N.Y. Comp. Codes R. & Regs. Tit. 20 §§ 2600-4.3

Current through Register Vol. 46, No. 45, November 2, 2024

Section 2600-4.3 - Duties

(a) Knowledge of client's omission. A tax return preparer who, having been retained by a client with respect to a matter administered by the department, knows that the client has not complied with the tax and revenue laws of the United States or any state or local government or has made an error in or omission from any return, document, affidavit, or other form which the client submitted or executed under the tax and revenue laws of the United States or any state or local government, must advise the client promptly of the fact of such noncompliance, error, or omission. The preparer must advise the client of the consequences as provided under the applicable Federal, State or local laws and regulations of such noncompliance, error, or omission. A preparer who knows that a return or document that has been prepared for filing contains an error or omission, may not sign, submit or file that return or document with the department, by electronic means or otherwise.

(b) Diligence as to accuracy.

(1) Due diligence. In connection with any return prepared by the tax return preparer, the preparer must exercise due diligence:

(i) in preparing or assisting in the preparing, approving, and filing of tax returns, documents, affidavits, and other papers relating to the return;

(ii) in determining the correctness of oral or written representations made by the preparer regarding the return to the department; and

(iii) in determining the correctness of oral or written representations made by the preparer to clients with reference to any matter administered by the department in connection with the return.

(2) Presumption of due diligence. A tax return preparer will be presumed to have exercised due diligence for purposes of this subdivision if the preparer relies on the work product of another person and the preparer used reasonable care in engaging, supervising, training, and evaluating the person, taking proper account of the nature of the relationship between the preparer and the person.

(c) Prompt disposition of pending matters. A tax return preparer may not unreasonably delay the prompt disposition of any matter before the department relating to a return prepared by the preparer.

(d) Assistance from or to persons whose registration has been refused, cancelled, or suspended. A tax return preparer may not, directly or indirectly, knowingly accept assistance from or assist any person who has been refused registration as a tax return preparer, or whose registration has been cancelled or suspended, if the assistance relates to the preparation of a New York State tax return other than the return of the person whose registration has been refused, cancelled, or suspended.

(e) Fees, notaries and check cashing.

(1) Fees. A tax return preparer may not charge an unconscionable fee in connection with any matter before the department relating to a return prepared by the preparer. For purposes of this paragraph, a fee is unconscionable if the amount of the fee is either excessive or unreasonable based on all of the relevant facts and circumstances, including the complexity of the underlying issue or issues to be addressed with respect to the matter and the time required to resolve the matter before the department.

(2) Notaries. A tax return preparer may not take acknowledgments, administer oaths, certify papers, or perform any official act as a notary public with respect to any matter administered by the department and for which he or she is employed as a tax return preparer.

(3) Negotiating taxpayer checks. A tax return preparer may not endorse or otherwise negotiate any check or other form of payment issued to a client by the government in respect to a Federal, State or local tax refund.

(f) Return of client's records.

(1) General. In general, a tax return preparer must, at the request of a client, promptly return any and all records of the client that are necessary for the client to comply with his or her Federal, State or local tax obligations. The preparer may retain copies of the records returned to a client. The existence of a dispute over fees generally does not relieve the preparer of his or her responsibility under this section.

(2) Records of the client defined. For purposes of this section, records of the client include all documents or written or electronic materials provided to the tax return preparer, or obtained by the preparer in the course of the preparer's representation of the client, that preexisted the retention of the preparer by the client. The term also includes materials that were prepared by the client or a third party (not including an employee or agent of the preparer) at any time and provided to the preparer with respect to the subject matter of the representation. The term also includes any return, claim for refund, schedule, affidavit, appraisal or any other document prepared by the preparer, or his or her employee or agent, that was presented to the client with respect to a prior representation if such document is necessary for the taxpayer to comply with his or her current Federal, State or local tax obligations. The term does not include any return, claim for refund, schedule, affidavit, appraisal or any other document prepared by the preparer or the preparer's firm, employees or agents if the preparer is withholding such document pending the client's performance of its contractual obligation to pay fees with respect to such document.

(g) Conflicting interests.

