provided to explain
reasonable efforts to
safeguard taxpayer data.

1.3.6.
SSTSs Nos. 1–7
Conduct citations)
1.3.7.
1.3.8.
1.3.9.
1.3.10.
1.3.11.
1.3.12.
1.3.13.
1.4. Reliance On Tools (NEW) This is a new standard regarding
the allowance of members
to rely on multiple types of resources in providing tax services.
Introduction The definition of tools is provided.

1.4.1.
1.4.2.
Statement Professional judgement must be used in reliance on
tools. The
guidance is intentionally broad in scope.
1.4.3.
1.4.4.
Explanation Tools should be used to improve efficiency and
enhance a
member’s understanding of an issue; tools cannot supplant
professional judgement.
SSTSs Nos. 1–7
Conduct citations)
1.4.5.
1.4.6.

1.4.7.
1.4.8.
SSTS No. 2, Standards for Members Providing
Tax Compliance Services, Including Tax
Return Positions
This new standard specifically addresses tax compliance
services
and consolidates into a single standard guidance from extant
SSTS Nos. 1–5.
2.1. Tax Return Positions (NEW)
Introduction
2.1.1. This replicates extant SSTS No. 1, ¶1 but removes
definitions of
tax return position and taxpayer, since these have been
relocated
to the definitions section.
2.1.2. (NEW) This adds reference to tax positions mentioned in
proposed
SSTS No. 1 and proposed SSTS No. 2.3.
2.1.3. This replicates extant SSTS No. 1, ¶16.
Statement
2.1.5. (NEW) This adds reference to the definition of tax
position in

proposed 1.1.4.
SSTSs Nos. 1–7
Conduct citations)
2.1.6. This includes extant SSTS No. 1, ¶4 and ¶5 and adds
reference
to written standards of other taxing authorities. If they exceed
the “realistic possibility of success” standard, then these other
standards should be followed.
2.1.9. (NEW) This adds guidance related to tax positions
proposed by other
parties, as referenced in proposed 2.3.
Explanation
2.1.10. This replicates extant SSTS No. 1,¶9.
2.1.11. (modified) This replicates extant SSTS No. 1, ¶10 but

deletes the statement
referencing the fact that the standards that apply to a taxpayer
may
differ from those that apply to a member.
SSTS No. 7, Form and Content
of Advice to Taxpayers
Tax Consulting Services
SSTSs Nos. 1–7
Conduct citations)

No. 7 Introduction – ¶1 3.1.1. (modified) This sentence was
deleted: “The statement does not, however,
cover a member’s responsibilities when the expectation is that
the advice rendered is likely to be relied on by parties other
than
the taxpayer.”
Statement Statement
the definition of competence under
Circular 230, Section 10.35.
tax return positions in proposed 2.1.
the requirement of a member to
communicate subsequent developments if he or she was
engaged to implement tax advice previously provided or is
engaged to specifically do so.

SSTSs Nos. 1–7
Conduct citations)
No. 7 Explanation – ¶11 Deleted.
3.1.11. (NEW) This adds guidance about if a member is
advising on a position but
is not engaged to prepare or sign a tax return, then as long as
the
member advises the taxpayer on the appropriate disclosure, the
standard is satisfied.
3.1.12. (NEW) This adds guidance about if a member believes
that a taxpayer
penalty may be assessed, the member should advise the taxpayer
about the possible penalty and opportunities for penalty
avoidance
with appropriate disclosure. This also states that it is the
taxpayer’s
responsibility to decide whether and how to disclose.
No. 7 Introduction – ¶1 3.1.13. This added a sentence that was
deleted in proposed 3.1.1. related
to advice likely to be relied on by parties other than the

taxpayer.
Tax Representation Services (NEW)
This is a new standard on taxpayer representation which focuses
on the representation relationship.
Introduction This limits the standard to representations which
require a power
of attorney. It also references guidance from other sources that
must be adhered to.
4.1.1.
4.1.2.
Statement This provides guidance on the steps a member needs
to address
throughout the course of the representational relationship.
4.1.3.
4.1.4.
SSTSs Nos. 1–7
Conduct citations)

4.1.5.
4.1.6.
4.1.7.
4.1.8.
Explanation This addresses competency and other subject areas
that members
need to be familiar with during the representation engagement,
including those imposed by the taxing authorities as well as
those
included in the AICPA’s Code of Professional Conduct.
4.1.9.
4.1.10.
4.1.11.
Contributors Members of the TEC, Tax Practice Responsibilities
Committee,
SSTS Revision Task Force and AICPA staff who participated in
the
issuance of the ED and the ITC are listed. Similar information
was
provided in the extant standards without a separate heading.

Effective date
If issued as final, the effective date for these finalized SSTSs
will be no earlier than Jan. 1, 2024.
Exposure draft
Proposed Statements on Standards for Tax Services
PREFACE
Introduction
Standards are the foundation of a profession. The
AICPA aids its members in fulfilling their ethical
responsibilities by instituting and maintaining standards
against which their professional performance can be
measured. Compliance with professional standards of
tax practice also reaffirms the public’s awareness of the
professionalism that is associated with CPAs as well as
the AICPA.
This publication sets forth enforceable tax practice
standards for members of the AICPA, known as the
Statements on Standards for Tax Services (SSTSs or
statements). These statements apply to all members
providing tax services regardless of the jurisdictions in
which they practice. Interpretations of these statements
may be issued as guidance to assist in understanding
and applying the statements. Any such interpretations
have the same authority as defined in the AICPA Code of
Professional Conduct, ET sec. 0.100.020, Interpretations
and Other Guidance.
The SSTSs and their interpretations are intended to
complement other standards of tax practice, such as
Treasury Department Circular No. 230, Regulations

