Tax Practice Review - the real benefit.
For the past several years, the controversy in tax peer review has centered on the concept of "voluntary" TPR (see "Point/Counterpoint: Voluntary Tax Practice Review," The Tax Adviser,Jan. 1995, p. 3). This article will not repeat the pros and cons of a voluntary TPR program, but will describe the rewards to be gained from the review process.
The AICPA Tax Division has, for several years, offered a series of checklists designed to assist in the thorough completion of tax compliance projects. It is easy to be misled into thinking that a TPR is simply a documentation program to review checklist compliance. Quality control is obviously an integral part of the program, but increased client satisfaction with the practitioner is the true benefit.
The TPR process involves a review of policies and procedures, and discussions with all levels of personnel of the reviewed firm in the following areas:
* Practice management/quality control: Review of the system used to deliver service, including personnel, supervision and professional development.
* Administration Measurement of the firm's compliance with internal and external professional standards. A tax practice must adhere to its stated policies on practice and procedures and the implementation of those policies.
* Technical review: Review of live client files to ensure that practice management/quality control measures are in fact being applied to actual client engagements. Reviewed issues include client expectations, technical accuracy, fee documentation and client communication.
A friendly, collegial atmosphere in a firm with multiple locations enhances its ability to candidly share TPR results. These results provide the basis for improvement programs for any practice. Be aware, though, that the results of a TPR can be overwhelmingly focused on internal matters. It should be the objective of the "reviewed" tax practice to enhance the comments and suggestions made by taking action on internal issues that will increase the firm's client satisfaction. The stated objectives of a TPR should include clients" overall satisfaction; client satisfaction with products and services provided (and the related objective of improved technical quality); and the firm's ability to monitor compliance with internal and external professional standards (e.g., the AICPA Statements on Responsibilities in fax Practice or IRS Circular 230).
The benefits to be derived from a TPR (internal or external) based on the implementation of the review team's findings include:
* Lower cost of services.
* Improved technical research and documentation.
* Standardization of tax practice and procedures.
* Measurement techniques for monitoring tax initiatives, such as functional specialization or concurring review policies.
* Fewer errors.
* Increased ability to defend tax positions.
* Enhanced internal standards in the areas of client acceptance, billing and collecting.
* In a mature industry such as public accounting, a tax practice must take every opportunity to explore methods for improvement. The (partial) list of actual "best practices" (taken from McGladrey & Pullen's internal pilot TPR program in Summer 1996) on page 588 offers ways to save administrative dollars while providing the best possible service to clients.
Many firms may view these procedures as merely generic ideas, and see themselves in full control, thereby dismissing the notion of initiating a TPR. In reality (based on McGladrey's experience), such a program will help all firms improve internal operations and expand their tax practice and client service. This, in turn, will lead to increased client satisfaction and profits for a growing tax practice.
RELATED ARTICLE: Best Practices
* Standard file documentation and organization with these features:
a. A bar-code on files as a tracking tool.
b. Separate sections within a file to allow simpler record retention.
c. Permanent tax files.
d. Well-organized and maintained computer files.
* Standard individual file as a tool for training.
* Standardized forms (by industry) for collecting information prepared by the client.
* Electronic tax bulletin board to capture memos, research data, standard tax workpapers and standard prepared-by-client listings.
* Tax personnel scheduling issues, including scheduling systems for compliance projects.
* Concurring review requirements for specialized areas.
* Development of industry or tax specialty, as highlighted by review of client files.
RELATED ARTICLE: Abbreviations Commonly Used in The Tax Adviser
TTA The Tax Adviser aff'g affirming AFTR2d American Federal Tax Reports, second series (Research Institute of America) Ann. IRS Announcement CB Cumulative Bulletin Cir. Court of Appeals Cl. Ct. Claims Court COBRA Consolidated Omnibus Budget Reconciliation Act of 1985 Cong. Rec. Congressional Record Ct. Fed. Cls. Court of Federal Claims DC District Court DRA Deficit Reduction Act of 1984 ERISA Employee Retirement Income Security Act of 1974 ERTA Economic Recovery Tax Act of 1981 Fed. Reg. Federal Register F2d Federal Reports, second series F3d Federal Reports, third series F Supp Federal Supplement GCM General Counsel Memorandum HIPAA Health Insurance Portability and Accountability Act of 1996 H. Rep. House Ways an Means Committee Reports IR Internal Revenue News Release IRB Internal Revenue Bulletin P.L. Public Law Regs. Sec. Treasury Regulation Rev. Proc. Revenue Procedure Rev. Rul. Revenue Ruling rev'g reversing RRA Revenue Reconciliation Act of 1993 SBJPA Small Business Job Protection Act of 1996 Sec. Section (refers to the Internal Revenue Code of 1986 unless otherwise indicated) S. Rep Senate Finance Committee Report SSRA Subchapter S Revision Act of 1982 Sup. Ct. Supreme Court TAM Technical Advice Memorandum TAMRA Technical and Miscellaneous Revenue Act of 1988 TC Tax Court (regular decision) TC Memo Tax Court (memorandum decision) TD Treasury Decision TEFRA Tax Equity and Fiscal Responsibility Act of 1982 TRA Tax Reform Act of 1986 USTC United States Tax Cases (Commerce Clearing House)
FROM JAY ZACK, CPA,TAX PARTNER AND DIRECTOR OF TAX SERVICES FOR THE TWIN CITIES PRACTICE, MCGLADREY & POLLEN, LLP, MINNEAPOLIS, MINN.
Editor's note: Mr. Pascarella chairs the AICPA Tax Division Tax Practice Management Committee. Mr. Zack is a member of the committee.
If you would like additional information about this article, contact Mr. Pascarella at (401) 331-8806 or Mr. Zack at (612) 376-9.379.
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|Author:||Pascarella, Stephen E., II|
|Publication:||The Tax Adviser|
|Date:||Sep 1, 1997|
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