Internet Uses for Tax Practice

By William F. Yancey, Roxanne M. Spindle, and Dennis R. Schmidt

The Internet and the Worldwide Web (Web) have experienced tremendous growth over the last two years. During this time The CPA Journal has run several feature articles designed to keep readers informed of developments on the Internet affecting accounting practices in general. This article provides a brief update of Internet technology and an extensive discussion of the uses of the Internet for acquiring tax related information. Addresses or uniform resource locators (URLs) for tax law, Federal and state tax forms, and vendors of tax related materials on the Web are provided. The final section describes how practitioners can use home pages of other tax professionals to glean a variety of useful information on U.S. and foreign tax issues.

Internet Technology

The Internet is a collection of thousands of computer networks using a common set of communications protocols that can be read by many different computer operating systems. The Web is simply a subset of the Internet where users can find and view files located on distant computers using simple hypertext links.

The Internet protocols are frequently reduced to three- or four-letter acronyms that can overwhelm the casual user; therefore, a table of some of the most common protocols is included here with an example of how the protocol might play a role in a tax practice (see Exhibit 1). Newer versions of Web browsers, such as Netscape Navigator, and Microsoft Internet Explorer, allow users to access all of the Internet protocols with a few pull-down menus and hypertext links.

Internet Mail Exchange. Sending e-mail messages is the most common use of the Internet. Until recently, e-mail generally was limited to simple text messages. Binary files (including all formatting, tables, and graphics) could be transferred using file transfer protocol (FTP), but this could involve two or three extra steps. Life got simpler with the multipurpose Internet mail exchange (MIME) extension that allows complete binary files to be transferred quickly between users as simple attachments to e-mail. When a binary file is transferred through e-mail or FTP, the recipient can view the document with a word processor, spreadsheet, or other appropriate software application, and make modifications to the document. This makes the binary transfer much more useful than faxes or plain text e-mail that must be reformatted.

A few cautions are in order for using MIME. First, older e-mail software may not be able to manage the transmission and receipt of binary documents; upgrades may be required. Second, it is important to name documents with proper extensions so the recipient's machine can recognize the application with which it is associated. Furthermore, if the recipient does not have the same software as the sender, the recipient must at least have software capable of recognizing and converting the file.

How can a tax practitioner use MIME? Suppose a practitioner wants to send a spreadsheet or research memo, either to a client or back to the office for review (assuming the practitioner is working at the client's office). The material could be faxed as hard copy, or copied to a disc and delivered by messenger or express mail. However, if the sender and the recipient are both connected to the Internet, the document can be sent more quickly and cheaply using a MIME-compatible e-mail application on the Internet. Material can be edited and returned quickly using the same technique.

Intranets. Hypertext transfer protocol (HTTP) is the common protocol of the Web. HTTP is used to interpret hypertext markup language (HTML) documents that reside on servers connected to the Web. HTTP is also the basis for private Webs, known as intranets. Unlike the Web, intranets are designed to run behind software and hardware firewalls to protect sensitive information from hackers, competitors, and licensing violators. Network administrators can configure the software to prevent unauthorized employees from browsing some or all of the intranet. Selected documents from the intranet can be copied to a public Web site. Developers of major corporate groupware systems, such as Lotus Notes, have developed new versions that allow some integration of existing groupware with HTTP applications on an intranet or the Web.

A firm's intranet could be used to handle a wide variety of information management needs. Printing and distribution costs can be reduced when internal policies, tax research memos, billing systems, and client records are accessible with an intranet. Information previously photocopied and transferred through intra-office mail can be quickly disseminated to authorized individuals across the intranet. Installing an intranet costs between $100 and $500 dollars per personal computer. Intranets also require additional training for the system administrators and users. Over the next few years the costs of intranet implementation should decrease, while the benefits increase.

Tax Law and Forms on the Web

Many tax-related materials were added to the Web during the last two years, and this trend is expected to continue. Tax professionals now have access to a variety of Federal, state, and foreign tax resources. They can also engage in online discussions, subscribe to mailing lists, participate in professional associations, read current tax updates and topical articles, and contact vendors. Several important tax resources can be found on the Web. The URLs (addresses) for their web sites can be found in Exhibit 2.

Tax Directories. Although there is a wealth of tax information on the Web, finding it can be difficult given the Web's chaotic nature. This is when an organized directory comes in handy. Directories index Web resources by category, allowing users to view a list of related sites and link to those sites immediately. Directories help reduce search time significantly; they are also useful for monitoring additions to the Web and for building bookmarks of favorite sites. The tax directories listed in Exhibit 2 are comprehensive in their coverage and updated frequently, making them excellent starting points for locating tax resources on the Web.

Federal Tax. The IRS Home Page can be reached directly or from any of the directories listed. Here users can download forms, instructions, and publications and explore a variety of other materials. This site contains full-text versions of recently released tax regulations, and individuals can submit comments electronically regarding proposed regulations. The IRS site was very popular during the last filing season, experiencing more than 40 million hits from mid-January to mid-April.