Governing Practice before the Internal Revenue Service
(Circular 230), penalty provisions of the Internal Revenue
Code and state boards of accountancy rules.
The SSTSs are written in as simple and objective a
manner as possible. However, by their nature, practice
standards provide for an appropriate range of behavior
and need to be interpreted to address a broad range
of personal and professional situations. The SSTSs
recognize this need by, in some sections, providing
relatively subjective rules and by leaving certain terms
undefined. These terms are generally rooted in tax
concepts and, therefore, should be readily understood
by tax practitioners. Accordingly, enforcement of
the SSTSs is under the General Standards Rule
(AICPA, Professional Standards, ET secs. 1.300.001 and
2.300.001), and the Compliance with Standards Rule
(AICPA, Professional Standards, ET secs. 1.310.001 and
2.310.001) of the AICPA Code of Professional Conduct,
and will be undertaken on a case-by-case basis.
Members are expected to comply with these standards.
Ongoing process
The following SSTSs and any interpretations issued
thereunder reflect the AICPA’s standards of tax practice
and delineate members’ responsibilities to taxpayers,
the public, the government and the profession. The
statements are intended to be part of an ongoing
process of articulating standards of tax practice for
members. These standards are subject to change
as necessary or appropriate to address changes
in the tax law or other developments in the tax
practice environment.
To accommodate the complexity and rapid change

inherent in the tax practice environment, the AICPA
issues supplementary guidance to the SSTSs and
interpretations in various forms, such as frequently
asked questions (FAQs) and practice guides. Such
documents are not rules, regulations or official guidance
of the Tax Executive Committee (TEC) issued pursuant
to its rule-making authority and, therefore, are not
authoritative guidance.
Members are encouraged to assess the adequacy of
their practices and procedures for providing tax services
in conformity with these standards. This process will
vary according to the size of the practice and the
nature of tax services performed.
The TEC promulgates the SSTSs and their
interpretations. Acknowledgment is also due to
the many members who have devoted their time
and efforts over the years to developing and
revising the AICPA’s standards.
Form of standards
Each statement is divided into subsections that address
a variety of aspects related to tax services. Although
some statements have several subsections that address
different aspects of tax services, the subsections should
be applied as essential elements of the entire statement
generally related to all tax services.
• For ease of analysis, each subsection contains an
introduction and an explanation section.

• In addition to the AICPA, applicable tax authorities
may impose specific reporting and disclosure
standards with regard to advising on tax return
positions or preparing or signing tax returns. These
standards can vary between taxing authorities and
by type of tax.
• A member should refer to the current version of
Internal Revenue Code Sec. 6694, Understatement
of taxpayer’s liability by tax return preparer, the most
recent version of Circular 230 and other applicable
tax authority guidance to determine the reporting
and disclosure standards that are applicable to the
service being provided.
Definitions
All terms herein are as defined in the AICPA Code
of Professional Conduct except as noted below.
• Taxpayer: A taxpayer is a client, a member’s
employer or any other third-party recipient
of tax services.
• Tax position: A tax position is (i) a position
reflected on a tax return on which a
member has specifically advised a taxpayer
or (ii) a position about which a member
has knowledge of all materials facts and,
on the basis of those facts, has concluded
whether the position is appropriate.
• Member: Consistent with the AICPA Code
of Professional Conduct, ET sec. 0.100;
unless otherwise noted, the SSTSs apply

to all members providing tax services.
Statement on Standards for Tax Services No. 1, General
Standards
for Members Providing Tax Services
1.1. Advising on tax positions
Introduction
1.1.1. This statement defines tax positions and sets
forth the general standards for members
advising on tax positions. Standards related to
tax return positions are contained in Statement
on Standards for Tax Services No. 2, Standards
for Members Providing Tax Compliance Services,
Including Tax Return Positions.
1.1.2. This statement also addresses a member’s
obligation to advise a taxpayer of relevant
tax disclosure responsibilities and potential
penalties.
1.1.3. In addition to the AICPA, applicable taxing
authorities may impose specific reporting and
disclosure standards with regard to advising
on tax positions. These standards can vary
between taxing authorities and by type of tax.
Statement
1.1.4. A tax position is a conclusion reached when

applicable tax law, regulations, case law or other
regulatory or recognized guidance is applied to a
particular transaction, a specific set of facts and
circumstances or a controversy.
1.1.5. A member should determine and comply with
the standards, if any, that are imposed by the
applicable taxing authority with respect to
advising on tax positions.
a. If the applicable taxing authority has no
promulgated standards with respect to
advising on tax positions, a member should
not advise a taxpayer to take a tax position
unless the member has a good-faith belief
that the position has at least a realistic
possibility of being sustained administratively
or judicially on its merits if challenged.
b. If the applicable taxing authority has written
standards that exceed the realistic possibility
standard described in 1.1.5.a. above, the
member should comply with those taxing
authority standards.
c. Notwithstanding section 1.1.5.a. and b.,
a member may, as permitted by a taxing
authority, advise a taxpayer to take a tax
position where the member (i) concludes
that there is a reasonable basis for the
position and (ii) advises the taxpayer to
appropriately disclose that position.
1.1.6. A member should exercise due diligence and
professional judgment when advising on

tax positions for a particular situation. Such
diligence and judgment should inform the
scope of the member’s inquiry undertaken
in the authoritative pronouncements for
the particular tax in question and, where
appropriate, in professional and other literature
related to the issues in question.
1.1.7. When advising on a tax position, a member
has the right to be an advocate for the taxpayer
with respect to a position satisfying the
aforementioned standards.
Explanation
1.1.8. The AICPA and various taxing authorities
impose specific standards with respect to tax
positions. In a given situation, the standards, if
any, imposed by the applicable taxing authority
may be higher or lower than the standards set
forth in section 1.1.5. A member is to comply
with the standards, if any, of the applicable
taxing authority; if the applicable taxing
authority has no standards or if its standards
are lower than the standards set forth in section
1.1.5., the standards set forth in section 1.1.5.
will apply.
1.1.9. In addition to a duty to the taxpayer, a member
has a duty to the tax system. However, it is well
established that the taxpayer has no obligation

to pay more taxes than are legally owed, and
a member has a duty to the taxpayer to assist
in achieving that result or any other legally
valid tax outcome the taxpayer desires. The
standards contained in section 1.1.5. recognize
a member’s responsibilities to both the
taxpayer and the tax system.
1.1.10. In reaching a conclusion concerning whether
a given standard in section 1.1.5. has been
satisfied with respect to a particular jurisdiction,
a member may consider a well-reasoned
construction of the applicable statute and
related regulations of that jurisdiction, if any,
well-reasoned articles or treatises or guidance
issued by the applicable taxing authority,
regardless of whether such sources would be
treated as authority under Internal Revenue Code
Section 6662, Imposition of accuracy-related
penalty on underpayments, and the regulations
thereunder. A position would not fail to meet
these standards merely because the position
is later abandoned for practical or procedural
considerations during an administrative hearing
or in the litigation process.
1.1.11. If a member has a good-faith belief that more
than one tax position meets the standards
set forth in section 1.1.5., a member’s advice
concerning alternative acceptable positions may
include a discussion of the likelihood that each
such position might or might not be challenged
by the taxing authority.
1.1.12. If particular facts and circumstances lead a
member to believe that a taxpayer penalty might

be asserted, the member should so advise the
taxpayer and should discuss with the taxpayer
the opportunity, if any, to avoid such penalty by
appropriate disclosure to the taxing authority.
A member should also advise the taxpayer it is
their responsibility to decide whether and how
to disclose.
1.2. Knowledge of errors
Introduction
1.2.1. This statement sets forth the applicable
standards for a member who becomes aware
of (a) an error in a taxpayer’s previously filed tax
return; (b) an error in a return that is the subject
of an administrative proceeding, such as an
examination by a taxing authority or an appeals
conference; or (c) a taxpayer’s failure to file a
required tax return.
1.2.2. As used herein, the term error includes any
position, omission or method of accounting
that, at the time a position is advised or a
return is filed, fails to meet the standards set
out in 1.1, Advising on Tax Positions, or 2.1, Tax
Return Positions. The term error also includes
a position taken on a prior year’s return that
no longer meets these standards due to
legislation, judicial decisions or administrative
pronouncements having retroactive effect.
However, an error does not include an item that
has an insignificant effect on the taxpayer’s tax
liability. The term administrative proceeding
does not include a criminal proceeding.

