Abstract
Changes to IRC Subsection 6694 and 6695 in recent years have expanded the penalties that can be imposed on tax return preparers in amounts, types of tax returns covered, and the rigor of standards that preparers must meet to avoid penalties. IRC § 6694 now requires "substantial authority" supporting tax positions unless they are adequately disclosed. Tax shelter or reportable transactions must be "more likely than not" to be sustained on their merits. Circular 230 imposes broader duties upon practitioners in an array of tax engagements and can be the basis for administrative sanctions when practitioners fail to meet requisite standards. Although Circular 230 currently applies only to CPAs and certain other covered tax practitioners, the IRS has recently announced it will extend the ethical aspects of its requirements, but not the practice rights, to paid tax preparers besides those currently authorized to practice before the IRS. The AICPA Statement on Standards for Tax Services no. 1 has been recently revised to elevate the required professional reporting standards in all tax engagements. The other SSTSs were reworded and reissued in revised form. The SSTSs apply to federal tax engagements, including those not covered by statutory preparer penalties and Circular 230, and to state, local and foreign tax engagements.