Tax Practitioner Intelligence #2

TPI #2 — The Client’s Label Is Not the Tax Answer

A Five-Question Practitioner Test for fact discipline before tax conclusions.

Clients describe situations in ordinary language. Practitioners have to convert those descriptions into tax facts before applying tax law.

The five-question practitioner test

  1. What exactly happened? Strip away the label and reconstruct the transaction, event, ownership, timing, payment flow, and documentation.
  2. Who are the actual parties? Identify the taxpayer, entity, owner, employee, trust, beneficiary, payor, and recipient before applying a rule.
  3. What is verified, and what is still assumed? Separate documents and records from client representations and practitioner inference.
  4. What tax rule attaches to those facts? Facts first. Rule second. Conclusion third.
  5. What changes if one material fact is different? Identify the hinge facts that would actually change the conclusion.

Practical takeaway: Before answering the tax question, make sure you have first answered the fact question.