New SSTSs are here

CPAs working in tax should be aware of revisions and additions to the AICPA’s Statements on Standards for Tax Services (SSTSs) effective Jan. 1. 

By Vivian J. Paige, CPA, CGMA 

CPAs in Virginia who are tax professionals are subject to a variety of rules, including the requirements of the AICPA Code of Professional Conduct, Treasury Department Circular No. 230, the Gramm-Leach-Bliley Act (GLBA), the Federal Trade Commission’s (FTC) Safeguards Rule, and the AICPA’s Statements on Standards for Tax Services (SSTSs). 

In May 2023, the Tax Executive Committee of the AICPA, which is designated by the AICPA to promulgate standards of tax practice, approved the issuance of the latest SSTSs. The issuance represented a years-long revision of the previous standards and included an exposure draft and a period during which comments on the proposed revisions were accepted. The revised SSTSs went into effect Jan. 1, 2024. 

The goals of the revision were twofold: (1) to ensure better alignment of the standards to reflect the current state of the tax profession, and (2) to address the emerging needs of the profession. The first goal was addressed by reorganizing the standards by the type of tax work performed. The second goal was addressed by introducing three new standards covering data protection, reliance on tools, and the representation of tax clients before taxing authorities.  

The seven existing SSTSs were reorganized into a practice-based framework, and incorporated the three new standards, resulting in four standards: 

• Statement on Standards for Tax Services No. 1, General Standards for Members Providing Tax Services: This statement addresses general matters applicable to all tax services and includes guidance from the existing SSTS Nos. 1, 5 and 6 while adding new standards on data protection and reliance on tools. 

• Statement on Standards for Tax Services No. 2, Standards for Members Providing Tax Compliance Services, Including Tax Return Positions: This statement addresses tax compliance services (tax return preparation) and includes guidance from the existing SSTS Nos. 1–5. 

• Statement on Standards for Tax Services No. 3, Standards for Members Providing Tax Consulting Services: This statement addresses the providing of tax advice and includes guidance from the existing SSTS No. 7. 

• Statement on Standards for Tax Services No. 4, Standards for Members Providing Tax Representation Services: This statement addresses the new standard on taxpayer representation and focuses on the representation relationship. 

The structure of the new SSTSs follows that of the previous ones, with each section providing an introduction, the standard i.e., the requirements to be followed, and an explanation. Except for the new standards, much of the remaining content was simply modified to clarify the language. There is, however, a new numbering system, which is much easier to follow than in the old SSTSs, where the paragraphs were simply numbered. In the new SSTSs, the first number represents the SSTS number, the second number the section within the SSTS, and the last number the paragraph under that section. For example, 1.2.1 points you to SSTS No. 1, section 2, Knowledge of Errors, and paragraph 1, which is the first paragraph of the introduction.  

The first two of the new standards, data protection and reliance on tools, are applicable to different types of tax services and are, therefore, included in the general standards in SSTS No. 1. Data protection can be found in Section 1.3. This new standard requires the CPA tax professional to make a reasonable effort to safeguard taxpayer data, including that transmitted or stored electronically, and to consider the applicable privacy laws when collecting and storing taxpayer data. The standard references both the GLBA and the FTC’s Safeguards Rule and complements the confidentiality standards in the AICPA Code (ET sec 1.700.001). 

The prior SSTSs provided no standard addressing the increasing reliance on technology in providing tax services. Section 1.4 addresses this oversight by providing guidance. Tools like tax preparation software, tax research publications, data analytics, and other resources can be used to improve efficiency and to enhance the CPA tax professional’s understanding of an issue. Tools cannot, however, supplant professional judgment. The new standard requires tax professionals to take reasonable steps to ensure the results presented by any tax tools used are reliable.  

The final new standard is contained in SSTS No. 4, which recognizes that tax representation can occur before any taxing authority (Circular 230, for example, only covers federal taxes) and that these taxing authorities may impose their own standards. SSTS No. 4 is designed to supplement, rather than override them, and to provide basic standards where a lower standard or no standard exists. Technical competence in the subject matter is required and SSTS No. 4 draws on the competence interpretation provided in the AICPA Code (ET sec. 1.300.010). In addition, this standard reminds CPA tax professionals of the conflict-of-interest standards in Section 1.000.020 as well as the integrity and objectivity rule in Sections 1.100.001 and 2.100.001 of the AICPA Code. 

In addition to the new standards, the AICPA Tax Executive Committee has issued two interpretations related to SSTSs Nos. 1 and 2. Interpretation No. 1-1 covers “Reporting and Disclosure Standards” while Interpretation No. 1-2 covers "Tax Planning.” The Committee also issued a “Frequently Asked Questions” document to cover several specific topics, including errors on tax returns, reliance on information from others for pass-through basis, and the use of estimates for earnings and profits. All of these items can be found on the AICPA website. 

Finally, while the documents refer to AICPA members, please remember that all CPAs in Virginia are bound by the AICPA Code of Professional Conduct and the SSTSs via Section 54.1-443.3 of the Code of Virginia.