Navigating the Revised Statements on Standards for Tax Services

By P. Jeffrey Christakos, MST, CPA, CFP®, and Andrew M. Christakos, CPA, CFP®, Westfield Wealth Management, LLC

The American Institute of CPAs (AICPA) has revised the Statements on Standards for Tax Services (SSTS) that all CPAs who are members of the AICPA or licensed by the New Jersey State Board of Accountancy must follow. The revised standards are effective as of Jan. 1, 2024.

The revised format for the standards is as follows:

• SSTS No. 1, General Standards for Members Providing Tax Services: In addition to general standards on tax practices, this section also includes a new standard on data protection. Members are now required to make a “reasonable effort to safeguard taxpayer data.” There is also a section on the use of electronic tools. As innovations in artificial intelligence, as an example, create efficiencies in tax preparation and research, members must exercise due professional care when using these tools. This is an increasingly difficult area for many firms. There are similar challenges in the use of tax software and research services.

• SSTS No. 2, Standards for Members Providing Tax Compliance Services, Including Tax Return Positions: This is a new standard to specifically address tax compliance services and consolidates guidance from other standards. It gives specific guidance on requirements that need to be in place before a member can sign a tax return as well as additional tax return disclosure requirements. An interesting standard (2.3.2.) in this section relates to the need to verify information received from the taxpayer or a third party when preparing or signing a return. The information does not have to be verified, but tax professionals should make “reasonable inquiries” if the information appears to be incorrect, incomplete or inconsistent to the tax preparer. There is a new requirement that taxpayers must be notified of the ramifications of missing answers to questions on their returns. Members should not advise a taxpayer to file a return with a position that takes advantage of a weakness in the audit selection process of a taxing authority.

• SSTS No. 3, Standards for Members Providing Tax Consulting Services: Tax professionals do not have the obligation to update previously given advice based on new developments in tax law. However, this standard adds the requirement that developments must be disclosed if the tax preparer assists in implementing the strategies designed prior to the changes. New guidance is established regarding advice given related to disclosures of tax positions. The standard is met when the member advises the taxpayer on the appropriate disclosure. Tax professionals need to advise clients of potential penalties related to disclosures as well as ways to minimize them. The responsibility to determine if and how the disclosure is made is retained by the taxpayer.

• SSTS No. 4, Standards for Members Providing Tax Representation Services: This new standard informs tax professionals of rules related to their client representation before taxing authorities. Members should take steps to be technically competent in the area that is being examined. Specific rules related to the tax authorities should be studied as well. Various taxing authorities may have unique representation standards that vary based on the type of tax imposed. There is additional guidance related to issues that may affect the member’s ability to provide competent representation.

Tax practitioners are faced with client issues and an ever-evolving set of rules and regulations. In addition, changes in technology can be helpful, but, if left unchecked, can lead to serious data protection exposures. Prudent attention to these updated standards can help to minimize these challenges.

P. Jeffrey Christakos, CPA/PFS, CFP®, is a wealth manager and principal at Westfield Wealth Management, LLC. He is a member of the NJCPA and can be reached at jeff@westfieldwealth.com.

Andrew M. Christakos, CPA/PFS, CFP®, is a wealth manager and principal at Westfield Wealth Management, LLC. He is a member of the NJCPA and was selected to serve as a member of the AICPA’s Emerging Personal Financial Planning Task Force. Andrew can be reached at andrew@westfieldwealth.com.