1.2.3. This statement applies whether or not the
member prepared or signed a return that
contains the error.
authorities may impose specific standards with
regard to errors discovered during the provision
of tax services by a member. These standards
can vary between taxing authorities and by
type of tax.
1.2.5. Special considerations may apply when a
member has been engaged by legal counsel
to provide assistance in a matter relating to
a taxpayer.
Statement
1.2.6. A member should inform a taxpayer promptly
upon becoming aware of the taxpayer’s failure
to file a required return, an error in a previously
filed return, an error in a return that is the subject
of an administrative proceeding, an error in an
administrative filing (such as a ruling request,
accounting method change, etc.) or an error in
advice provided. A member also should advise
the taxpayer of the potential consequences of
the error and advise on corrective measures to
be taken. Such advice may be given orally. See
also section 3.1.2. regarding the documentation

of advice.
1.2.7. If a member prepares a tax return for the current
or a prior tax year, and the taxpayer has not
taken appropriate action to correct an error
related to a tax return position in a tax return
for a prior year, the member should consider
whether to withdraw from preparing the current
return and whether to continue a professional
or employment relationship with the taxpayer.
If the member does prepare the current year
return, the member should take reasonable
steps to ensure that the error is not repeated.
1.2.8. A member is not allowed to inform a taxing
authority of an error without the taxpayer’s
permission, except when required by law.
Members also should consider whether they
can continue a professional relationship with
a taxpayer who refuses to properly mitigate a
discovered error.
1.2.9. If a member is representing a taxpayer in an
administrative proceeding with respect to
a return that contains an error of which the
member is aware, the member should request
the taxpayer’s agreement to disclose the error
to the taxing authority. Lacking such agreement,
the member should consider whether to
withdraw from representing the taxpayer in
the administrative proceeding and whether
to continue a professional or employment
relationship with the taxpayer.
Explanation
1.2.10. If a member becomes aware of an error

while performing tax services, the member’s
responsibility is to advise the taxpayer of
the existence of the error. The member
should advise the taxpayer of the error and
the potential consequences, and advise on
corrective measures to be taken, if any. If the
member does not prepare the taxpayer’s tax
return or was not the provider of the advice,
the member may instead advise that the error
be discussed with the taxpayer’s tax return
preparer or advisor. Similarly, when representing
the taxpayer before a taxing authority in an
administrative proceeding with respect to
a return containing an error of which the
member is aware, the member should advise
the taxpayer to disclose the error to the taxing
authority and of the potential consequences of
not disclosing the error. Refer to section 3.1.2.
for considerations regarding the decision to
provide such advice in oral or written form.
1.2.11. It is the taxpayer’s responsibility to decide
whether to correct an error. If the taxpayer does
not correct an error, a member should consider
whether to withdraw from the engagement
and whether to continue a professional or
employment relationship with the taxpayer.
Although recognizing that the taxpayer may not
be required by statute to correct an error by filing
an amended return, a member should consider
whether a taxpayer’s decision not to file an
amended return or otherwise correct an error
may predict future behavior that might require
termination of the relationship.

1.2.12. Once the member has obtained the taxpayer’s
consent to disclose an error in an administrative
proceeding, the disclosure should not be
delayed to such a degree that the taxpayer or
member might be considered to have failed to
act in good faith or to have, in effect, provided
misleading information. In any event, disclosure
should be made before the conclusion of the
administrative proceeding.
1.2.13. Members have a responsibility to both the
taxpayer and the tax system. Discovery of an
error in an administrative proceeding or filing,
such as a ruling request, might negate the effect
of the ruling if not disclosed to the authority.
Failure to comply with statutory or regulatory
compliance requirements impact not only the
taxpayer, but also the integrity of the entire
tax system.
1.2.14. A conflict between the member’s interests
and those of the taxpayer may be created
by, for example, the potential for violating
Code of Professional Conduct, Confidential
Client Information Rule (AICPA, Professional
Standards, ET sec. 1.700.001) (relating to the
member’s confidential client relationship); the
tax law and regulations; or laws on privileged
communications, as well as by the potential
adverse impact on a taxpayer of a member’s

withdrawal. Therefore, a member should
consider consulting with his or her own legal
counsel before deciding upon providing advice
to the taxpayer and whether to continue a
professional or employment relationship with
the taxpayer.
1.2.15. If a member believes that a taxpayer may face
possible exposure to allegations of fraud or
other criminal misconduct, the member should
advise the taxpayer to consult with an attorney
before the taxpayer takes any action.
1.2.16. If a member decides to continue a professional
or employment relationship with the taxpayer
and is requested to prepare a tax return for
a year subsequent to that in which an error
occurred, the member should take reasonable
steps to ensure that the error is not repeated.
If the subsequent year’s tax return cannot be
prepared without perpetuating the error, the
member should consider withdrawal from the
return preparation. If a member learns that
the taxpayer is using an erroneous method of
accounting and it is past the due date to request
permission to change to a method meeting the
standards of section 2.1.1., the member may
sign a tax return for the current year, providing
the tax return includes appropriate disclosure of
the use of the erroneous method.
1.2.17. Whether an error has no more than an
insignificant effect on the taxpayer’s tax
liability is left to the professional judgment
of the member based on all the facts and
circumstances known to the member. In judging

whether an erroneous method of accounting
has more than an insignificant effect, a member
should consider the method’s cumulative effect,
as well as its effect on the tax advice provided,
current year’s tax return or the tax return that is
the subject of the administrative proceeding.
1.3. Data protection
Introduction
standards for a member’s responsibilities
related to the protection of taxpayer data
obtained in the course of rendering services
for a taxpayer.
1.3.2. A member’s responsibility to protect taxpayer
information is a well-established professional
responsibility. The increasing use of technology
by individuals and businesses, together with
a growing awareness and attention of data
breaches and identity theft, has resulted in a
growing sensitivity towards and need for a focus
on the protection of taxpayer data, including
electronic data.
1.3.3. This standard complements, and does not
alter or replace, the confidentiality standards
established in the AICPA Code of Professional
Conduct 1.700.001, Confidential Information Rule
and the Interpretations thereunder.
Statement
1.3.4. A member should make reasonable efforts

