As a tax preparer, adhering to a strong code of ethics is crucial in maintaining professionalism and integrity in the industry. One important aspect of the code of ethics is confidentiality. It is essential to ensure that all client information remains confidential and is only used for the purpose of preparing their taxes. This means keeping physical documents secure and using encrypted software for electronic files. By upholding confidentiality, tax preparers build trust with their clients and demonstrate respect for their privacy.

Another key element of the code of ethics is competency. Tax preparers must have the knowledge and skills necessary to accurately prepare tax returns and provide sound advice to their clients. This involves staying up-to-date on the latest tax laws and regulations, as well as actively seeking professional development opportunities. Maintaining a high level of competency not only benefits clients by ensuring accurate tax returns but also reflects positively on the tax preparer's reputation and credibility in the industry.

Integrity is also a fundamental principle of the code of ethics for tax preparers. This means being honest and forthright in all dealings with clients, colleagues, and regulatory authorities. Tax preparers should avoid conflicts of interest and always act in the best interests of their clients. By demonstrating integrity in their work, tax preparers can build a strong reputation based on trust and reliability. Ultimately, upholding a code of ethics as a tax preparer is not only a professional responsibility but also a reflection of one's commitment to serving clients with honesty, competence, and respect.

Client confidentiality is a fundamental principle in the field of tax preparation. As tax preparers, we are privy to our clients' sensitive financial information, including Social Security numbers, income details, and other personal data. Maintaining client confidentiality not only builds trust but also ensures compliance with legal and ethical obligations. By safeguarding the privacy of our clients, we demonstrate professionalism and respect for their rights to privacy.

One of the key reasons why maintaining client confidentiality is crucial is to protect against identity theft and fraud. In today's digital world, where cyber threats are prevalent, safeguarding sensitive information is more critical than ever. Breaches in confidentiality can lead to severe consequences, not only for our clients but also for our own reputation and credibility as tax professionals. By establishing robust confidentiality protocols and safeguarding client data, we can mitigate the risks associated with unauthorized access and data breaches.

Furthermore, upholding client confidentiality fosters long-term relationships based on trust and reliability. When clients entrust us with their financial information, they expect us to handle it with the utmost care and discretion. By respecting their confidentiality and privacy rights, we demonstrate our commitment to serving their best interests. This trust forms the foundation of a strong professional relationship, leading to repeat business, referrals, and a positive reputation within the industry. In essence, maintaining client confidentiality is not just a legal requirement but also a cornerstone of professional integrity and trustworthiness in the field of tax preparation.

Professional conduct in tax preparation is of utmost importance in the accounting and finance industry. Tax preparers have a duty to uphold ethical standards, maintain integrity, and act in the best interest of their clients at all times. This includes being honest and transparent in their dealings, respecting client confidentiality, and adhering to relevant laws and regulations. By demonstrating professionalism in their work, tax preparers can build trust with their clients and establish a positive reputation in the industry.

One key aspect of professional conduct in tax preparation is ensuring accuracy and precision in all financial calculations and documentation. Tax preparers must pay close attention to detail, carefully review all information provided by clients, and double-check their work to minimize errors. Providing accurate tax returns not only benefits the clients by preventing potential audits or penalties but also reflects positively on the tax preparer's competence and credibility. In cases where mistakes are made, it is essential for tax preparers to take responsibility, rectify the errors, and learn from the experience to improve their processes in the future.

Moreover, effective communication skills are vital for maintaining professionalism in tax preparation. Tax preparers should be able to explain complex tax concepts in a clear and understandable manner to their clients, address any questions or concerns promptly, and manage expectations realistically. Building strong client relationships based on trust and open communication can lead to long-term partnerships and referrals. By upholding high standards of professional conduct, tax preparers can enhance their career prospects, earn the respect of their peers, and contribute to a more transparent and ethical tax preparation industry overall.

Due Diligence

The IRS places a high priority on accuracy and compliance in tax preparation, particularly for tax preparers who work with refundable credits and claims that are often subject to audits. Due diligence and compliance requirements are in place to protect both tax preparers and clients, ensuring returns are accurate, ethical, and compliant with IRS regulations. For preparers, understanding and following these requirements is essential to maintain a good reputation, avoid penalties, and reduce the risk of audits for clients.

