An Internet primer for tax professionals.

• Author: Black, Robert L.

How can surfing the Internet aid a tax practice? At the very least, Federal and state tax forms and instructions can be obtained from the Net, tax research can be performed using search engines, returns can be filed electronically and clients can receive and send electronic mail. However, none of this is possible unless the practitioner is technologically up to date. This article explains the tax practice uses of the Internet and the equipment needed to start surfing.

These days, most tax professionals have been exposed to the Internet (or "the Net"), even if only from the constant media coverage. The Net is useful not only because of the increasing tax information available through it, but also because of the opportunities it provides tax professionals for practice management and development and enhanced client relationships.

The Net has experienced phenomenal growth over the last few years. What started 27 years ago as a national network for communication between government agencies, defense contractors, scientists and educators has become an international network with more than 50 million users, and growing at the rate of about one million new users each month. Just as other emerging technologies have aided tax professionals over the last 20 years (e.g., microcomputers in the early 1980s, fax machines in the late 1980s and cellular phones in the early 1990s), the Net is potentially a very productive communication tool for the late 1990s.

Current tax applications and materials available through the Net are covered in this article. The following represent some of the major tools reviewed:

* Tax research materials and Internet connections to online tax services (e.g., direct access to LEXIS-NEXIS).

* Availability of Federal and state tax forms, instructions, publications, etc.

* Electronic filing via the Internet.

* Quick access to product reviews, software demos, pricing information and ordering ability from both tax- and practice-related vendors.

* Use of electronic mail (e-mail) and attached documents for electronic correspondence with clients and professionals outside the office.

* Application of long-distance telephone, videophone and teleconferencing technologies over the Net.

* Accessing Usenet newsgroups and mailing lists (listservs).

* Publishing a firm "home page" for practice development.

* Overview of intranet possibilities to facilitate intra-office communications.

This article is an introduction to the varied and powerful new tools for a tax practice available with Net technology. While hundreds of books have been written about the Net (generally without specific reference to tax materials), the following should stimulate practitioners' thinking about the possibilities of using Net technology in a tax practice.

Internet Terminology and Access Methods

The recent explosion in Internet use and applications can probably be traced to the development of the Mosaic "browser," the software that enables a user to navigate the Net. Mosaic was developed by a small group of programmers at the National Center for Supercomputing Applications (NCSA) at the University of Illinois at Urbana-Champaign. Mosaic distinguished itself by being a very user-friendly program providing, for the first time, a graphical-interface method to access the Net. Previously, Net users generally needed to be well-versed in terminal-style keyboard commands. The large numbers of Windows, Mac and UNIX users, coupled with Mosaic's cross-platform capability, caused its use to spread rapidly, in part due to the fact that its first and subsequent versions were provided free to users by simply accessing the Mosaic Internet site at NCSA.

Other similarly styled browsers soon hit the market; the most popular is Netscape Navigator, which has captured about 75% of the browser market.(1) Microsoft's browser, Internet Explorer, is now gaining in market share, although its current share is meager compared to Microsoft's usual market dominance.

Because of a common transmission protocol--Transmission Control Protocol/Internet Protocol (TCP/IP)--different computer networks, computers and operating systems (Windows, UNIX, etc.) can communicate with each other. A browser operating under TCP/IP enables the user to access any Internet site by a referencing method known as the site's Uniform Resource Locator (URL). A URL is an address to a specific Internet site. The Internet URL for the authors' Internet file server (i.e., a dedicated Internet host computer) at California State University (CSU) San Marcos is: http://www.csusm.edu/. This is the same style of address recently seen in all forms of advertising. That URL address, currently the most common style, is interpreted as follows:(2)

http:// = uses the "HyperText Transfer Protocol" service (vs. file transfer protocol (FTP), gopher, etc.) www. = refers to the "World Wide Web" (Web) system of hypertext Internet sites csusm. = the first part of the CSU San Marcos Web server address edu = the extension to "csusm" indicating that the server is located at an educational organization (vs. "com" for a business, "gov" for government, etc.)

"Hypertext" is becoming increasingly more common in electronic documents. Virtually every tax CD-ROM, for instance, uses hypertext links ("hyperlinks"); by mouse-clicking on a highlighted word(s), the user can move instantly to another location in the document. The hyperlink can also take the user to a completely different document (either at that site or another) in which, for example, the hypertext word(s) are defined or otherwise expanded.

Thus, in the case of the Web, hypertext is used to link not just to other documents on the current Web server, but also to other URL sites throughout the world. In other words, the hypertext word(s) contain an embedded URL reference that when clicked on can connect the user to the new URL site.

The popularity of the Web since its establishment in the early 1990s(3) has been stimulated by its use of the HyperText Text Markup Language (HTML) format. HTML is the most popular page design and hyperlink method for navigating the Net because it provides as common software format, regardless of the written language used.

Making a physical connection to the Net has become easier in the last year. Most computers(4) sold today contain a modem with speeds of either 14,400 or 28,800 bits per second (bps); the latter is the preferred speed because of its increased bandwidth (i.e., signal capacity). For computers without a modem, a 28,800-bps model can be purchased for about $150. Other alternatives include an Integrated Services Digital Network (ISDN) line, if available from the local phone company; with a $350 ISDN adapter/modem, the ISDN carries digital rather than analog signals at a four-times-faster rate of 115,200 bps (i.e., about 100 pages per minute or more).

These connection methods are slow in comparison to a direct connection to the Net through a dedicated file server in an office operating as an Internet host, which should be considered if cost-effective for the size of the practice. A leased line--for instance, a T1--connected to an Internet host can obtain much higher speeds--up to 1.5 mega bits per second (1,500,000 bps). Further, with the recent deregulation of the telecommunications industry, cable companies and other carriers (including satellite) will be entering the arena with significantly enhanced bandwidths.(5)

The next step is to select an Internet provider. All of the major online services (America Online, CompuServe, Microsoft Network and Prodigy) provide Internet gateways (connections) and e-mail. Moreover, numerous local and regional Net providers exist throughout the country. Even phone...