Jan. 2009 Review of Tax Research Systems

From the January 2009 Issue

If the old saying, “Only two things in life are certain: Death and Taxes,” is true, then equally so is the comment that at least one of these is easier to understand, while the other is in a constant state of flux. In the world of tax law, change has become the status quo, with major legislation coming virtually every year. Unfortunately, it is your responsibility as a tax professional to keep up with these myriad changes so that you can most effectively service your clients. Try as you may, you do not, and cannot, know everything.

Add to this the often subjective nature of tax law. While claiming it as an art form may be a stretch, there is often need for analysis by those with an ear to the thoughts of the taxation entities charged with enforcing them. In my opinion, the lack of objective, specific understanding of new legislation is the result of poorly and sometimes intentionally confusing language used by the drafters whose bills are often further muddied in committee processes that can strip out or water down the original intent and meaning. What comes out of these legislative committees is then added to the already befuddling mountain (or is it a vast abyss?) that is the Internal Revenue Code, the Treasury’s Regulations and other primary source materials.

To be certain, one of the byproducts of the confusing U.S. Tax Code is that there is a tax profession. Don’t get me wrong; I’m no supporter of a flat tax. But were our tax laws simple, there would be much less demand for the services of tax and accounting professionals. And while this may be something to be thankful for (after all, tax prep is still the major revenue stream in most small and mid-sized practices), the constant change often becomes a significant challenge to many professionals.

Fortunately, several information sources are available for professionals needing in-depth understanding of tax law. Of course, the vendors who offer these information sources also owe their existence to the complexities of our tax system. But their services are often invaluable, especially to practices with more complex client bases. Only a few years ago, these companies were mostly publishers of print materials, dutifully helping tax and accounting firms fill themselves with libraries of texts.

As these research providers have adopted web-based delivery methods for their materials, many have also added various practice tools, calculators, integration with tax prep programs and other features. Their core value is in two areas: primary source documents and analysis. The first gives users instant access to the code and statutes for various taxing entities across federal, state and even international levels, in addition to court rulings and other government-produced materials. The analysis gets to the crux of what the code and statutes mean in practice, with guidance and opinion from legal and accounting experts.

My father once told me that one of the best measures of intelligence is knowing how to find the answers to what you don’t know. With regard to the appropriate application of tax law, the key to this is having access to the research systems likely to provide you with clarification or guidance for tax treatments for the potential issues your clients are likely to face. You may not know what these issues are, but you can prepare for the unknown. And that’s the point. You don’t need to know everything; you just have to know how to learn it if and when the need arises.

The products in this review of tax research systems were reviewed based on the following characteristics: