Expect IRS visits to your client - and you!
The year's last Los Angeles IRS Stakeholder meeting with the tax professionals was held yesterday.
I always look forward to these meetings (as you may have noticed). Aside from being interesting and informative, they are usually fun.
Can you imagine enjoying seeing folks from the IRS? You could, if you got involved in IRS community relations activities. As a member of your state or local tax society, consider volunteering to be your society's liaison to IRS and your state. Volunteer to help teach community courses that IRS offers. Attend your association's meeting when IRS staff are presenting. Go up and say hello - exchange business cards. Chat.
The more often you have an opportunity to interact with IRS officials, and get to know them...the less of a threat they seem to be. Funny, how they turn into real people you can actually get to like.
Visits from Collections
For instance, who is more scary than a the tax collector - the Revenue Officer (RA). That's the person who will be spending more time in the field this year, visiting your clients - to collect taxes. Yup. IRS is stepping up field collections, according to Steve Turner, Collection Territory Manager in the Los Angeles area. His field team will be serving three functions:
- To visit the delinquent taxpayers' homes and business to determine their financial situations.
- To collect unpaid taxes, by whatever legal means they have.
- To educate taxpayers, especially small businesses, about their payment obligations
These visits will be unannounced. So, if you have clients in arrears, especially those who owe $10,000 or more without being on an installment agreement or with an offer in compromise in process...warn your clients to expect sudden visitations.
Alert your clients:
- To be as polite as possible, but to firmly refuse to allow them access to their premises.
- Tell your clients to request a business card - and to tell the RO that their tax practitioner will be calling them.
- Do NOT engage in casual chit-chat or allow them to explore their business or home, to chat with staff.
- Have them alert their receptionists and front line staff to be polite - but not to provide answers or access - to call you or their boss.
While all of this sounds scary and threatening, meeting Steve Turner is exactly the opposite experience. He's smart, charming and understands that your client may have special circumstances that need to be considered. Knowing the boss of all those ROs visiting you has this attitude can make your interactions with collections official less daunting. Better yet, knowing the direct phone number of the Collection Territory Manager can be a powerful asset, when you find yourself in a confrontational situation with one of his agents.
Visits from Exam
Next, we got to hear from Tonya Mitchell, Examination Territory Manager. Unfortunately, I chose that moment to leave the conference room to make a pit stop - and missed the details about the Revenue Agents (RA's - field auditors) visting OUR offices. Like the Collections field visits, though, Exam will be visting preparers for two reasons.
- To educate about proper tax return preparation procedures.
- To seek out preparers who are consistently preparing incorrect or fraudulent returns.
If you have concerns, read more about the Return Preparer Program in the Internal Revenue Manual. These initial visits are strictly from IRS's exam division. They have not yet reached the level of Criminal Investigation and Abusive Preparers. But if you have concerns, you can certainly read about these IRS initiatives.
Exam is hiring more staff. Not as many as you might think - about 600-700 people nationwide. Unfortunately, they are not coming close to replacing those who are retiring or leaving the Service. Attrition is about 30% of exam staff.
QuickBooks - you've been reading about IRS having trained staff to audit using QB. Well, they are now about to add Peachtree. Apparently, these are the number 1 and 2 software tools being used by small businesses nationwide. IRS will still accept paper G/Ls and books, but would prefer to get discs or flash drives with the files.
When asked about the problem of giving IRS access to all the other years in the QB software, IRS promised not to go on fishing expeditions. Uh, does that make YOU feel secure? Not me! So, export the client's QB files. Archive all the older years, so the detail is no longer in the file. And delete all the activity in the years after the one being audited. There may be some software out there than can manage this easily.
If you or your clients want to see the audit process, there is a video you can watch at www.irsvideos.gov.
Are you familiar with the concept of 'name controls'? IRS uses a 4-digit set of letters with the taxpayer's name and/or TIN to identify the taxpayer in the file. Well, just as we were leaving, James C Counts, from the California Society of CPAs, gave us an update on the problem we will be having with e-filing business returns next year.
It seems, in the past, when business returns were filed, even efiled, IRS staff manually entered the correct name controls for the business returns. With the increased volume IRS is expecting, they won't be doing that next season. Expect efile rejection due to name mismatches.
To avoid that, you will need to determine the correct name control for each business. Beware, IRS name controls don't change when a business changes its name. It is based on the name of the business at the time they filed their SS-4, requesting their employer ID number. The best place to find the information is on page 2 of the SS-4 confirmation letter. If you do not have that, contact IRS (you will need a POA) or have your client contact the IRS BEFORE you transmit your efiled return.
There was more - there always is when Sharon Sanders puts on a meeting. There were lots of questions and suggestions for improvements in procedures (some feasible enough to implement soon). There were gripes about IRS's new CPE provider rules, wondering why OPR feels it needs to re-create the wheel, when there are already perfectly functional systems in place to copy or use.
And there were awards...the first time ever. Recognition of four members who have been providing outstanding service to educate and help the taxpayer community.
- James C Counts, CPA - who participates in 4 IRS stakeholder groups and actively finds productive ways to make our lives easier. For instance, he's working on a master database of all IRS phone directories. I am looking forward to that one!
- Harry Lin, CPA and David Chi, CPA, both active members of the Sino-American CPA Society. These two gentlemen actively provide information to the Chinese business community, including workshops, explanations and clarifications of US tax law. Also, most notably, when there was that terrible disaster in China several years ago, Harry and David stepped up and worked with the Chinese Embassy and IRS to instantly set up a non-profit organization to receive donations for aid.
- Eva Rosenberg, EA - your TaxMama. I was embarrassed and surprised to be included in such august company. But, it is true. When it comes to Enrolled Agents spreading the word about tax laws, changes and ethical tax practices, well, that's what I have been doing for over 10 years. And now, with 4 national columns: at Dow Jones - MarketWatch.com, Equifax, Suze Orman's MoneyMindedMoms.com, and here - I am reaching millions of people.
Eva Rosenberg, MBA, EA, is the publisher of TaxMama.com, and author of the weekly syndicated Ask TaxMama column. She provides answers to tax questions from taxpayers and tax professionals worldwide.