Conference on Professionalism in Tax Practice: building a better tax system

National Public Accountant, The, Jan, 1994 by Jeffrey Lear

This fall, the National Society of Public Accountants and other tax practitioner organizations, led by the American College of Tax Counsel, participated in an invitational conference on Professionalism in Tax Practice. Additionally, the Internal Revenue Service participated in a forum to increase awareness of problems faced by practitioners and the Service.

Participants discussed ways to reduce the adversarial nature of the current tax system in order to enhance the efficiency of the collection process. The challenge now is to act upon these comments to build a more efficient and effective tax system.

Organizers divided the meeting into three panels which led discussions on the following topics: Professional behavior in a tax system based on advocacy; the hidden tax--reducing undue costs in the tax system; and organizational support for professionalism.

The ultimate success of the meeting, however, cannot be measured by the ideas exchanged in a crowded room over the course of a few hours. The meeting must be evaluated in the months ahead based on the actions of practitioners and Service members throughout the country.

PANEL 1: PROFESSIONAL BEHAVIOR

The first panel opened many eyes in both the private and public sectors with a frank discussion of the problems each has with the other. IRS representatives presented their problems with practioner professionalism, which were rebutted by a practitioner, followed by a practitioner presentation of problems with the Service, rebutted by a Service member.

The Service complaints about practitioners focused primarily on disclosure. Service personnel perceive three harmful strategies on the part of some practitioners and taxpayers for disclosing information.

First is the "go fish" strategy, where the Service requests information and the taxpayer responds with the minimum amount necessary, forcing Service members to make repeated requests to find the information they need. Second is the "bury them with chaff so they can't find the wheat" response, which throws a lot of extraneous information in with the answer in an attempt to hide items that might be harmful to the taxpayer. Finally, some taxpayers choose just to hold information out hoping that the statute of limitations will run.

Service personnel noted that disclosure problems such as these lead to overly broad information requests that cause further problems for practitioners and taxpayers. They stressed that a more cooperative approach to timely disclosure of relevant information would enhance the efficiency of the tax system for all involved. The practitioner rebuttal focused on the ethical duty that practitioners owe their clients which makes total disclosure difficult.

Practitioners noted two primary problems at IRS: the lack of checks on inefficiency and the "tax shelter mentality" maintained by many Service professionals. Practitioners pointed out that Service personnel are not subject to disciplinary actions such as preparer penalties or Circular 230 punishments. Service personnel responded that evaluations and potential advancement provide the incentives that keep their personnel focused.

Practitioners then noted that many front-line Service personnel seem to believe that routine transactions are shams, bogging down examinations with lengthy questioning about transactions that arise from a clear business necessity and have a legitimate economic reason. This attitude contributes to protracted examinations that may cost more to administer than they raise in increased revenue.

PANEL II:REDUCING UNDUE COSTS

The second panel focused on reducing costs in the system by closer cooperation between practitioners and the Service. Service representatives presented a detailed discussion of the delegation of responsibility for settling issues within the IRS. Practitioners spoke of concerns over incessant changes made by Congress in the tax code that make taxpayer compliance more difficult.

One panel member from a large corporation described his company's relation with the large case division of the IRS. He described a close relationship with the Service and the benefits it has brought to the company. While few businesses will ever reach the size necessary to command this attention from the Service, his comments were relevant to all practitioners in pointing up the benefits of maintaining a good working relationship with local IRS personnel.

PANEL III: ORGANIZATIONAL SUPPORT

The final panel discussed the mechanisms by which practitioner groups and the Service police themselves on professionalism and on what can be done in the future to ensure better communication between the Service and practitioners on the day-to-day issues of professionalism.

The panel discussed the extensive ethics course in place at the IRS and made reference to some of the rules of conduct set forth by the various practitioner organizations. Panel members put forth five general principals for improving professionalism in tax practice:

1-Increased communication between practitioners and IRS.