Hypertext, searchable copies of the Internal Revenue Code, the complete U.S. Code, and the Code of Federal Regulations are available on the Web. They are based on the latest versions released by the Government Printing Office (GPO). Users of these resources should be aware, however, that they do not reflect statutory or regulatory changes made since the GPO release date, which could be more than two years ago. Fortunately, information regarding new laws and regulations can be found at the Thomas Legislative Information site and the GPO Access site.

Judicial sources also are available on the Web. Recent Supreme Court and appellate court decisions can be accessed using the Federal Court Locator site. Unfortunately, decisions of the Tax Court and older appellate court opinions are not yet available on the Web.

State and International Tax. In recent months, many state and foreign tax resources have been added to the Web. Readers are encouraged to check out the various state and international tax directories listed in Exhibit 2. It is now possible to access a storehouse of legislative, administrative, judicial, and governmental information related to state and foreign tax regimes. Much of this information is not readily available in practitioners' tax libraries, but it is now easily accessible on the Web.

Tax Forms. Another valuable tax resource on the Internet is the availability of downloadable tax forms, instructions, and publications. Most of these materials are in portable document format (PDF) and require a PDF reader to view and print them. This is not a problem because Adobe Systems, Inc. provides its Adobe Acrobat PDF Reader free to the public. This software is easy to download and install. Exhibit 2 lists several sites from which forms, instructions, and publications can be downloaded. Refer to the state tax directories for state forms.

Other Tax Resources. What other tax-related resources are available for free on the Web? Individuals interested in participating in an active discussion forum should check out the misc.taxes and misc.taxes.moderated newsgroups. They can also join any of 27 tax discussion groups and browse through archives of previous postings at the Tax Analysts' Discussion Groups site. The Web has also become an excellent medium for disseminating information regarding professional associations and policy groups. Commercial sites are also in abundance. Virtually all of the major tax publishers and software vendors have established a strong Web presence. Practitioners can browse through product, service, and pricing information and place orders on-line. Many individuals and firms are also using the Web as an outlet for tax-related articles, newsletters, and publications. Readers interested in tax academia can explore the Tax Education on the Web site. In addition to a comprehensive tax directory, Yancey's Home Page contains hundreds of links to accounting, law, finance, government, and related sites. Finally, readers are encouraged to use any of the excellent (and free!) Internet search engines as an aid in locating other Web resources.

Using Tax Practitioners' Home Pages

Numerous tax practitioners have put up pages on the Web. Some practitioners make do with simple text information listing specialities and contact numbers. Others fill their home pages with firm brochures, client newsletters, and links to other useful Web sites. While the primary purpose of these pages is to generate new clients, frequently other accountants can glean useful information from visits to these sites.

The most fascinating feature of the Web is its ability to reach almost instantaneously across long distances. This means tax professionals from a variety of countries are only a mouse click away on the Web. They offer a potential contact in a foreign country and frequently offer a wealth of free background information on a country's tax laws.

For instance, Costanzo & Veronese Associates, an Italian firm with a Web page, offers a primer on Italian tax law and a chart of due dates of various Italian tax forms. Hugo Schouten CPA, Adelaide, Australia provides a link to the Australian Tax Wizard that answers basic Australian tax questions through the Internet. Edward Ryan and Co., CAs in England, provide information on almost every aspect of English accounting and tax law.

Serving Clients on the Web

The U.S. components of the Big Six firms have dedicated a huge amount of resources to developing Web sites. These sites can also provide useful information to other accountants in search of tax information. The Deloitte & Touche LLP Library page allows visitors to view online (and print) the contents of 14 guides and references on business, taxes, and personal finance. Coopers & Lybrand also makes many of its tax publications available on line.

Perhaps the most ambitious set of free materials is the one assembled at Ernst and Young's World Tax site. This site contains an enormous amount of material related to international business, tax, and accounting developments. EY's introduction to the site states that "corporate executives worldwide can find the answers to many questions with the click of their computer mouse." The best part about this site is that it has a searchable index that accepts keywords.

Useful free information is also provided by smaller practitioners and most vendors. Links to their pages can be found in the major tax directories. Most of the major tax publishers provide tax tidbits and late-breaking tax news at their Web sites. In fact, even those who subscribe to services may find that updates come quicker via the Web than waiting for hard copies to arrive in the mail.

An innovative example of using the Web to serve clients and limit free riders is the Ernst & Young Ernie online consulting service. Ernie subscribers are given instructions on how to access a secure Web page where they can e-mail queries on any tax or business topic. A coordinator uses E&Y's intranet to forward the question to the appropriate E&Y specialist, who sends an e-mail response to the subscriber within two business days. The subscription fee is $6,000 per year and covers an unlimited number of queries from any employee of the subscriber's firm.

Keep Browsing

The Internet and the Worldwide Web provide many opportunities to receive and disseminate tax information. Tax practitioners, tax managers in industry, and anyone seeking tax information can benefit from a visit to any of the tax directories listed in Exhibit 2. Best of all is the fact that information is constantly changing and improving. If you cannot find something today, keep browsing. Someone may be preparing to upload tomorrow the very thing you were looking for today. *