Question

With regard to a tax return position, a CPA should advise a taxpayer of

Answer 1

A CPA should advise a taxpayer on the risks, law merits, and consequences of a tax return position, relating it to tax requirements and principles and potential tax code changes.

Step-by-step explanation:

With regard to a tax return position, a CPA (Certified Public Accountant) should advise a taxpayer of the potential risks, the likelihood of success based on the tax law merits, and the potential consequences if the position is challenged by the IRS.

Essentially, the CPA is responsible for guiding the taxpayer to make informed decisions when filing a tax return, ensuring that the position taken is in compliance with current tax requirements and principles.

This includes explaining the equitable, simple, and efficient attributes that a tax system should ideally possess and how the taxpayer's position aligns with these principles.

In addition, a CPA should inform the taxpayer about potential changes in the tax code and how these could affect their tax liabilities and financial position.

As the 1040 tax form is an instrument of fiscal policy, and changes in the tax code can significantly impact the economy, it's important for the taxpayer to understand these broader implications.

Moreover, CPAs should highlight that tax code changes often result in a redistribution of income which can lead to significant political debates. For comprehensive information on current tax issues and changes, taxpayers can consult the Council of Economic Advisors.