to safeguard taxpayer data, including data
transmitted or stored electronically.
1.3.5. A member should consider applicable privacy
laws when collecting and storing taxpayer data.
Explanation
1.3.6. The statement uses the term “reasonable,”
knowing that actions or behaviors considered
“reasonable” may differ over time, among
members and from firm to firm based on size
and resources. The absence of any bright-line
rules was purposeful, allowing for changing
technology, laws, guidance and practice.
1.3.7. Appropriate safeguards should be implemented
to protect both member and taxpayer data
stored within the member’s information
systems platform. Appropriate safeguards
should be based on current recommended
practices, and may, for example, include the
installation and use of commercial security
software to prevent unwanted or unauthorized
access to information, encryption of data that is
sent between multiple parties over the internet,
the use of secure networks, strong password
policies, use of firewalls and use of secure data
sharing/collaboration platforms.

a. A member should consider other
industry standards, such as the AICPA’s
Privacy Management Framework and
Trust Services Criteria when developing
a privacy program.
1.3.8. Members may use electronic tools owned and
hosted by others, such as tax return preparation
software, or may outsource certain tasks, such
as converting paper documents to electronic
information. Members should take reasonable
efforts to confirm that taxpayer information
properly shared with others in the course of
providing a service is appropriately protected.
1.3.9. A member should take reasonable steps to limit
the amount of taxpayer confidential information
in the member’s files. For example, the member
should collect only the information necessary
to perform the services for which the member
is being engaged or otherwise approved
to perform by the taxpayer, returning or
redacting any confidential taxpayer information
unnecessary to complete the services. This
may also include insisting that any personally
identifiable information (PII) or personal health
information (PHI) be masked/anonymized
prior to receipt by the member. Additionally,
adherence to appropriate document retention
and destruction policies can help to ensure
that taxpayer data is properly removed from
a member’s information systems once it is no
longer needed under the respective statute
of limitations or the member’s document
retention policies.

1.3.10. In developing safeguards, members should also
consider steps to be taken in the event of a data
breach, including compliance with notification
obligations. For example, the Federal Trade
Commission (FTC) provides recommendations
that include securing systems and fixing issues
that are attributed to the breach. Consider
forming a plan to quickly respond to those
affected by the breach. Notify appropriate
authorities of the breach as required by law.
1.3.11. Members should consider applicable privacy
laws. For example, the Financial Services
Modernization Act of 1999 (also referred to as
the Gramm-Leach-Bliley Act (GLBA)), requires
professional tax return preparers to ensure
the security and confidentiality of customer
(i.e., taxpayer) financial information. As part of
the implementation of the GLBA, the FTC issued
the Safeguards Rule, requiring the development
of a written information security plan that
describes the program put in place to protect
taxpayer information commensurate with
relative firm size of the member and complexity
of services provided. Additionally, under these
rules, return preparers are responsible for taking
steps to ensure that their affiliates and service
providers safeguard taxpayer information in
their care. As with many privacy laws, the FTC
has subsequently updated the rule to keep
pace with technology and members should
periodically review applicable privacy laws to
keep abreast of applicable rules.
1.3.12. A member should have general knowledge
of the current security expectations of taxing

authorities and taxpayers. Data security is a
topic addressed in the tax press and by taxing
authorities. For example, at the time of this
writing, the IRS has a webpage with links to
various publications and other information
related to data protection. Members are not
expected to become experts in this area, but
it is reasonable that a member avail himself
or herself of the information made generally
available to tax professionals on the subject,
including those referenced in section 1.3.7.1.
1.3.13. Training is a vital component of any data
protection plan. A member should make
reasonable efforts to ensure all non-member
personnel who the member supervises should
be trained and informed about data protection.
For example, staff should be informed how to
recognize phishing emails and the dangers of
opening or downloading attachments from
unknown senders.
1.4. Reliance on tools
Introduction
standards for members when relying on tools
in the provision of tax services including, but
not limited to, the preparation of a tax return, tax
consulting services and tax representation.

1.4.2. For purposes of this section, a tool is a resource
used in the provision of tax services. Tools
include, but are not limited to, tax preparation
software, tax research publications (paper or
electronic), tax-related calculation aides, tax
planning software, state and local tax aids,
online data search engines, data analytics,
statistical models, artificial intelligence
and relevant professional publications
and resources.
Statement
1.4.3. A member should exercise appropriate
professional judgement and professional
care when relying on a tool.
1.4.4. A member may reasonably rely on tools used in
providing tax services to a taxpayer. Use of the
tool does not absolve the member of his or her
professional obligations under AICPA or other
applicable ethical standards.
Explanations
1.4.5. Tools developed for use in the provision of
tax services provide significant benefits to
members. It is generally a best practice of a
member to rely on such tools to a certain extent
to improve efficiency and client service.
1.4.6. The source of the tools must be considered
when determining the appropriate level of
reliance on that tool. For example, subscription-
based tax research tools and resources may

have more weight than opinion articles from
independent internet sources.
1.4.7. A member who employs tools in providing
tax services remains responsible for the
completed work product in accordance with
the various other standards contained in the
statements. Accordingly, members should take
reasonable steps to satisfy themselves that the
results presented by the use of various tools
are reliable. For example, a member should
confirm that the calculation of taxable income
and tax liability for an income tax return that
is completed using professional tax return
preparation software is accurate and meets the
standards for tax return positions established in
2.1, Tax Return Positions.
1.4.8. Tools should be used to enhance or improve
the member’s understanding of a tax issue,
not to supplant the member’s professional
judgement. For example, when preparing a
Federal Form 1040, U.S. Individual Income
Tax Return, a member must still attest under
penalties of perjury that, to the best of the
preparer’s knowledge and belief, the return
and accompanying schedules are true, correct
and complete. That responsibility cannot be
transferred entirely to reliance on a tool.
Statement on Standards for Tax Services No. 2, Standards for