(1) General. Except as provided by paragraph (2) of this subdivision, a tax return preparer shall not prepare a return for a client or represent a client before the department in a matter involving a return prepared by the preparer if the preparer's involvement in the matter involves a conflict of interest. A conflict of interest exists if:

(i) the representation of one client will be directly adverse to another client; or

(ii) there is a significant risk that the representation of one or more clients will be materially limited by the tax return preparer's responsibilities to another client, a former client or a third person, or by a personal interest of the preparer.

(2) Waiver. Notwithstanding the existence of a conflict of interest under paragraph (1) of this subdivision, the tax return preparer may prepare a return or represent a client in connection with a return prepared by the preparer if:

(i) the preparer reasonably believes that the preparer will be able to provide competent and diligent representation to each affected client;

(ii) the representation is not prohibited by law; and

(iii) each affected client waives the conflict of interest and gives informed consent, confirmed in writing by each affected client, at the time the existence of the conflict of interest is known by the preparer. The confirmation may be made within a reasonable period of time after the informed consent, but in no event later than 90 days. Copies of the written consents must be retained by the preparer for at least 36 months from the date of the conclusion of the representation of the affected clients, and must be provided to any officer or employee of the department on request.

(h) Submission of tax returns, affidavits and other documents to the department.

(1) General. A tax return preparer may not willfully, recklessly, or through gross incompetence:

(i) sign a tax return or claim for refund that the tax return preparer knows or reasonably should know contains a position that:

(a) lacks a reasonable basis;

(b) is an unreasonable position; or

(c) is a willful attempt by the tax return preparer to understate the liability for tax or a reckless or intentional disregard of rules or regulations by the tax return preparer;

(ii) advise a client to take a position on a tax return or claim for refund, or prepare a portion of a tax return or claim for refund containing a position that:

(a) lacks a reasonable basis;

(b) is an unreasonable position; or

(c) is a willful attempt by the tax return preparer to understate the liability for tax or a reckless or intentional disregard of rules or regulations by the tax return preparer.

(2) Pattern of conduct. A pattern of conduct is a factor that will be taken into account in determining whether a tax return preparer acted willfully, recklessly, or through gross incompetence.

(3) Frivolous position. A tax return preparer may not take a frivolous position or advise a client to take a frivolous position on a tax return, affidavit, or other document submitted to the department, whether in paper form or electronically.

(4) Advice regarding submissions. A preparer may not advise a client to submit a tax return, affidavit, or other paper or electronic document to the department, if in connection with the document:

(i) the purpose is to delay or impede the administration of Federal, State or local tax laws;

(ii) the document or return contains a position that is frivolous; or

(iii) the document or return contains or omits information in a manner that demonstrates an intentional disregard of a statute, regulation or established case law unless the preparer also advises the client to submit a document that evidences a good faith challenge to the statute, regulation or established case law.

(5) Advice regarding penalties. Advising clients on potential penalties.

(i) A preparer must inform a client of any penalties that are reasonably likely to apply to the client with respect to:

(a) A position taken on a tax return if:

(1) the preparer advised the client with respect to the position; or

(2) the preparer prepared or signed the tax return; and

(b) any tax return, affidavit, or other paper or electronic document prepared or signed by the preparer and submitted to the department.

(ii) The preparer also must inform the client of any opportunity to avoid any such penalties by disclosure, if relevant, and of the requirements for adequate disclosure.

(6) Relying on information furnished by clients. A tax return preparer advising a client to take a position on a tax return, document, affidavit or other paper or electronic submission to the department, or preparing or signing a tax return as a preparer, generally may rely in good faith without verification upon information furnished by the client. The preparer may not, however, ignore the implications of information furnished to, or actually known by, the preparer, and must make reasonable inquiries if the information as furnished appears to be incorrect, inconsistent with an important fact or another factual assumption, or incomplete.

(7) Responsibility of persons with principal authority. Any person, whether or not a tax return preparer, who has (or persons who have or share) principal authority and responsibility for overseeing a firm's practice of preparing tax returns, claims for refunds, or other documents by tax return preparers for submission to the department must take reasonable steps to ensure that the firm has adequate procedures in effect for all members, associates, and employees for purposes of complying with this Part. Any such person who has (or persons who have or share) this principal authority will be subject to discipline for failing to comply with the requirements of this paragraph if:

(i) the person through willfulness, recklessness, or gross incompetence does not take reasonable steps to ensure that the firm has adequate procedures to comply with this Part, and one or more individuals who are members of, associated with, or employed by, the firm are, or have, engaged in a pattern or practice, in connection with their practice with the firm, of failing to comply with this Part; or

(ii) the person knows or should know that one or more individuals who are members of, associated with, or employed by, the firm are, or have, engaged in a pattern or practice, in connection with their practice with the firm, that does not comply with this Part, and the person, through willfulness, recklessness, or gross incompetence fails to take prompt action to correct the noncompliance.

