Tax Planning and Regulations Overview

School: Northwood University, Michigan - Course: ACC 4070 - Subject: Accounting

Ami Scot Professor Jajo ACC4070-01 01/10/2022 Chapter 1 Discussion Questions and Exercises Discussion Questions 5. What is tax planning? Explain the difference between tax evasion and tax avoidance and the role of each in professional tax planning. Tax planning is the process of arranging one's financial affairs to minimizer tax liabilities. Tax avoidance is a legitimate objective of modern tax practice. Tax evasion is the illegal nonpayment of a tax. 6. Tax planning falls into two major categories: the "open" transaction and the "closed" transaction. Discuss each type of transaction and describe how each affects tax planning. In an open transaction, the tax practitioner maintains some degree of control over the potential tax liability because the transaction is not yet completed. Tax planning is relatively easy because the transaction has not been executed yet. In a closed transaction, all the pertinent actions have been completed; therefore, tax planning may be limited to the presentation of the facts to the government in the most favorable, legally acceptable manner possible. Tax planning is much for difficult because the transaction is already completed. 9. Define tax research. Briefly describe the tax research process. Tax research is finding answers related to tax situations. oIdentify pertinent issues oDetermination of proper authorities oEvaluation of the appropriateness of these authorities oApplication of these authorities 10.Who issues Circular 230? What tax practitioners are regulated by it? Tax practitioners are regulated by Circular 230, Regulations Governing Practice before the IRS. 11. CPAs must follow the rules of Circular 230. In addition, CPAs in tax practice are subject to two other sets of ethical rules. Give the name and the issuer of both these sets of rules. American Institute of Certified Public Accountants (AICPA) Code of Conduct

Statements on Standards for Tax Services (SSTS) 13.The term "practice before the IRS" includes the representation of clients in the U.S> Tax Court for cases being handled under the "small tax case procedure." True or false? False 14. The rules that govern practice before the IRS are found in Circular 230. Discuss what entails practice before the IRS and state which section of Circular 230 contains the definition. Section 10.2 Practice before the Internal Revenue Service comprehends all maters connected with a presentation to the IRS or any of its officers or employees relating to a taxpayer's rights, privileges, or liabilities under laws or regulations administered by the IRS. 15. There are two ways to become an EA. Briefly explain what they are and give the subpart and section references in Circular 230 where the details of becoming an EA are found. An enrolled agent is a person who has earned the privilege of representing taxpayers before the IRS by either passing a three-part comprehensive IRS test covering individual and business tax returns, or through experience as a former IRS employee. Section 10.4 Pass an exam administered by the IRS (10.4.a) Work for the IRS for 5 years (10.4.d) 16. EAs are subject to continuing education (CE) requirements. Briefly describe the CE requirements and give the reference to where the details can be found in Circular 230. Requirements: oA minimum of 72 hours of continuing education credit, including six hours of ethics or professional conduct, must be completed during each enrollment cycle. (3 years) oA minimum of 16 hours of continuing education credit, including two hours of ethics or professional conduct, must be completed during each enrollment year of an enrollment cycle. (1 year) Section 10.6.2 24. If a tax practitioner finds an error in a prior year's tax return, what action (if any) must he or she take under Circular 230? What subpart and section addresses this situation? Inform your client that there is an error on their tax return and tell the client that they must amend the return. oThe practitioner must advice the client of the consequences as provided under the Code and regulations of such noncompliance, error, or omission. Section 10.21