Revisions to AICPA Standards Now Effective

The most significant revisions to the American Institute of Certified Public Accounts’ (AICPA’s) Statements on Standards for Tax Services (SSTS) in over a decade went into effect on January 1, 2024. The SSTS are enforceable standards that all AICPA members providing tax services must follow.

One of the main revisions split the previous standard related to recommending tax positions into two sections: Section 1.1 and Section 2.1. Through this change, the AICPA intended to set the expectation that all members would be subject to the same basic standards with regard to level of authority.

Since the term “tax position” can have multiple definitions, Section 1.1 establishes a common definition to minimize uncertainty. A tax position is defined as “a conclusion reached by a member when applicable tax law, regulations, case law, or other regulatory or recognized guidance is applied to a particular transaction, a specific set of facts and circumstances, or a controversy.”

First, members must exercise due diligence and professional judgment when advising on a tax position. Second, members have the right to act as an advocate for the taxpayer when providing advice regarding a tax position.

Section 2.1 requires members preparing tax returns to advise taxpayers regarding the potential penalty consequences of a particular tax position and provide an opportunity to avoid a penalty through disclosure. With this now established as a national standard, members will be more likely to apply it consistently across jurisdictions.

In addition, Section 2.1 stipulates that members who prepare and sign tax returns may rely in good faith on others’ proposed tax positions with regard to issues being considered so long as Section 2.3 is satisfied. This affirms that members may prepare and sign returns that include a tax position put forth by a third party.

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