Tax Resolution Hot Sheet™ #2: FY20 Data Book; Interest Calculations on BK SFRs; Priorities

In this issue:

  • Fiscal Year 2020 Data Finally Released… Data Time!
  • IRM Update on Interest Calculations on Manually Prepared Returns in BK Cases
  • Are you doing the right work?

Fiscal Year 2020 Data Book
Last week, the IRS finally released the FY20 Data Book. This is my most favorite IRS statistical release of the year, as it includes all the juicy Collections activity details for the year.

As was expected, the shutdown of Collection activity from April 1, 2020 through September 30, 2020 resulted in significant changes to Collection and Examination activities at the Service. The number I was most looking forward to seeing was the change in NFTL filings. All last year, I was guesstimating that we’d see around 250,000 NFTL filings for fiscal year. I wasn’t actually that far off, but the Service beat my prediction with 291,000 NFTs filed.

Other interesting tidbits:

  • Case inventory dropped like a rock, as expected, with only 8.4 million Collection cases in inventory by the end of the fiscal year. This is getting balanced out by the massive increase in enforcement action going on right now, though, so don’t assume that tax resolution is dead — far from it!
  • Levy action dropped by almost half compared to 2019.
  • Delinquent return investigations increased by over 26% — this clearly shows the importance of this activity to the Service (in case you didn’t know it already).
  • OIC acceptance dropped to 31%, with only 0.19% of all Collections cases being resolved via OIC. Not 19%… 0.19%. This is something I continuously stress to tax pros.

From the Exam side, Dan shares:

  • Examinations were cut almost in half compared to three years ago.
  • 80% of audits are still being conducted by correspondence.
  • 90% of all Examinations are against individuals — despite more than half of Collection cases being against businesses. Quite the imbalance in The Force.

Interest Calculations on Manual Returns
IRS released an update to internal procedures on June 14, 2021 under IRM 5.9.13 pertaining to Service preparation of tax returns while a taxpayer is in bankruptcy.

Letter 1714 is a notice sent to the taxpayer that requests unfiled returns. This IRM procedure dictates the procedures for IRS employees to follow when following up on this request for returns and return information. This can include updating taxpayer records with explanations about why filing wasn’t required, reaching out to the taxpayer or their bankruptcy attorney by phone in an attempt to secure returns, attending the bankruptcy meeting of creditors into to get eyeball to eyeball with the taxpayer and demand the returns, or to prepare 6020(b) SFRs.

See also  Tax Resolution Hot Sheet™ #5: IRS Levy Procedural Deviations for ACTC

In the case of SFRs being prepared, the IRS employee must manually calculate the interest assessment for each tax period in question. This IRM update provides information on which interest assessments will incur priority claims in the BK, and the steps to calculate interest attributable to tax versus to penalties.

While on the surface this might sound like a procedure you could care less about, these procedural updates occur as a result of something getting missed by somebody. In this case, the government has lost out on money in BK cases due to improper calculations on priority claims. From a practical perspective for you as a taxpayer representative, it’s a reminder to double-check the government’s math when it comes to penalty and interest assessments.

Are you doing the right work?
The one thing that’s been top of mind for me more than anything else the last two months has been prioritizing my work.

By this, I don’t mean lining up my daily tasks and doing them in priority. Nay, nay.

What I actually by this is questioning whether I should be doing certain things at all.

I think we all take on projects, side interests, client work, etc. that we just shouldn’t. Not all clients are created equal, and you need to focus YOUR time on the most profitable clients. Not all service offerings are created equal, and some just aren’t things most tax pros should be doing in-house (I’m looking at you, payroll). It’s worth taking the time to step back and critically analyze your service offerings, your clientele, and other uses of your time to determine what you should and should not be doing.

Personally, over the months of May and June, I took a chain saw to my life and shed project after project. I shut down entire websites, terminated long-running yet incomplete projects, eliminated some course offerings, eliminated some in-house marketing projects, and stepped away from some profitable activities that didn’t provide any direct benefit to Tax Resolution Academy® members.

Basically, it was a significant personal effort to realign my priorities where they should be, and give me the space to focus intently on ONE non-tax business activity that I’m most interested in — rather than being spread thin across multiple unrelated endeavors.

See also  Tax Resolution Hot Sheet™ #3: Filing Compliance for IAs; Examinations Beget Examinations; Follow Up Marketing

Some quotes for you to ponder on this theme:

  • “More effort is wasted doing things that don’t matter than is wasted doing things inefficiently. Elimination is the highest form of optimization.” -James Clear
  • “Choosing the priority is as important as working on it.” -James Clear
  • “Monomaniacal focus on a single goal is perhaps the ultimate success stratagem.” -Oliver Emberton

So think about it…
What projects, clients, and services can you eliminate from your business that shouldn’t be there?

To your success,
~Jassen Bowman

 

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