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Ethics in tax resolution: balancing client advocacy and legal compliance

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CPAs specializing in tax resolution often walk a fine line between advocating for clients and adhering to legal and ethical guidelines. Given the complexities of IRS regulations and the high-stakes nature of tax resolution, ethical dilemmas are common. These situations emphasize the delicate balance CPAs must strike between zealously representing clients and upholding their moral and legal obligations. The AICPA’s Code of Professional Conduct provides a framework for addressing common ethical dilemmas in tax resolution and maintaining integrity.  

Navigating common ethical dilemmas in tax resolution 

One frequent issue in tax resolution involves unreported income. It’s not uncommon for clients to believe that income not reported on a 1099 form is exempt from taxation. For example, some clients may assume that cash income doesn’t count if the IRS isn’t immediately aware of it. As one CPA likes to say, “I don’t look good in stripes, and neither do my clients.” The AICPA’s integrity principle mandates honesty in these situations. Educating clients about their obligations protects them legally and reinforces the public interest principle, which fosters trust between the profession and the public. 

Conflicts of interest: identifying and resolving them ethically

Conflicts of interest are common in tax resolution, particularly when dealing with married couples or business partners. A typical example involves a couple whose spouse owes a significant amount to the IRS while the other has sufficient withholding to cover their liability. This can create a conflict, especially in divorce situations or where assets are shared. The AICPA emphasizes objectivity and independence in these cases, requiring CPAs to disclose any potential conflicts to all parties. In some cases, stepping away may be necessary to avoid compromising independence. 

Clients also are tempted to suggest moving assets to a spouse’s name to avoid IRS scrutiny. One client, for instance, considered selling property and depositing the proceeds in a spouse’s account to avoid reporting it in an offer in compromise. This is a classic case of fraudulent conveyance, and it is the CPA’s duty to explain the severe penalties involved. Upholding due care means understanding these legal ramifications and guiding clients away from potentially harmful actions. 

Transparency and confidentiality: balancing ethical priorities 

Transparency is critical in tax resolution. Clients must understand their options and the potential outcomes of different strategies. Whether negotiating an OIC or setting up a payment plan, CPAs must ensure clients are presented with a realistic picture of what the IRS will likely accept. At the same time, protecting client confidentiality is essential. CPAs with access to sensitive financial information are ethically bound to maintain confidentiality unless disclosure is required by law. 

In one case, a client revealed they had an unreported gold bar and wished to exclude it from IRS submissions. The CPA refused to assist despite the client’s insistence, knowing that concealing assets violates ethical standards. Assisting clients in submitting inaccurate financial information undermines the profession’s integrity and carries severe legal consequences. 

AICPA guidelines and their practical application 

The AICPA’s Code of Professional Conduct is built on six principles: responsibilities, public interest, integrity, objectivity and independence, due care, and scope and nature of services. While these principles apply broadly across the profession, tax resolution requires nuanced application. 

For example, due care requires CPAs to stay informed about IRS regulations and navigate complex tax laws effectively. When advising clients on whether to file jointly or separately for back taxes, CPAs must weigh the impact on both parties, especially in divorce scenarios or where significant assets are involved. Ensuring objectivity in these cases is crucial for providing unbiased advice. 

The long-term benefits of ethical decision-making

Ethical missteps in tax resolution can have far-reaching consequences. Violations of IRS rules or involvement in fraudulent schemes can result in fines, loss of licensure, or even criminal charges. More importantly, ethical breaches damage the trust that clients, the IRS and the public place in CPAs. 

Adhering to ethical standards fosters trust and builds long-term client relationships. Strong reputations with clients and IRS agents often lead to smoother negotiations and better outcomes. Upholding these standards is essential for sustaining a successful, reputable practice. In tax resolution, where the intersection of ethics and advocacy is particularly challenging, CPAs must remain committed to the AICPA’s Code of Professional Conduct. By balancing transparency, managing conflicts of interest, and maintaining the highest standards of integrity, CPAs can help clients resolve tax issues ethically and effectively, safeguarding their own reputations and public trust in the profession. 

