Tax and Ethics Homework:

13. The Client, an outside salesperson for a local shoe repair company, tells the CPA that she drove about half of her mileage for business. The clients does not keep a mileage log. What should the CPA do when completing the return?

14. The client makes aggressive estimates on expenses and when the CPA asks about documentation the client asks the CPA what are the chances of getting audited? How should the CPA respond?

15. The client has no records and no reasonable chance of prevailing in an audit. On the day of the audit the client tells the CPA to cancel the appointment to hold off the IRS. What should the CPA do?

16. What are Best Practices? What format should a CPA provide tax advice to a client in order to comply with Best Practices?

17. The client has what the CPA believes is a good chance of prevailing in an amendment to the clients prior year tax return based on the results of a recent case with similar facts to the clients situation. The client wants the CPA to take the matter (an appeal to be decided by an IRS panel) on a contingency if the amendment to the tax return is successful the CPA makes half of the refund as the contingent fee reward. May the CPA accept the engagement?

18. The CPA prepares a tax return for a client using client original records delivered to the CPA by the client. The client signs the authorization and the CPA transmits the return to the IRS electronically on the due date. The CPA sends the client a bill and the client does not pay the CPA. The client requests the return of their records and the CPA tells the client: when I get your payment then you will get your records. Has the CPA violated any rules?

19. The CPA has prepared a married filing joint tax return for a couple for many years. Both clients come to the CPA and tell the CPA that they are divorcing. There is one thing that the couple can agree on they want the CPA to handle the friendly divorce and prepare the tax returns for the couple in the best way possible. May the CPA undertake the engagement? If so, what should the CPA obtain from the clients?

20. One of the divorcing spouses (from the problem above) visits the CPA with a refund check from the IRS for $17,000. It does not appear that the couple is entitled to a refund from the IRS. The CPA tells the client that it is rare to get money from the IRS so let me (the CPA) hold on to the funds until we can sort this out the CPA deposits the check into the CPAs own personal checking account pending some kind of resolution with the IRS. Any issues?

21. The CPA, in preparing tax returns for the client learns that the client has engaged in systematic conduct of overbilling customers and only issuing refunds when a client complains essentially engaging in illegal conduct. What should the CPA do?

22. In 2021 the client confesses to the CPA that some of the office expenses listed on the tax return for 2020 (prepared by the CPA using client records) were for entertainment expenses at local Gentlemens Clubs. The client indicates that they have no intention of amending prior returns.

23. In preparing the 2020 tax return, the CPA learns that the client is operating a recreational marijuana dispensary (legal in Colorado) then depositing the proceeds into the combined corporate checking account the same account from which all bills are paid (including the CPAs fees). Any issues?

24. The client tells the CPA that the client will be travelling for the next four months and asks the CPA to pick up the clients mail and if any IRS check comes, to hold that check for the client. May the CPA comply?