Using the AICPA Statements on Standards for Tax Services as a reference please address (in memo format) the following independent circumstances:
1. You are preparing a tax return for a proprietor who is a self-employed independent insurance agent. He files a schedule C. When discussing automobile expense, the client indicates he wants to use the standard mileage rate rather than actual expenses. You ask him how many business miles he drove. He replies, “I guess around 20,000”.
Can you use his estimate? Why or why not? What is your responsibility?
2. Your, client informs you that after you filed his tax return, he received an additional 1099 form reporting dividend income from an investment which he had forgotten about. What responsibility do you have with respect to the new information?
3. Your client has purchased a tax shelter from his stockbroker. You read an article in the Wall Street Journal reporting that the Internal Revenue Service has recently won a Tax Court case concerning another tax shelter using a similar strategy. The shelter generates substantial tax savings for your client. Considering the Statements on Standards for Tax Services what is your course of action?