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Accounting

PwC AI agent acts proactively to preserve value

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Big Four firm PwC announced new agentic AI capacities, including a model that proactively identifies areas of value leakage and acts inside the tools teams already use to fix them itself. 

The new solution, Agent Powered Performance, combines continuous AI-driven insight with embedded execution to address the problem of businesses only finding problems when they have already hurt performance. By actively monitoring and working inside the client’s existing systems, though, PwC’s agents can actively and autonomously address such issues. 

The software, which is supported by PwC’s recently released Agent OS coordination platform, is  embedded in enterprise systems to sense where value is leaking, think through the most effective performance strategies using predictive models and industry benchmarks, and act directly in tools like ERP or CRM software to make improvements stick. 

The system connects directly into ERP environments, continuously monitors key metrics, and acts inside the tools teams already use. For example, a supply chain agent might detect rising shipping costs and automatically reroute deliveries to reduce spend. Finance agents can spot and correct billing errors before they reach the customer. Clients typically see measurable efficiency gains in the first quarter, with continued improvements over time as the system learns and adapts.

“Too many transformations still rely on one-off pilots and stale data, stretching the gap from insight to impact and suffocating ROI,” said Saurabh Sarbaliya, PwC’s principal for enterprise strategy and value. “Agent Powered Performance flips the economics by distilling PwC’s industry transformation playbooks into AI agents that turn static insights into compounding gains, without rebooting each time.”

Agent Powered Performance is platform-agnostic and built on an open architecture so it can work across different LLMs based on client preferences and task-specific needs. It works with major enterprise platforms including Oracle, SAP, Workday and Guidewire.

Agent OS Model Context Protocol

PwC also announced that its Agent OS AI coordination platform now supports the Model Context Protocol, an open standard from Amazon-backed AI company Anthropic. 

By integrating this standard, agent systems registered as MCP servers can be used by any authorized AI agent. This reduces redundant integration work and the overhead of writing custom logic for each new use case. By standardizing how agents invoke tools and handle responses, MCP also simplifies the interface between agents and enterprise systems, which will serve to reduce development time, lower testing complexity, and cut deployment risk. Finally, any interaction between an agent and an MCP server is authenticated, authorized and logged, and access policies are enforced at the protocol level, which means that compliance and control are native to the system—not layered on after the fact. 

This means that agents are no longer siloed. Instead, they can operate as part of a coordinated, governed system that can grow as needs evolve, as MCP support provides the interface to external tools and systems. This enables organizations to move beyond isolated pilots toward integrated systems where agents don’t just reason, but act inside real business workflows. It marks a shift from experimentation to adoption, from isolated tools to scalable, governed intelligence.

Research Composer

Finally, a PwC spokesperson said the firm has also launched a new internal tool for its professionals called Research Composer, a patent-pending AI research agent embedded in the firm’s ChatPwC suite, designed to accelerate insight generation by combining web data with PwC-uploaded content. 

Professionals will use the Research Composer to produce in-depth, citation-backed reports for either the firm or its clients. The solution is intended to enhance the quality of client work by equipping teams with research and strategic analysis capabilities. 

The AI agent prompts users through a step-by-step research workflow, allowing them to shape how reports are packaged—tailoring the output to meet strategic needs. For example, a manager in advisory services might use Research Composer to evaluate white space opportunities across industries or geographies, drawing from internal reports and up-to-date market data.

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Accounting

Eide Bailly merges in Traner Smith

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Eide Bailly, a Top 25 Firm based in Fargo, North Dakota, is growing its presence in the Pacific Northwest by adding Traner Smith, based in Edmonds, Washington, effective June 2, 2025. 

Traner Smith’s team includes two partners and 16 staff members and specializes in tax compliance and advisory services. Financial terms of the deal were not disclosed. Eide Bailly ranked No. 19 on Accounting Today‘s 2025 list of the Top 100 Firms, with $704.98 million in annual revenue, approximately 387 partners and over 3,500 employees. 

