M. Robinson & Company Practice Tips for New Tax Associates By Attorney Morris N. Robinson, CPA, LLM March 16, 2015

Transcription

1 We are tax law specialists with a focus on international and Massachusetts taxation. I have drafted this memorandum to help new tax associates understand what is expected of them. This memorandum covers tips on drafting effective tax documents; complying with tax ethics; and dealing with unanticipated tax issues. Disclaimer This document should not be construed as a comprehensive exposition of corporate policy. Rather, it is a series of practice tips to help orient legal associates who are new to our taxoriented law firm. 1. Focus on Practice Objectives/Exercise Common Sense Our job is to exercise our creativity to solve our client s tax objectives efficiently. So the first question an associate should ask when beginning any task is: What is the overall tax objective of our client and how does my work today advance our client s overall tax objective? There are often a spectrum of possible ways to achieve any particular tax objective such as, for example, resolving a domicile audit or drafting a private letter ruling. The key to success in our office is to focus on the objective. Wise associates rarely say to their supervisor, All I am trying to do is what you asked me to do. Wise associates make sure they understand the underlying objectives that their supervisor is trying to achieve. Then they exercise their creativity to achieve these objectives. Wise associates also exercise common sense. For example, If an associate does not fully understand the tax objectives underlying his work, he has an affirmative obligation to request clarification from a partner. This is simply applied common sense. If an associate s work seems incongruent with agreed-upon tax objectives, she has an affirmative obligation to request clarification from the partner before proceeding. This is also applied common sense. If necessary, face time with the partner can be scheduled for the end of the day when the meeting will not interfere with the office productivity for either the partner or the associate. 2. How to Draft Effective Letters: In General

2 Page 2 Tax associates typically draft many letters. In each case, the objective of the letter determines how it is drafted. Allow me to give two examples. (1) Transmittal Letters A transmittal letter describes what is being transmitted and what immediate actions the sender is looking for. Example: If a letter is transmitting a settlement agreement and a check to Massachusetts Department of Revenue the transmittal letter should (1) adequately identify the settlement agreement; (2) adequately identify the check; (3) identify who signed the settlement agreement; (4) identify that the signer had authority from the client to sign on behalf of the client; and (5) request a date-stamp a copy of the letter to indicate that the enclosed documents were received. There are perhaps hundreds of ways to word this transmittal letter and all are acceptable provided that the five overall objectives have been met. (2) Status Letters We typically use status letters when we are involved in complex tax audits or in complex tax litigation. Status letters provide a snapshot in time as we proceed to achieve our client s objectives. Status letters drafted with the following readers in mind: 1. The client. 2. Our staff. 3. Other practitioners such as cooperating law firms and/or CPA firms. 4. The client s malpractice attorney. 5. The Board of Bar Overseers. For our client, staff, and other practitioners, the status letter serves as an orientation, describing what we have accomplished and the next steps in the case as we see it. For the malpractice attorney and the Board of Bar Overseers, the status letter demonstrates that we are on top of the client s case and we are handling it is a professional manner. 3. How to Draft Effective Engagement Letters After an Engagement Control 1 is drafted, an associate may be asked to use the Engagement Control as a guide when drafting the related Engagement Letter. Although we do not charge for Engagement Letters, a great deal of time and thought goes into their preparation. The wise associate will understand the crucial difference between Engagement Controls and Engagement Letters. 1 Engagement Controls are described in subparagraph (1), immediately below.

