Professional Responsibilities
The ethical and legal duties of CPAs and tax preparers, including due diligence and confidentiality.
REG tests this through preparer-penalty fact patterns: a CPA signs a return taking a position, and you must pick which standard was breached. The “tell” is the level of authority — an undisclosed position needs substantial authority (roughly 40% likelihood), a disclosed position needs only a reasonable basis (roughly 20%), and a tax-shelter or reportable-transaction position demands more-likely-than-not (over 50%). Miss that threshold and IRC §6694 imposes the greater of $1,000 or 50% of the preparer’s income from the return for an unreasonable position. Watch for §6695 mechanical penalties too — failing to sign, furnish a copy, or keep records.
The classic trap is conflating this with Circular 230, the related term: Circular 230 is Treasury’s enforcement regime (via the OPR) governing practice before the IRS — censure, suspension, disbarment. Professional responsibilities is the broader umbrella covering the AICPA Code, the SSTS (revised 1/1/2024), and §7216, a criminal misdemeanor for knowingly or recklessly disclosing or using return info beyond preparing the return. Remember: “6694 = position, 6695 = process.”
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