Members
Providing Tax Compliance Services, Including Tax Return
Positions
2.1. Tax return positions
Introduction
standards for members preparing or signing tax
returns (including amended returns, claims for
refund and information returns) filed with any
taxing authority.
2.1.2. Additional standards apply to tax positions
which a member advises on. Refer to 1.1,
Advising on Tax Positions. When signing or
preparing a tax return that includes a tax
position which a third party advised on, also
refer to 2.3, Reliance on Information from Others.
2.1.3. For purposes of this statement, preparation of a
tax return includes giving advice on events that
have occurred at the time the advice is given if
the advice is directly relevant to determining the
existence, character or amount of a schedule,
entry or other portion of a tax return.
2.1.4. This statement also addresses a member’s
obligation to advise a taxpayer of relevant
tax return disclosure responsibilities and
potential penalties.
Statement
2.1.5. A tax return position is a tax position (as defined

in section 1.1.4) that is reflected on a tax return
prepared by a member or for which a member
signs as preparer.
2.1.6. A member should determine and comply with
the standards, if any, that are imposed by the
applicable taxing authority with respect to
preparing or signing a tax return.
a. If the applicable taxing authority has no
written standards with respect to preparing
or signing a tax return, a member should
not prepare or sign the tax return unless
the member has a good-faith belief that the
tax return position has at least a realistic
possibility of being sustained administratively
or judicially on its merits if challenged.
b. If the applicable taxing authority has written
standards that exceed the realistic possibility
standard described in section 2.1.6.a. above,
the member should comply with those taxing
authority standards.
c. Notwithstanding section 2.1.6.a. and b.,
a member may, as permitted by a taxing
authority, prepare or sign a tax return which
includes a tax return position where (i) the
member concludes there is a reasonable
basis for the tax return position and (ii) the
position is appropriately disclosed.
2.1.7. When preparing or signing a tax return on which
a tax return position is taken, a member should,
when relevant, advise the taxpayer regarding

potential penalty consequences of such tax
return position and the opportunity, if any, to
avoid such penalties through disclosure.
2.1.8. A member should not advise a taxpayer to take
a tax return position or prepare or sign a tax
return reflecting a tax return position that the
member knows:
a. exploits the audit selection process of a
taxing authority, or
b. serves as a mere arguing position advanced
solely to obtain leverage in a negotiation with
a taxing authority.
2.1.9. A member may rely, in good faith, on the tax
positions proposed by others regarding the
issues being considered, provided the member
is satisfied that the standards in 2.3, Reliance on
Information from Others, are satisfied.
Explanation
2.1.10. The AICPA and various taxing authorities
impose specific reporting and disclosure
standards with respect to tax return positions
and preparing or signing tax returns. In a given
situation, the standards, if any, imposed by the
applicable taxing authority may be higher or
lower than the standards set forth in section

2.1.6. A member is to comply with the standards,
if any, of the applicable taxing authority. If the
applicable taxing authority has no standards or
if its standards are lower than the standards set
forth in section 2.1.6, the standards set forth in
section 2.1.6. will apply.
2.1.11. Our self-assessment tax system can function
effectively only if taxpayers file tax returns that
are true, correct and complete. A tax return is
prepared based on a taxpayer’s representation
of facts, and the taxpayer has the final
responsibility for positions taken on the return.
2.1.12. In reaching a conclusion concerning whether
a given standard in 2.1.6. has been satisfied,
a member may consider a well-reasoned
construction of the applicable statute and
related regulations, if any, well-reasoned articles
or treatises or pronouncements issued by
the applicable taxing authority, regardless of
whether such sources would be treated as
authority under Internal Revenue Code Section
6662, Imposition of accuracy-related penalty on
underpayments, and the regulations thereunder.
A position would not fail to meet these
standards merely because it is later abandoned
for practical or procedural considerations
during an administrative hearing or in the
litigation process.
2.1.13. If a member has a good-faith belief that
more than one tax return position meets the
standards set forth in section 2.1.6., a member’s
advice concerning alternative acceptable
positions may include a discussion of the

likelihood that each such position might or
might not cause the taxpayer’s tax return to
be examined and whether the position would
be challenged in an examination. In such
circumstances, such advice is not a violation of
section 2.1.6.
2.1.14. A member’s advising on whether information is
appropriately disclosed by the taxpayer should
be based on the facts and circumstances of the
particular case and the disclosure requirements
of the applicable taxing authority. If a member
advising on a tax position, but not engaged to
prepare or sign the related tax return, advises
the taxpayer concerning appropriate disclosure
of the position, then the member shall be
deemed to meet the disclosure requirements of
these standards.
the opportunity, if any, to avoid such penalty
by disclosing the position on the tax return. A
member should also advise the taxpayer it is
their responsibility to decide whether and how
to disclose.
2.2. Tax return questions
Introduction
standards for members when signing the

preparer’s declaration on a tax return if one or
more questions on the return have not been
answered. The term questions include requests
for information on the return, in the instructions
or in the regulations, whether or not stated in the
form of a question.
Statement
2.2.2. Before signing as preparer, a member should
take reasonable steps to obtain from the
taxpayer the information necessary to provide
appropriate answers to all required questions on
a tax return.
Explanation
2.2.3. It is recognized that the questions on tax
returns are not of uniform importance, and
often they are not applicable to the particular
taxpayer. Nevertheless, there are at least three
reasons why a member should be satisfied that
a reasonable effort has been made to obtain
information to provide appropriate answers to
the questions on the return that are applicable to
a taxpayer:
a. A question or other information may be of
importance in determining taxable income or
loss, or the tax liability shown on the return, in
which circumstance an omission may detract

from the completeness of the return.
b. A request for information may require a
disclosure necessary for a complete return or
to avoid penalties.
c. A member often must sign a preparer’s
declaration stating that the return is true,
correct and complete. Additionally, this may
be stipulated as being signed under penalties
of perjury.
2.2.4. Reasonable grounds may exist for omitting an
answer to a question applicable to a taxpayer.
For example, reasonable grounds may include
the following:
a. The information is not readily available and
the answer is not significant in terms of its
impact on taxable income or loss, or the tax
liability shown on the return.
b. Genuine uncertainty exists regarding the
meaning of a question in relation to the
particular return.
c. The information requested is voluminous; in
such cases, a statement should be made on
the return that the information will be supplied
upon request.
2.2.5. A member should not omit an answer merely
because it might prove disadvantageous to
a taxpayer.
2.2.6. A member should consider whether the

omission of an answer to a question may cause
the return to be deemed incomplete or result in
penalties, and advise the taxpayer accordingly.
2.2.7. If reasonable grounds exist for omission of an
answer to an applicable question, a taxpayer
is not required to provide on the return an
explanation of the reason for the omission.
2.3. Reliance on information from others
Introduction
standards for members concerning the
obligation to examine or verify certain
supporting data or to consider information
related to another taxpayer when preparing a
taxpayer’s tax return.
Statement
2.3.2. In preparing or signing a return, or a portion of a
return, a member may in good faith rely, without
verification, on information furnished by the
taxpayer or by third parties. However, a member
should not ignore the implications of information
furnished and should make reasonable inquiries
if the information furnished appears to be
incorrect, incomplete or inconsistent either on
its face or on the basis of other facts known to
the member. A member should consider one or
more of the taxpayer’s prior year tax returns, or a
portion of a return, whenever feasible.
2.3.3. If the tax law or regulations impose a condition