The IRS has specific due diligence requirements for tax preparers, especially for clients who claim refundable credits like the Earned Income Tax Credit (EITC), Child Tax Credit (CTC), American Opportunity Tax Credit (AOTC), and the Head of Household (HOH) filing status. Due diligence means that the preparer must take reasonable steps to ensure that information on the return is accurate and complete.

Form 8867: Paid Preparer’s Due Diligence Checklist: This form must be completed and submitted with every tax return that includes certain credits or the Head of Household filing status. Form 8867 guides preparers through a list of questions to verify eligibility and accuracy for each credit or status. It includes confirming qualifying criteria, examining documentation, and ensuring responses are complete and accurate.

Document Retention: The IRS requires preparers to retain copies of Form 8867 and any supporting documents, such as proof of residency for dependents, copies of client interviews, or notes related to eligibility verification. These records must be kept for at least three years from the filing date.

Reasonable Inquiries: Tax preparers must ask additional questions and obtain clarifications when client-provided information seems incomplete, inconsistent, or raises red flags. If a client provides vague or unclear information, the preparer is responsible for clarifying and obtaining supporting documentation as needed.

Knowledge Requirement: The IRS expects tax preparers to apply their knowledge and judgment when preparing returns. This means understanding IRS rules, credits, and deductions well enough to spot potential issues, ask relevant questions, and address discrepancies. If something doesn’t seem right or complete, the preparer has a responsibility to investigate further.

 The IRS imposes penalties on tax preparers who fail to meet due diligence requirements or who engage in fraudulent practices. These penalties can be substantial and may include fines, loss of preparer identification numbers, or criminal charges for severe violations. Here’s how to avoid penalties and identify common fraud red flags.

•  Failure to Meet Due Diligence Requirements: For each return missing due diligence requirements, the IRS can impose a penalty (currently $600 per infraction as of 2024). This applies to returns with credits or filing statuses like EITC, CTC, and HOH that require extra documentation and verification.
• Understating Client’s Tax Liability: If a preparer knowingly submits an incorrect return that understates a client’s liability, they may face penalties for each instance.
• Filing False or Fraudulent Returns: Fraudulent activities, such as fabricating deductions, inflating income to qualify for credits, or creating false dependents, are serious offenses. Tax preparers caught engaging in fraud may face criminal penalties, fines, and suspension of their preparer’s license

Things to Know

• Any client who receives and qualifies the Child Tax Credit (CTC), return will be held by the IRS until mid-February, typically released February 15th. This means if you file these clients returns early January their returns can take longer than the standard "28 days". The IRS holds CTC returns automatically so clients will not have an update on "where's my refund" until after that date.
• Due to a lot of fraud during and after Covid the IRS sends out verification letters for taxpayers to verify their tax returns. Not all clients will receive these letters, but majority will. With that being said it is EXTREMELY IMPORTANT that we are verifying with the clients that we have the correct physical address on file. If we do not get the address correct it will cause a huge delay for your taxpayers in getting verified. There is a process with the IRS to change address as well as get new letters sent out.
  • If your client is selected to do a verification letter, they will either receive it in the mail, but sometimes they will need to login to their ID.me accounts ( Sign in to ID.me - ID.me ) and have the letter sent out.
  • The letter can take up to 30 days to receive, please reassure your client it is normal practice from the IRS and there is nothing we can do but help them verify.
  • Once your client gets their letters you will want to log in to their ID.me accounts for them to verify identity. The reason why is because since we are using a bank product to pull the fees from returns the last 4 of the accounting number on the return it asks for to verify, is different than the clients account number, which will confuse them. If a client messes up the verification it can take up to 6 months to get it fixed, so it is best we do it for the clients.
• The IRS will sometimes hold and randomly select clients tax returns to be held for additional review, especially first-time self-employed taxpayers. This does not mean you did anything wrong or your client it is standard procedures with the IRS and there is nothing we can do about it but wait for it to be released.
• For the software, clients can download the app TaxesToGo and upload any documents required for filing. Once they do, they will have a special access code number to give you to be able to access the documents to finish the quote.