ATP 105 Ethics key terms

Treasury regulations setting minimum standards for practicing before the IRS, covering who may represent taxpayers, duties of competence and diligence, and rules on fees, conflicts, and written advice.

A civil penalty imposed on a tax return preparer who takes an undisclosed position lacking substantial authority or discloses a position lacking a reasonable basis, assessed per return.

A confidence threshold, weaker than more likely than not but stronger than reasonable basis, under which the weight of legal sources supports a position at roughly a forty percent likelihood.

The lowest defensible standard for a tax position, met when there is some supporting authority and the position is not frivolous, roughly a twenty percent likelihood of being sustained.

A standard of confidence meaning greater than fifty percent likelihood that a position will be upheld on its merits, commonly required for certain return positions and advice.

A return position that lacks any reasonable basis in law or fact, such as an argument already rejected by courts, exposing the taxpayer and preparer to penalties.

Representing a taxpayer in communications, meetings, or proceedings with the IRS, including preparing and filing documents, which requires authority such as an enrolled agent credential or CPA license.

A tax practitioner licensed by the federal government after examination and background checks, authorized to represent any taxpayer before the IRS on any tax matter.

The form a taxpayer files to authorize an individual to receive confidential tax information and represent the taxpayer before the IRS for specified periods and tax matters.

A form permitting a designated person to receive and inspect a taxpayer's confidential tax information without granting authority to represent the taxpayer in IRS proceedings.

The obligation of a preparer to make reasonable inquiries and keep records supporting return positions, including verifying eligibility for credits such as the earned income credit.

The duty not to disclose client tax information without consent except as authorized by law or required for the engagement, protecting the client's privacy and trust.

A situation where a practitioner's personal, financial, or professional interests or duties to another party could impair objective judgment, requiring disclosure and client consent.

A charge for services that depends on the outcome of a matter, generally restricted in tax practice except for certain refund claims and audits where allowed by rule.

An independent IRS office that helps taxpayers resolve problems not fixed through normal channels, including cases of financial hardship or systemic delays.

All income received in any form from any source unless specifically excluded by law, forming the starting point for computing taxable income.

Gross income reduced by certain deductions allowed regardless of itemizing, such as retirement contributions and student loan interest, used to determine many limits and phase-outs.

A deduction subtracted from gross income to arrive at adjusted gross income, available whether or not the taxpayer itemizes, such as contributions to a traditional IRA.

A fixed deduction amount based on filing status and other factors, subtracted from adjusted gross income instead of itemizing, with additional amounts for age or blindness.

Individual expenses allowed as deductions only if the taxpayer elects to list them, such as mortgage interest, charitable gifts, and state taxes, subject to limits.

An item of income that the tax law removes from gross income entirely, such as certain employer-provided health insurance or qualified fringe benefits.

Postponement of tax on income or gain until a later year, as with certain like-kind exchanges or retirement account earnings, rather than permanent exclusion.

The category a taxpayer uses on a return, such as single, married filing jointly, or head of household, which determines rates, deduction amounts, and credit eligibility.

A qualifying child or qualifying relative whose support and residence or relationship tests are met, allowing the taxpayer certain deductions and credits.

Taxes deducted from wages or other payments and remitted to the government on the taxpayer's behalf, credited against the tax shown on the annual return.

Periodic prepayments of tax made by taxpayers whose withholding does not cover their liability, generally required quarterly to avoid underpayment penalties.

Adjusted gross income reduced by the standard or itemized deduction and any qualified business income deduction, the base to which tax rates are applied.

A direct reduction of tax owed, dollar for dollar, which is more valuable than a deduction of the same amount; some credits are refundable.

A credit that can reduce tax below zero and generate a payment to the taxpayer, such as the earned income credit, unlike credits limited to tax owed.

A refundable credit for lower-income workers based on earned income and number of qualifying children, subject to income limits and due diligence verification by preparers.

Gain from selling a capital asset, taxed at preferential rates if long-term, meaning the asset was held more than one year before sale.

The taxpayer's investment in property for tax purposes, generally its cost, used to measure gain or loss on sale and to compute depreciation.

Income taxed at regular graduated rates rather than preferential capital gain rates, including wages, interest, and business profits.

An annual deduction allowing recovery of the cost of business or income-producing property over its useful life under prescribed recovery periods and methods.

Social Security and Medicare tax on net earnings from self-employment, computed on a Schedule and partly deductible in arriving at adjusted gross income.

The income level, varying by filing status and age, below which a taxpayer generally is not required to file a return, though filing may still be beneficial.

The time limit within which the IRS may assess tax or a taxpayer may claim a refund, generally three years from filing but longer for substantial omissions or fraud.