Ofelia is a new client of your firm and recently completed a course in taxation

Question

Ofelia is a new client of your firm and recently completed a course in taxation in school.She believes that if you are audited by the IRS, they will keep digging into your return until they “find something.”She would like to claim a deduction for the loss in value of her car which she uses only for personal reasons resulting from “decrease in value” in the amount of $300.Her position does not have a “reasonable basis” and will most certainly be disallowed.She wants to claim this deduction so that the IRS has something to find and will not look too carefully at the rest of her return. What SSTS apply to this situation?Can you sign this tax return without violating the SSTS?

Explanation / Answer

The SSTS which applies to this situation is tax return position. This is when the the member has knowledge of all material facts and on the basis of those facts they have disclosed whether the tax return is appropriate for them or not. In this case her position does not have reasonable basis. The member in this case has a responsibility to advise the client to disclose all the material facts and should disclose all the potential penalties. If the client does not agree and still want to take the deduction after knowing all the obligations and penalties, the preparer should not sign the return as it will violate the SSTS.

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.