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

In this issue:

  • Procedural update on filing compliance for Installment Agreements
  • Employment tax exams initiated from income tax audits
  • Are you sending Thank You notes?

Filing Compliance for Campus Installment Agreements
An update has been made to IRM 5.19.1.4.4.1 effective July 1, 2021 to allow Campus Collection to grant payment plans to taxpayers whose account records show filing delinquency for 2019 and 2020. Since the IRS is still woefully behind on processing paper filed returns for 2019, not to mention 2020, their have been issues with taxpayers that have filed to get an IA established to resolve prior tax periods.

This IRM change addresses this issue, and finally gives you an option to help clients that are stuck in this situation. As you should already be aware, the IRS employee handling a Collection case is required to do a compliance check to make sure the taxpayer has filed all required returns before they authorize an Installment Agreement for that taxpayer. If their 2019 or 2020 return is sitting in a mail tub somewhere, not yet opened, then the taxpayer has met their filing obligation and should be able to get their IA.

This IRM update is in effect through the end of the current fiscal year (Sep. 30, 2021). Telephone assistors can set up the IA even if the return does not show up on IRS computer systems — but again, only for 2019 and 2020 returns. In addition, if you have a client that filed a 2020 return that has not been processed, ask the IRS employee to include the 2020 liability in the payment plan right now as you set it up. You’ll need a copy of the client’s 2020 return in hand, to read off the balance due, but it can help reduce penalties and interest a little bit and definitely saves a lot of time.

This procedural deviation applies to both IMF and BMF liabilities; AKA, both individual and business tax debts.

To learn more about Installment Agreement procedures, including the purpose of demonstrating that your client is current and compliant and how that benefits your client, see our 2-hour CPE class, CTR-132: Individual Installment Agreements, available exclusively to Academy members.

Examination Begets Examination
IRS Policy Statements are an under-explored portion of the already under-explored Internal Revenue Manual (IRM). Studying the IRM is, in my experience, the key to being a better taxpayer representative, and I’ve recently become fascinated with exploring policy statements.

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

Yes, I’m a tax nerd, through and through.

Today, let’s hop into our Tax Time Machine™ and leap back to January 5, 1979, to the enactment of Policy Statement 4-4. This 42-year old IRS policy, still in effect today, states that when an individual is selected for an examination of their personal income tax returns, it may also open the door to examination of their employment tax returns if that individual owns a business. It’s not automatic, by any means, but it provides Revenue Agents with wide discretion in opening additional audits against the taxpayer.

In particular, it states, “Every examination to include check for filing of other Federal tax or information returns.” Think about that. Your client is being audited for, say, their 2019 income tax return. But, because they own a small business, they also run the heightened risk of further IRS probes into their business returns for all of 2019 — all four 941’s, the 940, the 1120S, the W-2s, the W-3, the 1099’s. All of it. The Revenue Agent will conduct a compliance check, of course, to see if there are any returns missing. But on top of that, PS 4-4 instructs the RA to consider conducting a parallel examination of the payroll tax returns and information returns for the same tax year as the income tax audit.

In many ways, this does make sense. It’s a “dummy check” to make sure the taxpayer reported all income on their personal tax return as they claimed as a business expense on their 1120S, for example. But opening the entire 941 series to audit could create a whole new set of problems for the taxpayer, if there are any issues. At the very least, it increases the cost of representation to the taxpayer.

This creates both a practical reason and a marketing reason for you to communicate to your clients that they should be utilizing your services for ALL their needs, not just business OR personal. By having everything pass through your office, there is a reduced chance for something to be missed across the two sides of their tax lives. It makes any potential representation far simpler, too, as it avoids having to chase down information from another accountant if you’re doing the audit representation. This also just makes your practice run smoother and more profitably, as well. It truly is win-win-win for the client, the IRS, and you.

See also  Tax Resolution Hot Sheet™ #6: Tax Pro Account, Data Security and Sharpening the Saw

When was the last time you sent a Thank You note?
This seems to have become a lost courtesy.

As a kid, my mother would always insist that I send a handwritten thank you note to people that had sent me gifts. In my early sales jobs, I would always send one of those small business “Thank You” cards via snail mail to prospects that had taken the time to meet with me, whether they purchased anything or not. In my tax practice, I would always at least send an email to thank people for meeting with me, along with suggestions for follow-on actions.

In recent months, I’ve noticed that most of the Zoom meetings I’ve taken result in zero follow up communication. None. Zip. Zilch. It’s kind of off-putting, to be honest.

This morning, I just happened to have been reading the results of a fascinating marketing test, conducted on behalf of Wayfair Canada. The test involved sending follow up messages to people that had put things into their online shopping cart, but then didn’t complete the purchase transaction on the Wayfair website. Half those folks were sent just an email, and half those shoppers were sent both the email AND a follow-up postcard via snail mail.

Davinder Singh, Head of Marketing for Wayfair Canada, said, “The direct mail retargeting response rate was about double the digital-only retargeting response rate.”

Wow! I sure didn’t expect it to be that high. It’s a clear reminder to me that I need to send out some snail mail follow ups this afternoon!

What about you? How are you following up with prospects that met with you for a consultation, but didn’t retain your services? Are you, at the very least, sending off thank you emails? What about a nice little handwritten thank you card? Go big and send them a copy of your book and an actual letter?

People appreciate these small touches, and it translates directly into bottom line profits in your business. In marketing, the money really is in the follow up. Even I need the occasional reminder about that, so I’m willing to bet you did, too.

You can get more prospect follow up ideas and see actual marketing pieces for doing so with a Champions or Titans level membership to the Tax Resolution Academy®. Learn more about membership at:

https://community.taxresolutionacademy.com/

To your success,
~Jassen Bowman