Chapter 3: Due Diligence (Section 10.22)
This chapter focuses on the requirement for tax professionals to exercise due diligence. Practitioners must verify the accuracy of all client information before filing returns and ensure proper documentation is maintained. Failure to meet due diligence standards can result in fines and penalties under Circular 230.
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1.
A client claims a large business expense but cannot provide any receipts or supporting documents. What should you do to meet due diligence requirements?
2.
You’ve discovered a discrepancy in the information your client provided. How should you proceed?
3.
A client provides details of income that appear inconsistent with their prior year’s records. What is the best course of action?