Question

You are engaged by, Elizabeth Smith, an individual client to do monthly bookkeeping and prepare tax returns for a partnership (E&J LLC). Elizabeth and her brother, Jonathan Smith, are 50-50% partners. Elizabeth effectively controls the partnership and its finances and Jonathan is a passive investor. While you work with Elizabeth monthly,you meet with Jonathan only once a year in connection with tax return preparation. While preparing the tax return, you become aware that Elizabeth is aggressively passing personal expenses through the partnership. What obligation or ethical responsibility do you as the tax preparer have to make sure Jonathan is aware of his sister’s conduct? Is there any authoritative literature supporting this ethics interpretation?

Answer 1

Introduction:- Tax professionals are in A unique position because the work they do for their customers leave their customers responsible for any mistakes made Or potential fraudulent claim. Once the tax payer sings the return, Or the electronic equivalent the tax payers assumes full responsibility for the information provided.

The tax preparers work according to law which affect their working. The key job of tax professionals is to protect their clients from any kind of fraud, penalties or fines.

In this case as a tax preparer I should inform Jonathan about his sister's misconduct.

The authoritative literature supporting this ethics is the IRS which has defined the requirements for taxpayer ethics and professional standards in circular 230