Susan Smith accepted a new corporate client, Winter Park Corporation. One of Susan’s tax managers conducted a review of Winter Park’s prior year tax returns. The review revealed that an NOL for a prior tax year was incorrectly computed, resulting in an overstatement of NOL carrybacks and carryovers to prior tax years. Apply the Statements on Standards for Tax Services (SSTSs) to the following situtations. The SSTSs are in Appendix E of this text.
a. Assume the incorrect NOL calculation does not affect the current year’s tax liability. What recommendations (if any) should Susan make to the new client? See SSTS No. 6.
b. Assume the IRS is currently auditing a prior year. What are Susan’s responsibilities in this situation? See SSTS No. 6.
c. Assume the NOL carryover is being carried to the current year, and Winter Park does not want to file amended tax returns to correct the error. What should Susan do in this situation? See SSTS No. 1.