A tax return position is reflected on a tax return on which an accountant has advised a taxpayer, or a position for which the accountant knows the relevant facts and, based on those facts, has decided whether the position taken is appropriate. The following points apply to the accountant who is developing a tax return position:
When recommending a tax return position, the accountant has the responsibility to be an advocate for the taxpayer.
The accountant should comply with those standards imposed by the applicable taxing entity when recommending a tax return position. If there is no written standard associated with the tax position, then the accountant should not recommend a tax return position unless he or she has a good-faith belief that the position has at least a realistic possibility of being sustained administratively or judicially on its merits. However, the accountant may recommend a tax return position by concluding that there is a reasonable basis for the position and advises the taxpayer to disclose the position.
When the accountant recommends a tax return position to a taxpayer, he or she should advise the taxpayer about the potential for penalty consequences of taking the recommended position, as well as any opportunities for using disclosures to avoid these penalties.
The accountant should not recommend that a taxpayer take a tax position that takes advantage of the audit selection process of the relevant taxing entity, or because it merely serves as a position taken in order to obtain negotiating leverage with the taxing entity.