Learning tax with flowcharts.

• Author: Cereola, Sandra J.

THE FLOWCHART IS A VISUAL REPRESENTAtion of a document flow, process, or logical pattern of thought. Because flowcharts are useful in communicating information, tax textbook authors sometimes create illustrations with flowcharts. Authors may depict the series of steps in the enactment of a tax bill or the logic in determining a particular tax treatment, such as the value of a casualty loss or vacation rental deduction, through a flowchart exhibit.

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Flowcharts are useful in many different settings, including classrooms and accounting practices. Flowcharting activities in a tax class not only help students understand the course material but also prepare them for their professional lives. Tax advisers use flowcharts to explain rules to their clients when appropriate. Auditors and other systems analysts use them to illustrate and document the processing of information through a system and may pinpoint ways to improve business practices.

The IRS publishes flowcharts to help taxpayers understand complex tax rules. These charts can help bridge the technical gap between tax professionals and their clients, particularly with complex tax rules that may be difficult to follow in the narrative form. (See, e.g., IRS Publication 936, Home Mortgage Interest Deduction (2009). Flowcharts presented in the first few pages can help taxpayers determine whether their home mortgage interest expenses or financing points are deductible.)

Accountants preparing flowcharts to document the sequence of transactions through a system may uncover unnecessary steps in the processing of the transactions, duplication of processes, or lapses in internal control. In "Flowcharts See a Revival as Auditing Tool" (Compliance Week (August 22, 2006)), Christine Dunn reported a revival in the use of flowcharting as a vital tool for accountants in the study and documentation of internal control processes when complying with the Sarbanes-Oxley legislation.

Flowcharting is a skill with many applications in the business environment. The benefits that students derive by creating electronic flowcharts can be gained with little to no cost other than the instructor's start-up time; most programs already have the software available in their spreadsheet applications. This column provides instructors with step-by-step instructions to minimize their start-up time when assigning flowchart construction.

Flowcharts in the Classroom

The use of flowcharting in the classroom helps students learn using multiple senses. Simply put, students who are strong auditory learners appreciate the traditional classroom lecture. On the other hand, illustrations--such as charts, graphs, and diagrams--enhance the...