(i) Requirements for written advice.

(1) Any written advice (including by means of electronic communication) given by a tax return preparer concerning one or more Federal, State, or local tax matters is subject to the requirements of this subdivision.

(2) The tax return preparer must:

(i) base the written advice on reasonable factual and legal assumptions (including assumptions as to future events);

(ii) reasonably consider all relevant facts and circumstances that the tax return preparer knows or reasonably should know;

(iii) use reasonable efforts to identify and ascertain the facts relevant to written advice on each tax matter;

(iv) not rely upon representations, statements, findings, or agreements (including projections, financial forecasts, or appraisals) of the taxpayer or any other person if reliance on them would be unreasonable;

(v) relate applicable law and authorities to facts: and

(vi) not, in evaluating a tax matter, take into account the possibility that a tax return will not be audited or that a matter will not be raised on audit.

(3) Reliance on representations, statements, findings, or agreements is unreasonable if the tax return preparer knows or reasonably should know that one or more representations or assumptions on which any representation is based are incorrect, incomplete, or inconsistent.

(4) A tax return preparer may only rely on the advice of another person if the advice was reasonable and the reliance is in good faith considering all the facts and circumstances. Reliance is not reasonable when:

(i) the tax return preparer knows or reasonably should know that the opinion of the other person should not be relied on;

(ii) the tax return preparer knows or reasonably should know that the other person is not competent or lacks the necessary qualifications to provide the advice; or

(iii) the tax return preparer knows or reasonably should know that the other person has a conflict of interest in violation of rules described in this Part.

(5)

(i) In evaluating whether a tax return preparer giving written advice concerning one or more tax matters complied with the requirements of this section, the department will apply a reasonable tax return preparer standard, considering all facts and circumstances, including, but not limited to, the scope of the engagement and the type and specificity of the advice sought by the client.

(ii) In the case of an opinion the tax return preparer knows or has reason to know will be used or referred to by a person other than the tax return preparer (or a person who is a member of, associated with, or employed by the tax return preparer's firm) in promoting, marketing, or recommending to one or more taxpayers a partnership or other entity, investment plan or arrangement a significant purpose of which is the avoidance or evasion of any tax, the department will apply a reasonable tax return preparer standard, considering all facts and circumstances, with emphasis given to the additional risk caused by the tax return preparer's lack of knowledge of the taxpayer's particular circumstances, when determining whether a tax return preparer has failed to comply with this subdivision.

(j) Solicitation and advertising. A tax return preparer may not, with respect to conduct as a tax return preparer, in any way use or participate in the use of any form of public communication or private solicitation containing a false, fraudulent, deceptive, misleading or coercive statement or claim.

(k) Best practices. Tax return preparers should provide clients with the highest quality representation concerning Federal, State and local tax issues by adhering to best practices in providing advice and in preparing or assisting in the preparation of a submission to the department. The best practices set forth in this subdivision are statements of practices for all tax preparers to aspire to achieve. A violation of a best practice defined in this subdivision will not alone constitute an act of misconduct by the preparer sufficient to support a disciplinary action but such a violation, especially if indicative of a pattern of conduct, may be considered in determining whether a disciplinary rule set forth in the other sections of these standards has been violated. In addition to compliance with the standards of practice provided elsewhere in this Part, best practices include the following:

(1) Communication. Communicating clearly with the client regarding the terms of the engagement. For example, the preparer should determine the client's expected purpose for and use of the advice and should have a clear understanding with the client regarding the form and scope of the advice or assistance to be rendered.

(2) Applying law and facts. Establishing the facts, determining which facts are relevant, evaluating the reasonableness of any assumptions or representations, relating the applicable law (including potentially applicable judicial doctrines) to the relevant facts, and arriving at a conclusion supported by the law and the facts.

(3) Advice. Advising the client regarding the import of the conclusions reached.

(4) Actions. Acting fairly and with integrity in practice before the department.

N.Y. Comp. Codes R. & Regs. Tit. 20 §§ 2600-4.3