Introduction
Statements on Standards for Tax Services (SSTSs) are issued by the AICPA Tax Executive Committee (TEC), the senior technical body of the AICPA designated to promulgate standards of tax practice. The “General Standards Rule” (ET secs. 1.300.001 and 2.300.001) and the “Compliance With Standards Rule” (ET secs. 1.310.001 and 2.310.001)1 of the AICPA Code of Professional Conduct require compliance with these standards. Many state boards of accountancy also incorporate the SSTSs as part of their professional rules of conduct for CPAs.
Background
The Statements on Standards for Tax Services (SSTSs) have their origin in the Statements on Responsibilities in Tax Practice (SRTPs), which provided a body of advisory opinions on good tax practice. The guidelines as originally set forth in the SRTPs became more important than many members had anticipated when the guidelines were issued. The courts, the IRS, state accountancy boards, and other professional organizations recognized and relied on the SRTPs as the appropriate articulation of professional conduct in a CPA’s tax practice. The SRTPs became de facto enforceable standards of professional practice because state disciplinary organizations and courts regularly held CPAs accountable for failure to follow the guidelines set forth in the SRTPs.
1 All ET sections can be found in AICPA Professional Standards.
The SRTPs were originally issued between 1964 and 1977. The first nine SRTPs and an introduction were combined and promulgated in 1976; the tenth SRTP was issued in 1977. The original SRTPs concerning the CPA’s responsibility to sign the tax return (SRTP No. 1, Signature of Preparers, and No. 2, Signature of Reviewer: Assumption of Preparer’s Responsibility) were withdrawn in 1982 after Treasury Department regulations were issued adopting substantially the same standards for all tax return preparers. The sixth and seventh SRTPs, concerning the responsibility of a CPA who becomes aware of an error, were revised in 1991. The first interpretation of the SRTPs, Interpretation No. 1-1, Realistic Possibility Standard, was approved in December 1990.
Given the level of reliance on the SRTPs by state disciplinary organizations and courts, the AICPA’s Tax Executive Committee (TEC) concluded it was appropriate to issue tax practice standards that would become a part of the AICPA’s Professional Standards. At its July 1999 meeting, the AICPA board of directors approved support of the executive committee’s initiative and placed the matter on the agenda of the October 1999 meeting of the AICPA’s governing council. On October 19, 1999, council approved designating the TEC as a standard-setting body, thus, authorizing that committee to promulgate standards of tax practice. As a result, the original SSTSs, largely mirroring the SRTPs, were issued in August 2000. The SSTSs and Interpretation No. 1-1, Realistic Possibility Standard, of SSTS No. 1, Tax Return Positions, superseded and replaced the SRTPs and their Interpretation No. 1-1, effective October 31, 2000.
Although the number and names of the SSTSs, and the substance of the rules contained in each of them, remained the same as in the SRTPs, the language was revised to both clarify and reflect the enforceable nature of the SSTSs. In addition, because the applicability of these standards is not limited to federal income tax practice (as was the case with the SRTPs), the language was changed to indicate the broader scope. In 2003, in connection with the tax shelter debate, SSTS Interpretation No. 1-2, Tax Planning, of SSTS No. 1 was issued to clarify a member’s responsibilities in connection with tax planning; that interpretation became effective December 31, 2003. These two interpretations were initially updated in 2010. On August 15, 2011, the TEC adopted the updated Interpretation No. 1-1, now titled, Reporting and Disclosure Standards, and Interpretation No. 1-2, Tax Planning, effective January 31, 2012.
When the original SSTSs were issued, an effort was made to keep to a minimum any changes in the language of the SSTSs from that of the predecessor SRTPs. This was done to alleviate concerns regarding the enforceability of standards that differed from the SRTPs under which members had been practicing. Since the issuance of the original SSTSs, members have asked for clarification on certain matters, such as the duplication of the language in SSTS No. 6, Knowledge of Error: Return Preparation, and No. 7, Knowledge of Error: Administrative Proceedings. Also, certain changes in federal and state tax laws have raised concerns regarding the need to revise SSTS No. 1. As a result, in 2008, the original SSTS Nos. 1–8 were updated, effective January 1, 2010. The original SSTS Nos. 6–7 were combined into the revised SSTS No. 6, Knowledge of Error: Return Preparation and Administrative Proceedings. The original SSTS No. 8, Form and Content of Advice to Taxpayers, was renumbered SSTS No. 7. In addition, various revisions were made to the language of the original SSTSs. The last significant updates to the content of the SSTSs were effective January 1, 2010.
In April 2018, changes were made to the SSTSs to bring the references to the AICPA Code of Professional Conduct into conformity with the AICPA ethics codification.
In September 2018, the TEC approved the formation of a task force to update the SSTSs. The task force comprised AICPA Tax Section members representing diverse interests including small and sole practitioner firms, Private Company Practice Section (PCPS) members, medium and large CPA firms, and academia. The task force developed and presented the updated SSTSs to the TEC for its approval.
Since the update project began, extensive discussions occurred among members of the task force, the AICPA’s Tax Practice Responsibilities Committee (TPRC), the TEC, and other interested stakeholders in an effort to develop these revisions and insure they reflect the needs of today’s tax practice environment.
In August 2022, the proposed revisions were exposed for public comment to the AICPA’s membership and interested stakeholders. Thirty comment letters were received, and the proposed updates were modified to reflect these comments.
On April 25, 2023, the TEC met to consider the revisions to the exposed material and proposed additional changes for consideration by the task force. On May 18, 2023, the TEC met and unanimously adopted the revised standards to become effective January 1, 2024.