3 Page 3 (1) Engagement Controls We make extensive use of Engagement Controls in every area of our tax practice. For details, see our web site. Engagement Controls list the steps we propose to take to achieve client s objectives. Engagement Controls are designed to orient and control the actions of a practice team that might include a partner, an associate, other members of our staff, the client, an outside CPA firm and/or an outside law firm. The objective of the Engagement Control is to think through the tax case so that each member of the practice team understands what he or she needs to do to work cooperatively together to fulfill the client s objectives. (2) Engagement letters Unlike Engagement controls, engagement letters are legal documents. The overall objectives of our Engagement Letters are: a) To describe the level of professional responsibility we have undertaken; b) To list work that we will NOT perform; 2 and c) To describe our right to be paid for the work we perform to satisfy our professional responsibility. Thus, Engagement Letters describe (1) the case background; (2) our overall objectives; (3) how we intend to achieve our objectives; and (4) how and when we will be paid. Engagement letters are always written with at least four readers in mind: 1. The client. 2. Our staff. 3. The firm s malpractice attorney. 4. The Board of Bar Overseers. (3) How Differing Objectives Result in Different Documents The differing objectives of Engagement Letters and Engagement Controls result in significantly different documents. a) The Engagement Letter presents a tax perspective from 20,000 feet. It reflects a broad overview of our tax work. The Engagement Letter, however, does not necessarily include the nitty gritty details involved in achieving the client s objectives. 2 In appropriate cases, for example, a firm of certified public accountants may undertake to prepare income tax returns. In our engagement letter, we will indicate that we will review these returns but will not prepare them.

4 Page 4 b) The Engagement Control presents the view from the ground, showing how the actions of each professional fits into the overall case objectives. Here inclusion of the nitty gritty details are appropriate and serves as an effective check list to make sure that all work is performed timely and nothing is overlooked. The wise associate will understand the crucial difference between Engagement Letters and Engagement Controls and will not simply copy and paste from an Engagement Control to create an Engagement Letter. 4. How to Organize Tax Memoranda Effectively It is sometimes difficult to organize tax memoranda so that they are easy to understand. The best organization is usually the simplest organization. So try to keep the organization of tax memoranda as simple as possible. 5. How to Deal With Unanticipated Tax Issues: When to Talk To Your Supervisor Sometimes, an unanticipated tax issue is quite interesting. Unlike a law school exam, however, our objective is not to explore every possible issue. Rather, we must understand, What is the economic value of this new tax issue to the client? The partner s job is to discuss the economic implications of this new legal issue with his/her client. Ultimately, our client decides whether or not to explore the issue. New associates are rarely equipped by their limited experience to answer questions involving legal economics. Also, they typically have not been authorized by our client to pursue the legal inquiry. Thus, if an unanticipated tax issue might consume more than a half hour of an associate s time, the associate should discuss the issue with a partner before the associate does the work. 6. Violations of Black Letter Tax Law Are Never Permitted We will never permit the intentional violation of black letter tax law by a client unless the matter is clearly de minimis. 3 We never consider the likelihood of discovery by IRS through an audit. 4 If a client insists we violate black letter law, our policy is immediately to sever our relationship with the client. Example: Giving the government (directly or through a foreign bank) more information that required by United States law is NOT a violation of black letter law directed to either our client or to the foreign bank. 5 3 In our office this means that the tax involved is perhaps $50 to $75 dollars and the cost of compliance is a multiple of that amount. 4 This is a clear violation of professional ethics that can cost the violator the privilege of practicing before the Internal Revenue Service. See United States Treasury Circular Of course, our client must decide to forgo privacy after consulting with us.

5 Page 5 7. How We Deal With Professional Disagreements In some cases, an associate and a partner may disagree in their legal or tax analysis. Such disagreements are important and welcome. 6 These disagreements should be discussed in advance of the conference with the client. 7 After the partner-associate discussion, however, the partner and the associate must speak with one voice when dealing with the client. 8 Our one-voice policy helps give the client peace of mind. It also reflects the likelihood that a partner with over 40 years of experience might have a more seasoned judgment than an associate with only a few years of experience. End of Document 6 This is one method whereby new associates become seasoned professionals. 7 These discussions consume a partner s time. Therefore, these discussions should be scheduled for the end of the day when they do not result in lost office productivity. 8 Clients should always be told the different ways of achieving a tax objective and the advantages and disadvantages of different approaches. Ultimately, the client must give his or her knowing consent to the approach chosen. Where appropriate, the factual background, legal analysis, and the client s decision can be memorialized in a contemporaneously-written confirmatory letter addressed to the client.