The IRS Mess

CPAs nationwide are outraged, frustrated and fed up.  

The  U.S. government’s revenue collector is in chaos and no solution is imminent. CPAs representing their clients can’t reach IRS agents by phone and spend hours dealing with inexperienced and over-taxed IRS auditors.  Cyber-security disasters occur with disturbing regularity.  To make matters worse, the IRS is a political football:  Congress has (a) threatened to impeach the IRS commissioner and (b) actually reduced the IRS’ budget due to their ongoing war with the IRS and party politics. This despite data showing the IRS’s uncollected tax debts rose 23% in six years while the agency’s collection staff fell 23% due to the budget cuts.  Absolutely insane.

So, for my roundtable group, who am I gonna’ call? IRS-buster Adam Fayne, a partner at Chicago-based Arnstein & Lehr, one of the country’s oldest and most respected law firms.  Fayne’s tax practice focuses in the areas of tax controversy, tax planning, corporate advisory and white collar criminal matters. As a tax attorney, he represents businesses and individuals before the IRS.  Here are some nuggets Adam shared with us.

Get a Power of Attorney from all your clients, making it easier and quicker to work with the IRS on behalf of clients. The IRS typically honors a POA for three years.

Don’t bunch correspondence from multiple cases in one envelope to the IRS.  Their workers are only able to focus on one matter at a time.

IRS statistics show that taxpayers achieve more favorable results when represented by an expert than handling it on their own.

Accountants generally do not enjoy the same client-privilege with their clients as attorneys.  What a client says to a CPA IS discoverable.  But if a CPA signs a Kovel agreement with the client’s attorney, especially in criminal cases and with serial non-filers, then the CPA is able to enjoy the same client-privilege with that attorney.

To verify that the IRS has received documents sent by the CPA, be sure to remit a check with the documents in a small, odd amount; $102, e.g.  This way, the IRS can never say the documents were not filed.

CPA Firm Management & Governance is a must-read for partners who want to run their firm like a real business.  It addresses ►Best Practices for managing and structuring the leadership group, ►how decisions get made, ►voting, ►how the Board functions, ►the role and expectation of a partner, ►the Managing Partner, ►organization structures for various firm sizes, ►job descriptions of key management positions, ►partner accountability  

The Tax Practitioner Hotline seems to have improved.  This is one area that the IRS has staffed up.

The Appeals Department used to be more independent from Exam personnel.  Today, there is a higher rate of Appeals sending cases back to Exam.  So, focus on building your case upfront and avoid Appeals.

Schedule Cs are experiencing a lot higher audit risk than Sub-S and partnerships.