Eide Bailly already has offices in Seattle, but hopes to grow further in the Pacific Northwest. “We’re pleased to welcome the talented team at Traner Smith to Eide Bailly,” said Eide Bailly managing partner and CEO Jeremy Hauk in a statement Monday. “Their expertise with high-net-worth individuals, real estate and privately held businesses aligns well with our strengths, and their client-centric approach is a perfect cultural fit. Having an office in Edmonds, Washington, is a great complement to our existing presence in Seattle. Together, we’re poised to deliver even greater value to families and businesses in the Seattle metro area.” 

“Joining Eide Bailly is a natural next step for us — it provides access to deeper technical resources in areas like state and local tax, national tax, succession planning and international tax while allowing us to continue the personalized service our clients value,” said Kevin Smith, a partner at Traner Smith, in a statement. 

“With this expanded support and platform, we’re excited to grow our reach, elevate what we do best, and help more clients than ever before,” said Shane Summer, another partner at Traner Smith, in a statement.

Eide Bailly has announced several other mergers in recent weeks. Earlier this month, it added Hamilton Tharp, a firm based in Solana Beach, California, and Roycon, a Salesforce consulting firm in Austin, Texas. In late April, it merged in Volpe Brown & Co., in North Canton, Ohio. Eide Bailly expanded to Ohio last year by merging in Apple Growth Partners. Last year, Eide Bailly also sold its wealth management practice to Sequoia Financial Group. The deal with Sequoia appears to be fueling the recent M&A activity. As part of the deal, Eide Bailly Advisors became part of Sequoia Financial, while Eide Bailly received an equity investment in Sequoia.

In 2023, Eide Bailly added Secore & Niedzialek PC in Phoenix, Raimondo Pettit Group in Southern California, Bessolo Haworth in California and Washington State, Spectrum Health Partners in Franklin, Tennessee, and King & Oliason in Seattle. In 2022, it merged in Seim Johnson in Omaha, Nebraska, and in 2021, PWB CPAs & Advisors in Minnesota. In 2020, it added Mukai, Greenlee & Co. in Phoenix, HMWC CPAs in Tustin, California, and Platinum Consulting in Fullerton.

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Accounting

BMSS announces investment, collaboration with Knuula

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Top 100 firm BMSS announced an investment in Knuula, an engagement letter and client documents software provider. The investment from BMSS came after successfully implementing Knuula over the past year to streamline its engagement letter process. It was after doing so that the firm’s leadership came to believe that Knuula could create complex client documents at an enormous scale, which was a huge need for the broader accounting industry. BMSS thought this presented a great opportunity to guide Knuula and help facilitate its growth. 

“We began working with Knuula in Spring 2024 to streamline our engagement letter process,” said Don Murphy, Managing Member of BMSS. “It quickly became clear that Knuula was not only a strong solution for us, but also an ideal partner in advancing industry-wide automation.”

While the specific terms of the deal were not disclosed, a spokesperson with Knuula said that, after this investment, BMSS and a collection of 21 of their partners now own 13% of the company. The investment represents not some passive revenue deal but an active collaboration between the two companies, with the spokesperson saying they will be working closely together on things like product development, new features, improvements, and networking.

The deal comes about a year after Knuula integrated with QuickFee, a receivables management platform for professional service providers, which allowed users to have engagement letters directly connecting to their QuickFee billing platform, tying the execution of the letter directly to the billing process. 

“We’ve long sought to partner with a firm focused on strategic innovation in the accounting space,” said Jamie Peebles, founder of Knuula. “To develop a perfect solution for large firms, it is ideal to have a partner that is willing to work closely together and iterate quickly. This requires constant feedback between our two teams. The IT team from BMSS worked with our development team constantly and helped us iterate rapidly. We also had consistent input from partners, manager, and administrative staff to help us make valuable changes to Knuula. BMSS was a perfect partner for us.”

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