with respect to deductibility or other tax
treatment of an item, a member should make
reasonable inquiries to determine to the
member’s satisfaction whether such condition
has been met.
2.3.4. When preparing a tax return, a member should
consider relevant information actually known
by that member from other sources, including
the tax return of another taxpayer. In using such
information, a member should consider any
limitations imposed by any law or rule relating
to confidentiality.
Explanation
2.3.5. The preparer’s declaration on a tax return often
states that the information contained therein
is true, correct and complete to the best of the
preparer’s knowledge and belief based on all
information known by the preparer. This type
of reference should be understood to include
information furnished by the taxpayer or by third
parties to a member in connection with the
preparation of the return.
2.3.6. The preparer’s declaration does not require a
member to examine or verify supporting data; a
member may rely on information furnished by
the taxpayer unless it appears to be incorrect,
incomplete or inconsistent. However, there is a

need to determine by inquiry that a specifically
required condition, such as maintaining books
and records or substantiating documentation,
has been satisfied and to obtain information
when the material furnished appears to be
incorrect, incomplete or inconsistent. Although
a member has certain responsibilities in
exercising due diligence in preparing a return,
the taxpayer has the ultimate responsibility for
the contents of the return. Thus, if the taxpayer
presents unsupported data in the form of lists of
tax information, such as dividends and interest
received, charitable contributions and medical
expenses, such information may be used in the
preparation of a tax return without verification
unless it appears to be incorrect, incomplete or
inconsistent either on its face or on the basis of
other facts known to a member.
2.3.7. Even though there is no requirement to
examine underlying documentation, a member
should encourage the taxpayer to provide
supporting data where appropriate. For
example, a member should encourage the
taxpayer to submit underlying documents
for use in tax return preparation to permit
full consideration of income and deductions
arising from security transactions and from
pass-through entities, such as estates, trusts,
partnerships and S corporations.
2.3.8. The source of information provided to a
member by a taxpayer for use in preparing the
return is often a pass-through entity, such as a
limited partnership, in which the taxpayer has
an interest but is not involved in management.

A member may accept the information provided
by the pass-through entity without further
inquiry, unless there is reason to believe it is
incorrect, incomplete or inconsistent, either on
its face or on the basis of other facts known
to the member. In some instances, it may be
appropriate for a member to advise the taxpayer
to ascertain the nature and amount of possible
exposure to tax deficiencies, interest and
penalties by taxpayer contact with management
of the pass-through entity.
2.3.9. A member should make use of a taxpayer’s
returns for one or more prior years in preparing
the current return whenever feasible. Reference
to prior returns and discussion of prior-year tax
determinations with the taxpayer often provides
information to determine the taxpayer’s general
tax status, avoid the omission or duplication
of items and afford a basis for the treatment
of similar or related transactions. As with the
examination of information supplied for the
current year’s return, the extent of comparison
of the details of income and deduction between
years depends on the particular circumstances.
2.4. Use of estimates
Introduction
standards for members when using the
taxpayer’s estimates in the preparation of a
tax return. Appraisals or valuations are not
considered estimates for purposes of this
statement. The accuracy of the estimate is

the responsibility of the taxpayer.
Statement
2.4.2. Unless prohibited by statute, administrative
rule or judicial holdings, a member may use
estimates, whether from the taxpayer or other
sources authorized by the taxpayer as permitted
in 2.3, Reliance on Information from Others,
in the preparation of a tax return if it is not
practical to obtain exact data and if the member
determines that the estimates are reasonable
based on the facts and circumstances known to
the member. Estimates should be presented in
a manner that does not imply greater accuracy
than exists.
Explanation
2.4.3. Accounting requires the exercise of professional
judgment and, in many instances, the use
of approximations based on judgment. The
application of such accounting judgments, as
long as not in conflict with rules set forth by a
taxing authority, is acceptable. These judgments
are not estimates within the purview of this
statement. For example, a federal income tax
regulation provides that if all other conditions for
accrual are met, the exact amount of income or
expense need not be known or ascertained at
year end if the amount can be determined with

reasonable accuracy.
2.4.4. When the taxpayer’s records do not accurately
reflect information related to small expenditures,
accuracy in recording some data may be
difficult to achieve. Therefore, the use of
estimates by a taxpayer in determining the
amount to be deducted for such items may be
appropriate.
2.4.5. When records are missing or precise
information about a transaction is not available
at the time the return must be filed, a member
may prepare a tax return using a taxpayer’s
estimates of the missing data. The member
should inform the taxpayer of the taxpayer duty
to maintain records that support the return.
2.4.6. Estimated amounts should not be presented in
a manner that provides a misleading impression
about the degree of factual accuracy.
2.4.7. Specific disclosure that an estimate is used for
an item in the return is not generally required;
however, such disclosure should be made in
unusual circumstances where nondisclosure
might mislead the taxing authority regarding
the degree of accuracy of the return as a whole.
Some examples of unusual circumstances
include the following:
a. A taxpayer has died or is ill at the time the
return must be filed.
b. A taxpayer has not received a Schedule K-1
for a pass-through entity at the time the tax

return is to be filed.
c. There is litigation pending (for example,
a bankruptcy proceeding) that bears on
the return.
d. Fire, technology issues or natural disaster
has destroyed the relevant records.
2.5. Departure from previous positions
Introduction
standards for members in advising on a tax
return position that departs from the position
determined in an administrative proceeding or
in a court decision with respect to the taxpayer’s
prior return.
2.5.2. For purposes of this statement, administrative
proceeding includes an examination by a taxing
authority or an appeals conference relating to a
return or a claim for refund.
2.5.3. For purposes of this statement, court decision
means a decision by any court having
jurisdiction over tax matters.
Statement
2.5.4. Unless the taxpayer is bound to a specified

treatment of a tax return position in a later
tax year, the member may advise on a tax
return position or prepare or sign a tax return
that departs from the treatment of an item as
concluded in an administrative proceeding or
court decision with respect to a prior return of
the taxpayer, provided the requirements of 2.1,
Tax Return Positions, are satisfied.
Explanation
2.5.5. If an administrative proceeding or court decision
has resulted in a determination concerning a
specific tax treatment of an item in a prior year’s
return, a member will usually advise this same
tax treatment in subsequent years. However,
unless the taxpayer is contractually bound to
a particular tax treatment, departures from
consistent treatment may be justified under
such circumstances as the following:
a. Taxing authorities tend to act consistently
in the disposition of an item that was the
subject of a prior administrative proceeding
but generally are not bound to do so. Similarly,
a taxpayer is not bound to follow the tax
treatment of an item as consented to in an
earlier administrative proceeding.
b. The determination in the administrative
proceeding or the court’s decision may have
been caused by a lack of documentation.
Supporting data for the later year may be
appropriate.

