Components of Tax Practice

Tax practice is a rapidly growing field that provides substantial opportunities for tax specialists in public accounting, law, and industry. The tasks performed by a tax professional may range from the preparation of a simple Form 1040 for an individual to the conduct of the tax research and planning for highly complex business situations. Tax practice consists of the following activities:

Describe the components of a tax practice and understand the importance of computer applications in taxation

• Tax compliance and procedure (i.e., tax return preparation and representation of a client in administrative proceedings before the IRS)
• Tax research
• Tax planning and consulting
• Financial planning

Tax Compliance and Procedure
Preparation of tax returns is a significant component of tax practice. Tax practitioners often prepare federal, state, and local tax return preparation (i.e., compliance) function usually is performed by a company's internal tax department staff. In such a case, a CPA or other tax practitioner may assist the client with the tax research and planning aspects of their tax practice, and may even review their return before it is filed.

Typical Misconception

Many people believe that a tax practitioner should serve in the capacity of a neutral, unbiased expert. They tend to forget that tax practitioners are being paid to represent their clients' interests. A tax practitioner may sometimes recommend a position that is defensible, but where the weight of authority is on the side of the IRS.

An important part of tax practice consists of assisting the client if an administrative appeal is contemplated with the IRS's  Appellate Division. In most instances, an attorney is retained if litigation is being considered.

Tax Research
Tax research is the search of the best possible defensibly correct solution to a problem involving either a completed transaction (e.g, a sale of property) or a proposed transaction (e.g. , a proposed merger of two corporations). Research involves each of the following steps:

• Determine the facts.
• Identify the issue(s).
• Identify and analyze the tax law sources (i.e., code provision, Treasury Regulations, administrative rulings, and court cases).
• Evaluate nontax (e.g, business) implications.
• Solve the problem.
• Communicate the findings to the client.

Tax research may be conducted in connection with tax return preparation, tax planning, or procedural activities.