Explanation of the Revisions to the SSTSs
The goals of the revisions to the SSTSs were to ensure that the standards are better aligned to reflect the current state of the tax profession and to address the emerging needs of today’s members. Updates to the standards included the following:
Reorganization of the SSTSs by type of tax work performed
Promulgation of three new standards surrounding data protection, reliance on tools, and the representation of tax clients before taxing authorities
Reorganization
The task force included in its efforts to update the SSTSs a new practice-based organizational structure for the standards. Under the new organizational framework
SSTS No. 1 includes general tax guidance with broad applicability (includes new standards on data protection and reliance on tools).
SSTS No. 2 includes tax return preparation guidance.
SSTS No. 3 includes guidance specific to providing tax advice.
SSTS No. 4 includes guidance for members providing tax representation services (new standard).
The task force believed that the existing SSTSs were largely applicable to all types of tax services and were drafted to be general in nature to allow for their use no matter what type of tax service was being delivered. At the time of the drafting of the original standards, most of the tax services being provided were compliance-oriented and involved tax return preparation.
The revision project reorganized the SSTSs so that most of the existing standards have been incorporated into either general standards (SSTS No. 1) or compliance standards (SSTS No. 2). Because the new SSTSs around data protection and reliance on tools are applicable to different types of tax services, they were also included with the general standards. The existing standard related to tax advisory services (SSTS No. 3) and the new standard related to representation services (SSTS No. 4) were determined to be unique and have been separately stated. This alignment is intended to assist members in applying standards to specific tax practice situations and to help them understand the scope and expectations of these standards.
Data Protection
The subject of the protection of taxpayer data has exponentially grown over time and has gained global importance as technology now allows for the transfer and storage of large amounts of confidential financial information with the simple press of a button. In many cases, this data is never seen in a hard copy format. The task force believed it was important to implement a standard which ensures members adopt reasonable safeguards to protect taxpayer data, both in electronic format and otherwise.
The task force also recognized that constant advances in technology make it challenging to identify any one set of standards with broad applicability across all tax practices. The purpose of the new standard is to expressly state a member’s responsibility to make a reasonable effort to safeguard confidential client information. It was broadly written to consider the variability among member practices as well as continuingly changing privacy laws and technology.
Reliance on Tools
Tax is not a static subject, given regular changes resulting from various legislative and regulatory amendments, and judicial decisions. However, over time, these changes have become more frequent, extensive, and complex, with related authoritative guidance from the taxing authorities often delayed or incomplete. This situation often leaves members struggling to (1) provide clients or firm departments the necessary information to allow the correct and accurate preparation and filing of their respective tax returns and (2) plan for future events to efficiently manage potential tax liabilities.
Members have long relied on tools of various types to allow them to accurately interpret a particular provision of the tax code. However, in today’s tax practice environment, members rely on technology to provide services more than at any point in history. That trend will continue with the introduction of artificial intelligence, data science, quantum computers, and other developing technologies.
Currently, tax professionals do not have a professional standard relating specifically to reliance on these tools when providing services. The task force identified the need for a standard that protects members by defining when they may reasonably rely on tools of all types used in the performance of tax services.
Tax Representation
As previously noted, the best practices that were the forerunners of the existing SSTSs were written over 50 years ago. At that time, tax preparation was the overwhelming service provided by tax professionals. Since then, tax practices have expanded to provide a wide variety of services, including tax representation services. The task force believed the continuing growth in the number of CPA firms providing tax representation services, in various venues, involving different types of taxes, obligated the development of this standard.
Other Concerns
Another goal of the task force was to avoid proposing standards that might appear duplicative of other existing standards currently in effect. Although it is true that CPAs who provide tax services are bound by existing standards related to representation, including Circular 230, such rules may be limited in scope (for example, Circular 230 only governs representation before the IRS).