Contentious clients and taxes: Best practices for persuading a difficult client

Many people dislike paying taxes, but it really becomes a problem for accounting firms when a client disputes the professional's advice and is wrong about a correct tax treatment. Tax professionals can end up having very contentious interactions with clients who disagree with them. Many tax professionals are not trained in how best to deal with these interactions, which compounds the problem.

Professor Amy Hageman (Kansas State University) and her colleagues, Donna Bobek, Derek Dalton, and Robin Radtke, carried out a research project published in The Journal of the American Taxation Association that explored tax professional-client interactions and the tactics tax professionals use to persuade their clients. They addressed two important research questions. First, they examined what types of persuasive tactics are most common and effective in a tax context. Second, they provided descriptive evidence about specific contentious issues that arise between tax professionals and clients. They then explored ways public accounting firms can help tax professionals be successful in handling contentious interactions.

The research study employed an experiential questionnaire (EQ) to glean rich, descriptive data about actual interactions experienced by tax professionals. 89 tax professionals from public accounting firms responded to the EQ and provided detailed information about specific contentious issues, including particulars about the tax issue involved, persuasion tactics used, and the current status of the relationship between the client and the tax professional. Further, based on the results from the EQ, a follow-up survey was developed. 140 tax professionals responded to the follow-up survey and provided additional insight regarding contentious client interactions.

The EQ results provide a number of insights. First, the results suggest tax professionals are often in the position of having to persuade clients because the client is clearly wrong about the proper tax treatment of an item. Thus, the persuasive arguments most commonly used by tax professionals focus on possible IRS actions and legal arguments. Results also indicate tax professionals are often able to convince the client that the professional's initial position is correct; however, doing so is quite stressful. Additionally, it is not uncommon for contentious issues to lead to the termination of the professional-client relationship.

Results from the follow-up survey also reveal a number of implications for both tax professionals and public accounting firms. For example, it was found that most tax professionals in the study did not receive any formal training in negotiation strategies; however, the vast majority of tax professionals agreed that such training is needed. This result indicates a disconnect in training expectations (i.e., the lack of training offered in practice versus the training tax professionals indicate is needed). Results also indicate tax professionals believed more-experienced tax professionals (e.g., senior managers and partners) should be included during contentious client interactions involving less-experienced tax professionals (e.g., senior associates or inexperienced managers).

Additionally, tax professionals reported both firm-wide training regarding tax negotiations and partner involvement during contentious client interactions would help reduce the high levels of stress in those situations. Further, the experienced tax professionals (e.g., partners and senior managers) who responded to the survey provided a diverse set of recommendations for less-experienced tax professionals (e.g., clearly communicate the potential risks, document as much detail as possible, remain objective and composed, help the client search for more reasonable tax-saving strategies, etc.).

This study makes several contributions. First, it provides an in-depth examination of actual contentious interactions experienced between tax professionals and their clients. Whereas prior research has examined contentious interactions from an auditing perspective, this is one of the first studies to shed light on these contentious issues from a tax standpoint.

The study's findings have implications for researchers, educators, and public accounting firms alike. For example, one important finding is that tax professionals are often faced with the task of convincing clients that the clients' positions are wrong or unrealistic. This is a difficult task and the results of the follow-up survey suggest firms may not have sufficient resources in place to aid professionals in dealing with these situations. Second, several practical suggestions for public accounting firms are proposed, including the need for additional training and the importance of mentoring in dealing with difficult situations. Further, based on the follow-up study, experienced tax professionals can offer guidance, reassurance, and support to less-experienced professionals in dealing with difficult client interactions.