The answers to these frequently asked questions (FAQs) are based on guidance developed by the Statement on Standards for Tax Services (SSTSs) Guidance Task Force in response to questions that were presented during the SSTS public exposure period and since that time in administering the SSTSs. These FAQs are not rules, regulations or official statements of the Tax Executive Committee issued pursuant to its rule-making authority and, therefore, are not authoritative guidance.
The SSTSs should be used in conjunction with these FAQs. The answers to these FAQs may not necessarily address the requirements of other regulatory bodies, including State Boards of Accountancy, the Internal Revenue Service and other tax regulatory bodies whose rules may differ from those of the AICPA. A member should always consult these other sources to ensure compliance with all appropriate regulatory requirements.
May a member rely on an S corporation's shareholder basis worksheet produced by a prior accountant in preparing the current year's return (in the following situation)?
An S corporation has been in business for 10 years and is a new client of the member. The prior accountant's tax software produced a schedule that was provided to the corporation and shareholders entitled: “Shareholder Basis Worksheet.” May the member rely on this form for the basis of the shareholders in preparing the current year's return?
Yes, if, after reviewing prior returns and the worksheet which was prepared by the prior preparer's tax software, it appears to be reasonable and the member does due diligence by confirming that the prior preparer is competent.
May a member rely on an S corporation's basis worksheet produced from a firm's tax software when older year's substantiation isn't available (in the following situation)?
An S corporation has been in business for 15 years and has been a firm's client since inception. The CPA has a policy of destroying all Forms 1120S, U.S. Income Tax Return for an S Corporation, and workpapers after seven years. Neither the firm nor the corporation has copies of the first eight years of tax returns. The firm's software produces a schedule entitled: “Shareholder Basis Worksheet.” The current tax period is the first year out of the last seven where it appears there may have been distributions in excess of basis. May a member rely on this basis worksheet?
The member may rely on the worksheet if the numbers seem reasonable after examining the seven most recent returns and the worksheet calculations.
The AICPA’s Statements on Standards for Tax Services (SSTSs) are enforceable tax practice standards for members of the AICPA. Additional guidance is also found in the corresponding interpretations and frequently asked questions (FAQs). Access to the complete set of SSTSs and guidance are available in the AICPA’s Statements on Standards for Tax Services Library.