While reviewing a new client's prior-year tax returns, a CPA became aware that the client did not properly file all required federal income tax returns. Under Treasury Circular 230, what should the CPA do in this situation?

a. Notify the AICPA of the situation and request a ruling of continuance.

b. Notify the Internal Revenue Service of the client's noncompliance.

c. Resign from the engagement.

d. Advise the client of the consequences of the noncompliance.

Question

Social Studies

Mathew Hester

7 November, 18:25

While reviewing a new client's prior-year tax returns, a CPA became aware that the client did not properly file all required federal income tax returns. Under Treasury Circular 230, what should the CPA do in this situation?

a. Notify the AICPA of the situation and request a ruling of continuance.

b. Notify the Internal Revenue Service of the client's noncompliance.

c. Resign from the engagement.

d. Advise the client of the consequences of the noncompliance.

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Answers (1)

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Vance Hubbard · Answer 1

While reviewing a new client's prior-year tax returns, a CPA became aware that the client did not properly file all required federal income tax returns. Under Treasury Circular 230, CPA advise the client of the consequences of the noncompliance.

Answer: Option D

Explanation:

While the CPA becomes aware that a new client did not file the income tax returns properly under treasury Circular 230 the client can be advised of the consequence he would be facing due to noncompliance.

Under the revised rules the client can be given a chance to file the returns properly based on the facts and circumstance approach. Careful analysis to be done by the practitioner so that the advice does not enable the client to approach fraud tax filing.