Practical highlights of recent tax research.

• Author: Bolt-Lee, Cynthia E.

Perhaps more than ever, recent years demonstrate the increasing importance of taxation for both businesses and individuals. This article distills research published in tax and accounting journals of interest to tax practitioners. The first study presents evidence on the importance of training for tax professionals in dealing with contentious client interactions. The next three studies provide insights on taxpayer responses to tax incentives and government efforts to increase tax compliance and awareness. A final study examines how companies adjust their tax planning decisions in response to those of their competitors. Collectively, these studies have been published in The Journal of the American Taxation Association, National Tax Journal, and Journal of Accounting and Economics.

Examining contentious interactions between clients and tax professionals

A recent study in The Journal of the American Taxation Association examines the relationship between tax professionals and their clients when a disagreement occurs due to a controversial tax position. (1) In contrast to the frequently researched subject of auditor-client relationships, tax professional-client interactions are seldom examined. Phase one of the two-phase study surveyed public accounting professionals to gather information about the types of contentious client situations that occur, the persuasion tactics used, and the relationship status between tax professional and client after resolution of the issue. Based on information gathered in phase one, the authors created a second survey to analyze details about the nature of contentious interactions, persuasion tactics used, negotiation training received, and recommendations from survey respondents.

Authors Donna Bobek, Derek Dalton, Amy Hageman, and Robin Radtke sent 5, 200 emails to a list of South Carolina CPAs for phase one and 4,260 emails from the same list for the follow-up survey. The 140 respondents averaged over 25 years of experience, with the majority serving as partner or equivalent, and were employed by a variety of firm types and sizes.

Survey results show that the most challenging interactions occurred when a client demanded an overly aggressive position to reduce taxes. Professionals with less experience, and concerned about client retention, felt the most pressure. While most respondents indicated the need for training in the areas of negotiation, persuasion, and interpersonal skills, only 10% of professionals in the study had such a program in their firm.

The authors of the research, titled "An Experiential Investigation of Tax Professionals' Contentious Interactions With Clients," conclude with several recommendations. Firms need to develop formal training and mentoring relationships. Professionals should be clear in their communications with clients and should maintain detailed documentation of contentious conversations. The survey revealed that the most effective tactic to persuade a contentious client is to express concerns over penalty exposure. The authors suggest that less-experienced professionals should seek advice from those with more experience. Finally, the study showed the value of remaining objective and composed throughout all client interactions.

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