c. A taxpayer may have yielded in the
administrative proceeding for settlement
purposes or not appealed the court decision,
even though the position met the standards
in 2.1, Tax Return Positions.
d. Court decisions, rulings or other authorities
that are more favorable to a taxpayer’s
current position may have developed since
the prior administrative proceeding was
concluded or the prior court decision
was rendered.
2.5.6. The consent in an earlier administrative
proceeding and the existence of an unfavorable
court decision are factors that the member
should consider in evaluating whether the
standards in 2.1, Tax Return Positions, are met.
Members
Providing Tax Consulting Services
Introduction
standards for members concerning certain
aspects of providing tax advice to a taxpayer
and considers the circumstances in which a
member has a responsibility to communicate
with a taxpayer when subsequent developments

affect advice previously provided.
Statement
3.1.2. A member should use professional judgment
to ensure that tax advice provided in a tax
consulting engagement reflects competence
and is based on applicable standards. For this
purpose, competence follows the definition
established in Section 10.35 of Circular 230.
A member may communicate tax advice in
writing or orally. When communicating tax
advice in writing, a member should comply
with relevant taxing authorities’ standards, if
any, applicable to written tax advice. A member
should use professional judgment about any
need to document oral advice. A member is
not required to follow a standard format when
communicating or documenting oral and
written advice.
3.1.3. A member should assume that tax advice
provided to a taxpayer will affect the manner in
which the matters or transactions considered
would be reported or disclosed on the taxpayer’s
tax returns. Therefore, for tax advice given to
a taxpayer, a member should consider, when
relevant (a) return reporting and disclosure
standards applicable to the related tax position
and (b) the potential penalty consequences
of the return position. In ascertaining applicable
return reporting and disclosure standards, a
member should follow the standards in 2.1,
Tax Return Positions.
3.1.4. A member has no professional obligation

to communicate the impact of subsequent
developments that affect advice previously
provided to taxpayers, whether current clients
or not. Members should communicate the
impact of subsequent developments when they
are assisting in implementing procedures or
plans associated with the tax advice previously
provided, or are specifically engaged to report
on such developments by specific agreement.
Explanation
3.1.5. Tax advice is recognized as a valuable service
provided by members. The form of advice may
be oral or written and the subject matter may
range from routine to complex. Because the
range of advice is so extensive and because
advice should meet the specific needs of
a taxpayer, neither a standard format nor
guidelines for communicating or documenting
advice to the taxpayer can be established to
cover all situations.
3.1.6. Although oral advice may serve a taxpayer’s
needs appropriately in routine matters or in
well-defined areas, written communications are
recommended in important, unusual, substantial
dollar value or complicated transactions. The
member may use professional judgment about
whether, subsequently, to document oral advice.
3.1.7. In deciding on the form of advice provided
to a taxpayer, a member should exercise
professional judgment and consider such
factors as the following:

a. The importance of the transaction and
amounts involved
b. The specific or general nature of the
taxpayer’s inquiry
c. The time available for development and
submission of the advice
d. The technical complexity involved
e. The existence of authorities and precedents
f. The tax sophistication of the taxpayer
g. The need to seek other professional advice
h. The type of transaction and whether it
is subject to heightened reporting or
disclosure requirements
i. The potential penalty consequences of the
tax position for which the advice is rendered
j. Whether any potential applicable penalties
can be avoided through disclosure
k. Whether the member intends for the
taxpayer to rely upon the advice to avoid
potential penalties

3.1.8. A member may assist a taxpayer in
implementing procedures or plans associated
with the advice offered. When providing
such assistance, the member should review
and revise such advice as warranted by
new developments and factors affecting
the transaction.
3.1.9. Sometimes a member is requested to provide
tax advice but does not assist in implementing
the plans adopted. Although such developments
as legislative or administrative changes or
future judicial interpretations may affect the
advice previously provided, a member cannot
be expected to communicate subsequent
developments that affect such advice unless the
member undertakes this obligation by specific
agreement with the taxpayer.
3.1.10. Taxpayers should be informed that (a) the
advice reflects professional judgment based
upon the member’s understanding of the facts,
and the law existing as of the date the advice
is rendered and (b) subsequent developments
could affect previously rendered professional
advice. Members may use precautionary
language to the effect that their advice is based
on facts as stated and authorities that are
subject to change.
3.1.11. If a member advising on a position, but not
engaged to prepare or sign the related tax
return, advises the taxpayer concerning
appropriate disclosure of the position, then
the member shall be deemed to meet the
disclosure requirements of these standards.

the opportunity, if any, to avoid such penalty
by disclosing the position on the tax return.
Although a member should advise the
taxpayer with respect to disclosure, it is the
taxpayer’s responsibility to decide whether
and how to disclose.
3.1.13. This standard does not address situations in
which consulting services may be relied on by
parties other than the taxpayer.
Members
Providing Tax Representation Services
Introduction
standards for a member representing a taxpayer
with a power of attorney before an applicable
taxing authority. Representing a taxpayer in
various tax matters could involve application of
other standards. The focus of this statement is
on the representation relationship itself.

authorities may impose specific guidance
related to the representation of taxpayers, such
as Circular 230. These standards can vary
between taxing authorities and by type of tax.
Statement
4.1.3. The member, and any individuals working with
or for the member, should have or take steps
to obtain technical competence in the subject
matter involved. This includes competence
in the technical tax area involved as well as
the tax practice and procedures of the taxing
authority. For this purpose, competence follows
the definition established in Section 10.35 of
Circular 230.
4.1.4. The member should take appropriate steps to
ensure compliance with all relevant professional
and regulatory obligations when representing
a taxpayer.
4.1.5. The member should act with integrity and
professionalism in all dealings with the taxing
authority. This includes not unduly delaying or
impeding the taxing authority.
4.1.6. Information requested by the taxing authority
should, with taxpayer approval, be provided
by the member on a timely basis unless there
is a good-faith belief that the information
is privileged.
4.1.7. The member should consider if the taxpayer’s
conduct may be fraudulent or criminal in
nature. If so, the member should advise the

