A
tax advisor is a financial expert especially
trained in tax law. Some countries require tax
advisors to verify the balance sheets of
companies above a certain size. Individuals
usually require tax advisors to minimize
taxation, to avoid learning the details of tax
law in complicated financial situations
themselves or to learn the details of tax law
from a professional advisor.
In the United States, tax preparers are
regulated but not licensed by the Internal
Revenue Service of the United States Department
of the Treasury. There are penalties for failure
to disclose the identity of the preparer on the
return, for the failure to give the taxpayer a
copy of the return, and for negligence in
preparing the return.
Practice before the Internal Revenue Service is
regulated by Treasury Department Circular No.
230, Regulations Governing the Practice of
Attorneys, Certified Public Accountants,
Enrolled Agents, Enrolled Actuaries, and
Appraisers before the Internal Revenue
Service[1]. Most practice is limited to
attorneys, Certified Public Accountants (CPAs),
Enrolled Agents, and Enrolled Actuaries.
Rendering tax advice is also regulated by
Circular 230.
Failure to uphold these standards can result in
disciplinary action ranging from reprimand to
permanent disbarrment from practice.
DUTY OF TAX ADVISORS &
CONSULTANTS
Circular 230, Reg 10.33(a): Best practices. Tax
advisors should provide clients with the highest
quality representation concerning Federal tax
issues by adhering to best practices in
providing advice and in preparing or assisting
in the preparation of a submission to the
Internal Revenue Service. In addition to
compliance with the standards of practice
provided elsewhere in this part, best practices
include the following:
(1)Communicating clearly with the client
regarding the terms of the engagement. For
example, the advisor should determine the
client's expected purpose for and use of the
advice and should have a clear understanding
with the client regarding the form and scope of
the advice or assistance to be rendered.
(2)Establishing the facts, determining which
facts are relevant, evaluating the
reasonableness of any assumptions or
representations, relating the applicable law
(including potentially applicable judicial
doctrines) to the relevant facts, and arriving
at a conclusion supported by the law and the
facts.
(3) Advising the client regarding the import of
the conclusions reached, including, for example,
whether a taxpayer may avoid accuracy- related
penalties under the Internal Revenue Code if a
taxpayer acts in reliance on the advice.
(4)Acting fairly and with integrity in practice
before the Internal Revenue Service.
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