Research Skills: Critical for Tax Practitioners

by C. Andrew Lafond Jr., CPA, DBA
Pursuit, December 2006

Tax research, the process of finding answers to tax questions, is a fundamental skill for tax practitioners. However, as tax law continues to grow in volume and complexity, research has become more challenging. No one can stay abreast of all laws in a given area. However, tax practitioners should be able to investigate and interpret the appropriate law in order to resolve an issue.

Most tax practitioners need to improve some aspect of their tax research skills. For older practitioners, the use of an electronic tax service is a common area of need. New practitioners typically require a better understanding of the three primary sources of law and need to enhance their ability to evaluate and select the proper authority.

Good tax research skills are important to the profession. A large percentage of tax returns are filed over a four-month period January - April, so there is a need to resolve emerging tax questions quickly. Many of these questions can be answered by referencing guides such as the CCH U.S. Master Tax Guide or the RIA Federal Tax Handbook. Other issues are not as cut and dried and require more careful interpretation of the law and the expertise of higher authority. During the tax season time crunch, practitioners must be able to rapidly and efficiently locate the proper authorities to answer tax questions. Training will greatly improve a practitioner's skill in this area.

Conducting tax research requires the following steps:
• Gather and establish facts
• Identify the issues
• Locate the proper primary authority
• Weigh and evaluate the authority
• Develop conclusions
• Communicate the results of the research

The first two steps are iterative processes that become easier with experience. As facts are discovered or established, issues evolve, and there is a subsequent need to gather more facts. Establishing the facts thoroughly and identifying salient issues are skills that improve with experience and knowledge of tax law.

Locating the proper authority involves the effective use of an electronic or paper tax service. Most firms use electronic services. Effectively harnessing the software's capability can improve the tax researcher's efficiency. The ability to research databases (both primary and secondary authorities) through key word, site, content, or index searches is extremely important since considerable time is wasted when search queries are not structured properly.

Once primary sources are located, they must be evaluated. Evaluating competing primary sources of authority however, is a skill that comes with both training and experience. As the proper authority is located and evaluated, the practitioner must develop a conclusion, or offer a set of alternatives to resolve the tax issue. Communicating conclusions or alternatives is an essential part of the tax research process.

Finally, the practitioner should document research findings, conclusions, and recommendations in the work papers, usually in the form of
a memo to the file and in a formal letter to the client.

Effective tax research training focuses on three objectives: gaining an understanding of the three primary authorities and the law issued by each authority; improving competence in using an electronic tax research service; and honing skills in the selection of the proper authority. For seasoned tax practitioners, training in the use of tax research software may be all that is needed. Less experienced practitioners may benefit from training in the role of legislative history as well as how to navigate through the Internal Revenue Code. Newer practitioners also need to be well-grounded in various Treasury Department and IRS pronouncements and understand the differences between trial-level, appellate, and Supreme Court decisions within the federal and state judicial systems. They should also gain experience in recognizing reliable sources of primary authority.

Tax research is a critical skill for all tax practitioners. Finding answers to tax questions with substantial authority is necessary to retain and satisfy clients, minimize potential penalties, and maximize firm profitability on tax research projects. Ultimately, effective training can reduce frustration, increase confidence, and make the tax practitioner more effective and efficient.