taxpayer to retain legal counsel and refrain
from further representation.
4.1.8. Upon completion of the examination by the
taxing authority, the member should review
any documents or computations detailing the
results of the examination for correctness and
discuss with the taxpayer the consequences of
agreeing to these conclusions.
Explanation
4.1.9. Competency is an important issue for
professionals who provide tax representation
services. While continuing professional
education tends to focus on tax law updates
or more complex technical tax issues,
members often overlook the complicated
rules of tax practice and procedure that go
hand in hand with representation of taxpayers.
Members dealing with tax agencies should be
knowledgeable about the procedural issues they
may encounter while representing taxpayers.
4.1.10. Members should consider multiple areas
which could impact a taxpayer representation
engagement. Among other items, this
may include:
a. Consulting with a local law firm to determine
whether the representation would constitute
the unauthorized practice of law;
b. Determining whether CPA licensure in
another jurisdiction may be required;

c. Executing any taxpayer authorizations
required by the taxing authority such as
powers of attorney;
d. Determining whether the member may
be facing a conflict of interest such as
representing other taxpayers who are
taking a contrary position;
e. Establishing and documenting in writing an
understanding with the taxpayer regarding
objectives of the engagement, services to
be performed, taxpayer’s acceptance of its
responsibilities, member’s responsibilities
and any limitations of the engagement.
4.1.11. When representing taxpayers, members are
required to comply with all conflict-of-interest
standards, such as Section 1.000.020, Ethical
Conflicts of the Code of Professional Conduct.
Questions for respondents
The goal of the revisions of the SSTSs is to ensure
that the standards are still relevant in today's tax
environment, address the current and emerging needs
of today's members and to serve the public. In addition,
the standards were reorganized to enhance their
understanding and use.
The AICPA values the views of all stakeholders and
is seeking comments. We encourage you to provide

us your thoughts on any or all of the revisions and
have provided specific questions to help you provide
us feedback.
Please advise if your response is on behalf of a firm,
business or other stakeholder or whether it represents
your individual views. Additionally, please include
what your role and title is and details of your firm or
organization size.
Please submit comments via our online form.
Alternatively, you may email your submission to:
[email protected]
ED1. Do you agree with the reorganization of the
current SSTSs, and will it enhance their use
and understanding? Please explain the
rationale behind your response.
ED2. Based on review of the proposed changes to the
SSTSs, is there any other subject matter which
you believe should be revised or deleted from
the SSTSs? If so, please provide the rationale.
ED3. Are the proposed new standards (data
protection, reliance on tools and tax
representation services) clear and
understandable? If you believe more
specificity would be helpful, what
recommendations would you suggest?
ED4. What other subjects impact your tax practice
or the tax function you perform and should be
considered in future revisions to the SSTSs?
Please provide details of the recommended
additions, together with your reasoning for the
proposed changes.

ED5. What additional guidance is needed to help
you understand, effectively implement
and apply the proposed standards to your
working environment?
Part 2:
Invitation to Comment
This ITC is separate and independent from the preceding ED
and presents items
for consideration that require additional research and
investigation and thus will
require additional time to define and potentially implement.
Depending on the nature
of the comments received in response to this ITC, the AICPA
will pursue additional
research to determine the appropriateness of future
modifications to the SSTSs or
other guidance. At this time, it is not known if or when any
changes resulting from
the ITC will be implemented.
Introduction
As part of the process to update the SSTSs, the SSTS
Revision Task Force held extensive discussions around

the importance of additional concepts with the potential
to significantly impact the tax practice of the future. A
resonating theme emerged in many discussions related
to quality management in tax, defined as a proactive,
risk-based, scalable approach to ensure that an
individual or firm possesses the necessary competence
to practice. Based on the discussions, members
agreed that quality is a key market differentiator in
their practices; however, its implementation is
inconsistent and the environment in which members
operate is dynamic.
Given the importance of this topic, the AICPA is
inviting members and stakeholders to comment on
the questions raised in this ITC. The task force and the
TEC will consider all comments in determining the best
approach to address quality within the tax function.
Issue description
One of the aims of the AICPA’s Code of Professional
Conduct is to protect the public interest. The public
interest principle states that "... members should
accept the obligation to act in a way that will serve the
public interest, honor the public trust and demonstrate
a commitment to professionalism.” Members are
expected to provide quality services in a manner that
demonstrates a level of professionalism consistent with
these goals. These are the expectations that members
are held to and, when asked, it is recognized that high
quality work products are a defining feature of CPAs.
The CPA brand is consistently associated with
numerous characteristics including trust, integrity,
honesty and quality. Many professions aspire to
be associated with these traits, yet few achieve the
reputation CPAs have maintained for over 125 years.

Thus, members have an opportunity to continue to be
perceived as the premier providers of tax services by
demonstrating adherence to quality principles in the
delivery of their services. By investing in systems that
will help them develop a strong approach to quality
management and making sure that such concepts are
embraced by all individuals who are part of the firm or
department, members can enhance the services they
provide and can better position themselves in the event
of an investigation by the IRS Office of Professional
Responsibility or other government agency.
State of quality management in tax
CPAs have benefited from practicing in a self-regulated
profession due to the strong reputation of the AICPA’s
professional standards. However, in December of 2009,
the IRS released a 57-page document outlining a plan
to regulate all tax return preparers. Although CPAs,
attorneys and enrolled agents were exempted from
most of the requirements imposed on “unenrolled” tax
return preparers, the IRS indicated a plan to assess
the quality of tax return preparation by exempted tax
professionals. Despite the judicial determination in
Loving v. Commissioner that the IRS did not have the
authority to regulate tax return preparers, discussions
regarding both the regulation of tax return preparers and
the quality of professionally prepared tax returns have
continued. For example, the IRS requires individuals
representing taxpayers before the IRS to have
adequate procedures in place to comply with ethical

and quality guidelines established in Circular 230
(refer to Section 10.36).
The IRS has since publicly announced that it is
reviewing the provisions of Circular 230 with the intent
of updating them. Although unknown if such revisions
will encompass mandatory enhancements to quality,
it is widely believed that greater scrutiny, by both the
taxing authorities and the public at large, will be placed
on members.
Some members have expressed that initiating an
approach to quality management in tax may be
perceived as a step towards peer review. The TEC
and the AICPA consider the concept of quality
management and peer review to be independent
and distinct from one another.
Implementation
With more focus on quality management in tax comes
the perception that implementing such procedures
could present a burden or put members at a competitive
disadvantage against other tax practitioners. In reality,
most members already have quality management
procedures in place. While some may believe that
such an approach could mandate the use of checklists
or other such documents to prove procedures are
being adhered to in the performance of tax services,
alternative simpler approaches could be used. For
example, a member could periodically discuss how
they adhere to the six elements of a tax practice quality
control system identified in the Tax Practice Quality
Control Guide and Template. This resource is offered
by the AICPA Tax Section to members who are looking
to develop a more robust system in areas such as:

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