The New SSTSs

February 17, 2023

CalCPA’s Comments on Proposed Tax Ethics Standards

By Kip Dellinger, CPA

CalCPA’s Committee on Taxation recently submitted comments on the AICPA’s revised and new Statements on Standards for Tax Services (SSTSs). 

The AICPA asked for comments on how it might address the issue of quality control in tax practice, which is a necessary element to ensure compliance with both the revised and the new SSTSs.

After consideration of comments from interested parties, the SSTSs are scheduled to become effective Jan. 1, 2024. While the SSTSs govern AICPA members, they are recognized by CalCPA as guidelines for its members and are cited by the California Board of Accountancy in enforcement proceedings involving CPA discipline pertaining to the required standard of care when providing tax services to a client.

The proposals retain, virtually intact, the seven existing SSTSs and then add three new standards that address:

1. Data Security

2. Use of Tools

3. Representing Taxpayers Before a Tax Authority

The existing standards address tax positions, responding to questions on returns, procedural aspects of preparing returns, use of estimates in tax preparation, consideration of findings in an administrative proceeding; discovery of an error in preparation or an administrative proceeding; and the form and content of advice to taxpayers.

Reorganization of the Standards

The standards are reorganized into a new format intended to make them more user-friendly. They address general standards and applications, as well as the three fundamental activities of tax practice: return preparation, advisory and tax controversy service. 

CalCPA Comments on Proposals

Find CalCPA’s transmittal letter, general comments and comments on specific provisions online

In general, it’s noted that the SSTSs require a CPA to possess competency to perform tax service undertaken for a client or employer. In describing the competency requirement, the proposals refer to Treasury Department Circular 230 defining of governing practice of CPAs before the IRS. CalCPA’s recommendation is that, instead, the reference be to the competency definition contained in the AICPA Code of Professional Conduct (with which Circular 230 is consistent) to provide that the CPA profession’s conduct standards govern the performance of services rather than those of a third party.

Tax Positions: Statement No. 1.1

In previous versions of the standards, the CPA was generally responsible to be an advocate for the tax client with regard to advising on tax positions. The proposals remove the requirement, but acknowledge the CPA may advocate for the tax client. We recommended that if the CPA does not intend to function as an advocate, the CPA should affirmatively inform the tax client because we believe that taxpayers have a general expectation that their tax advisor will function as an advocate.

Knowledge of Error: Statement No. 1.2

Regarding the discovery of an error on prior year’s returns, we recommended that the SSTSs clarify that the CPA responsibility to address an error be limited to errors of which the CPA becomes aware. This presumably limits the CPA’s responsibility to monitor subsequent developments to those of which he or she becomes aware, or to a situation where the CPA is willfully ignorant. It’s important to note that under the proposed standard, the CPA’s responsibility for informing the tax client of error is limited to situations where the CPA is performing a tax service for the client rather than other services; for example, audit or non-tax consulting services. It does retain the requirement to inform the tax client of errors on returns prepared by others (for example prior returns) if the CPA is performing tax services for the client.

Data Protection: Statement No. 1.3

Several comments were offered regarding data protection requirements, primarily directed to clarification of the terms and to limit the CPA’s responsibility for original transmittal and receipt of information to that which is within the control of the CPA. For example, the CPA generally cannot control the way a tax client transmits data to the firm, but only can provide specific methods and tools for transmission and encourage their use. It’s also noted that the requirements of this standard provide broad rather than specific guidance and are not more onerous than the requirements of the IRS of preparers of tax returns when annually renewing their identification numbers (PTIN).

Reliance on Tools: Statement No. 1.4

The Reliance on Tools standard acknowledges that the CPA can and does utilize a variety of tools (for example, technical resources, varieties of software, cloud storage); it imposes on the CPA a requirement to comply with applicable laws pertaining to their use and to use professional judgment in the use or application of tools as well as to provide reasonable care in ensuring the quality of the tools. The recommendation regarding this standard was minimal and limited to suggesting that an example be removed and addressed as a Frequently Asked Question.

Compliance Services: Statement No. 2

Besides recommending that the STTSs retain recognition that the IRC provisions for tax positions are different for taxpayers and tax preparers, it was suggested that some terms used in the SSTSs be defined by reference to the AICPA Code of Professional Conduct.

It was also recommended that several examples be removed from the SSTSs and addressed in the form of FAQs because, generally, examples are not rules and should not be confused as such.

Tax Representation Services: Statement No. 4

It was recommended that the AICPA Standard of Competency govern the competency requirement described in the standard rather than that proposed reference to the Circular 230 definition. The two definitions are substantially similar and the standard refers to a requirement to comply with the rules of the tax authority before whom the CPA is appearing. The standard is that of the AICPA and, consequently, it’s definition of competence, would appear more appropriate.

Comments on Quality Control

In conjunction with the exposure of the SSTS proposals, comments were requested concerning the role the AICPA should take regarding quality management in tax practice and the way the AICPA should address quality control within the scope of the standards. 

The problem with applying quality control in tax practice is that the size, scope and nature of CPA practices are breathtakingly diverse. Consequently, it was recommended that any quality management standard be aspirational in nature and constructed in a manner that addressed the diverse nature and scope of CPA practices, and that quality management might best be addressed as an interpretation of the general SSTS standards, or in the form of FAQs or other similar guidance.


The proposed updated, revised and expanded SSTSs are designed to address the evolving current practices and ethical issues impacting the CPA profession and its members in tax practice. As such, they should be viewed as a welcome addition to guidance in this area of a CPA’s tax practice.  

Kip Dellinger, CPA is senior tax partner at Kallman+Logan & Company, LLP. 

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