Yes, IRS Activity is Picking Up
I hope that everyone reading this article has had a Merry Christmas (or other enjoyable holiday) and a Happy New Year! As we embark upon another tax season as small business owners (as well as a new year of recordkeeping), I just wanted to provide all of my readers with an update on the IRS activity that I am seeing. The goal is not to cause alarm for anyone. I simply aim to provide another incentive for small business owners to keep the best set of books and business records that they can and to try to file their returns as accurately as possible. Additionally, I wanted to provide a few words of guidance in the event that you receive a notice.
The IRS Is Answering the Phone
One of the positive improvements I’ve seen so far, in just the first couple of weeks of the new year, is that the IRS is answering the phone. This cannot be taken for granted. If any of you have tried calling the IRS general individual or business contact numbers in 2022, you may have discovered that it required a significant hold time, or even worse, that call volume was so extensive that you could not even be placed in the hold queue! Practitioners like myself have a special phone number that we can call which tends to fare better than the general phone lines. However, I do sometimes try the general numbers on the taxpayer notices and see if I can get through those queues before I resort to the special practitioner number (to avoid additional call routing). My hold time just a couple of days ago was only 20 minutes in the general business queue, which is a massive improvement over the hours-long hold times I had in the practitioner queue in 2022. I read an article recently that many of the new customer service agents hired and trained in the previous year have begun providing phone support. This is a welcome improvement.
More Notices Are Going Out
With the challenges that the IRS faced during the Covid-19 pandemic largely resolved, the additional hires at the IRS, tax form updates that make failed compliance easier to spot, and the substantial funding supplement that the IRS received for enforcement in the Inflation Reduction Act, the barrage of notices for previous tax years has begun. From what I’ve been seeing, these notices commonly include (but are not limited to): 1) collections notices for taxpayers who filed but did not pay, 2) requests for unfiled returns, 3) payroll compliance notices, 4) penalty assessments for failure to comply with various information return reporting requirements, and 5) proposed assessments for “matching issues” where the taxpayer did not report information on their filed return that the IRS has record of through W-2, 1099, and other reported information. Most of the notices I am seeing are from new clients contacting me for returns that I did not prepare, but occasionally my tax preparation clients receive notices as well. As a reminder, please fill out your tax organizer documents as completely as possible and provide all Forms W-2, Forms 1099, and all other tax documents before finalizing your return. I definitely appreciate my clients that get started and file early in the year, and if that happens because the client is really on top of it, that is great! But there is no need to rush and submit a return before you are completely sure that you have included all key elements of the return, such as all items of income, deductions, and other relevant tax information. As the taxpayer, you are the last line of defense as to your submitted return. Always review it carefully before signing your consent to e-file.
Check Your Mail Often
Because email, cell phones, and electronic banking have become so prominent in recent years, many of us do not check our mail as frequently as we should. However, the IRS and state departments of revenue provide notifications to taxpayers via mail. Many of the notices require a response or action within 30 days, before further action (such as an assessment) occurs. I have had so many prospective clients contact me about an “emergency” notice that they received that is dated over a month, or even two months ago, where the options to handle the case have already changed drastically once they have contacted me. The earlier the prospective client contacts me, the more likely I will be able to assist that client in reaching a resolution that they will be happy with (or at least minimize their burden), and the more likely I will be able to fit the engagement into my queue of work. Over the past year, it has pained me that I could not take on some of the prospective clients who really needed help, because I could not fit a same day or next day response into my schedule for a matter with a notice dated weeks or months ago. I would highly recommend that taxpayers check their mail at least weekly for notifications from tax authorities and other important information relating to their personal or small business taxes.
Contact Your Practitioner Right Away
If you receive a notice from the IRS or state department of revenue, be sure to notify your tax preparer or other practitioner right away, for the same reasons I mentioned previously. I will sometimes get an email from a tax preparation client to the effect of “sorry to bother you, but I received this notice…”. Please “bother” me as soon as possible if I prepared your tax return and you receive a notice! The sooner you contact me the better able I am to explain to you whether you may actually owe what was assessed, whether the notice may have been mistakenly issued, or whether you may be able to challenge the assessment.
Thanks for reading this article! Please contact me using the form below if you receive a tax notice for your individual or business tax returns from the IRS or a state department of revenue.