654 MODULE 37 TAXES: GIFT AND ESTATE

(1) Information is not readily available and the answer is not significant in terms of taxable in-
come or tax liability.
(2) Uncertainty as to meaning of question.
(3) Answer is voluminous and return states that data will be supplied upon examination.
4. Procedural Aspects of Preparing Returns
5. A ePA may in good faith rely without verification upon information furnished by the client or by
third parties, and is not required to audit, examine, or review books, records, or documents in or-
der to independently verify the taxpayer's information.
(1) However, the ePA should not ignore implications of information furnished and should make
reasonable inquires if information appears incorrect, incomplete, or inconsistent.
(2) When feasible, the ePA should refer to the client's past returns.
6. Where the IRS imposes a condition for deductibility or other treatment of an item (e.g., requires
supporting documentation), the ePA should make appropriate inquiries to determine whether the
condition for deductibility has been met. . .
7. When preparing a tax return, a Cl' A should consider information known from the tax return of an-

other client if that information is relevant to the return being prepared, and such consideration
does not violate any rule regarding confidentiality.
8. Use of Estimates
9. Where data is missing (e.g., result of a fire, computer failure), estimates of the missing data may
be made by the client: '
10. A Cl'A may prepare a tax return using estimates if it is impracticable to obtain exact data, and the
estimated amounts are reasonable.
11. An estimate should not imply greater accuracy than actually exists (e.g., estimate $1,000 rather
than $999.32).
12. Departure from Position Previously Concluded in an IRS Proceeding or Court Decision
13. Unless the taxpayer is bound to a specified treatment in the later year, such as by a formal closing
agreement, the treatment of an item as part of concluding an IR8- proceeding or as part of a court
decision in a prior year, does not restrict the ePA from recommending a different tax treatment in
a later year's return.
14. Court decisions, rulings, or other authorities more favorable to 'the taxpayer's current position may
have developed since the prior proceeding was concluded or the prior court decision was rendered.
15. Knowledge of Error: Return Preparation
16. The term "error" as used here includes any position, omission, or method of accounting that, at the
time the return is filed, fails to meet the standards as outlined in 1. and 2. above. An error does not
include an item that has an insignificant effect on the client's tax liability.
17. A ePA should inform a client promptly upon becoming aware of a material error in a previously
filed return or upon becoming aware of a client's failure to file a required return. A ePA
(1) Should recommend (either orally or in writing) measures to be taken.
(2) Is not obligated to inform the IRS of the error, and may not do so without the client's permis-
sion, except where required by law.
18. If the ePA is requested to prepare the client's current return, and the client has not taken appropri-
ate action to correct an error in a prior year's return, the Cl' A should consider whether to continue
a professional relationship with the client or withdraw.
19. Knowledge of Error: Administrative Proceedings
20. When a ePA is representing a client in an IRS proceeding (e.g., examination, appellate confer-
ence) with respect to a return that contains an error of which the ePA has become aware, the ePA
should promptly inform the client and recommend measures to be taken.
21. The ePA should request the client's permission to disclose the error to the IRS, and lacking such
permission, should consider whether to withdraw from representing the client.