Interacting With The IRS: Pandemic Tax Challenges And Detours

Taxes

In the latest episode of Tax Notes Talkenrolled agents Eva Rosenberg and Jeffrey Schneider share their experiences on communicating with the IRS during the coronavirus pandemic and how the agency can improve. 

The post has been edited for length and clarity.

William Hoffman: Welcome, Eva, and welcome, Jeffrey. Today, we’re talking about how tax professionals are dealing with the various IRS communications channels: phone, fax, email, online accounts, guidance, and instructions, and how those channels have fallen short as the agency continues to adapt to the unprecedented restrictions imposed by the worldwide COVID-19 pandemic.

Let’s put this in context first. Eva, briefly tell me about your tax practice: its location, how many staff and how many clients, how many returns, and what kind. Anything that will put this into context.

Eva Rosenberg: I’m phasing out most of my actual tax practice. I’ve sold the practice three times. I’m down to my last 10 or 15 clients until they die. My main focus is training tax professionals or tax preparers to pass the enrolled agent [EA] exam.

My beat is dealing with the IRS Return Preparer Office extensively and talking to them and emailing them on a very regular basis advocating for everybody who is sitting for the EA exam and writing. Between writing and teaching, I am on the IRS website probably eight to 10 hours a day.

William Hoffman: How many practitioners would you estimate you deal with in a year at some professional level?

Eva Rosenberg: Thousands. I teach all over the place and I have a very small staff. I have one part-time person physically in the office with me and several independent contractors around the country and around the world helping with different parts of the school.

But between the EA students and the people whose questions I answer — which include tax professionals and the public — I deal with several thousand tax practitioners in the course of a year.

Jeffrey Schneider: I am in south Florida. My office is located in Stuart, which is halfway between West Palm Beach and Fort Pierce. In my practice I do about 400 returns, including S corporations, C corporations, partnerships, trusts, estates, and of course individuals.

My biggest niche is I am a tax representative. I am a certified tax representation specialist. I deal with the IRS five to six times a week. I don’t deal with them as much as Eva, but I deal with them on an extensive basis.

William Hoffman: Jeffrey, how much time you spend communicating with the IRS through the various channels that I listed earlier, and maybe any that I missed: phone, fax, email, online accounts, guidance, and instructions? Which channels do you use the most and which the least?

Jeffrey Schneider: I call the Automated Collection Service (ACS) and the Priority Practitioners Service (PPS) all the time. Every time that there’s a client that needs a transcript, every time they get a letter, I’m on the phone as opposed to just writing a letter because the IRS does open them, they just don’t have to process anything.

IRS Commissioner Chuck Rettig said back in November [2020] that they opened up the final 2 million envelopes. Somebody asked, “How many of them have been processed?” He wouldn’t answer. They opened them and then they leave them on somebody’s desk.

I don’t do much in the way of writing anymore. A phone call to these two different units is better. The phone call could take 15 minutes, or it can take up to 45 minutes or an hour. It depends upon the complexity of the case, how many years are involved, and what level they’re up to.

If I’m just on transcript delivery, it takes a little shorter. If I just want the transcripts, whether they’re account transcripts, wage investment transcripts, or tax return transcripts, or if I have to actually negotiate an installment agreement with the PPS or ACS right then and there.

William Hoffman: We’re always hearing about how poor IRS customer phone service is. But the PPS hotline and other resolution types of services are also poor historically. I’m wondering how much worse they’ve gotten for you during the pandemic.

Jeffrey Schneider: I use a service called Call enQ, and it’s basically like a routing call center type thing. You press one of their numbers, put in your account number, and usually I wait three minutes to get online.

If I would call some of the offices like the lien release office, I could sit on the phone for an hour. I don’t sit on the phone for an hour because I have to make other phone calls. I use Call enQ all the time for the services that I subscribe to. The worst I’ve ever had to wait was about nine minutes.

William Hoffman: What’s your resolution rate through these channels that you are using? When you call the IRS, how often do you get an answer one way or another for your client? Or at least move substantially in that direction?

Jeffrey Schneider: It depends what I’m doing. If it’s a straight installment agreement or transcript delivery, it’s resolved right then and there. If I have to do what we call a partial pay installment agreement, where I have to submit documents and so on, as opposed to just mailing the thing in, it has to go through its proper channels. Depending upon the amount, it has to go through management. Sometimes it has to go through the counsel’s office.

Offer in compromise is all by mail to the offer unit. Even if I’m dealing with a revenue officer or a settlement officer on an audit or a collection case, I send them a copy, but I also send it to the offer unit. Both of them can take anywhere upwards of a year. It used to be six to eight months. I had one that took 16 months to do. I’m now in the middle of another one; it’s been six months.

It’s a very slow process. People are working from home sporadically. They’re not coming into the office so things have been drastically slower on all ends. You just have to play peacekeeper with the taxpayer.

Eva Rosenberg: Bill, let me jump in on the PPS because this is supposed to be our hotline. It’s actually nicknamed the tax practitioners’ hotline, and it used to be absolutely fabulous. You used to be able to call them and get information. They’d help you answer questions, not just pull transcripts. We used to have an office here in Los Angeles with an entire team and we all knew the team.

Now it’s all centralized. The people staffing that office are no longer the cream of IRS. It used to be the cream and they were the best, most experienced people. Most of them have retired. These are newer people who don’t have the expertise or the training. Very often they cannot answer your question. They don’t even know they have the authority to pull some of the records that you’re requesting.

A practitioner really needs to know what the PPS is for when they’re told that something cannot be done. If the practitioner knows it can, we need to request a supervisor or a manager. That used to be easier when they were in an office and there was a call center and they could call somebody over.

Now they’re working from home so they have to put you on hold, call somebody, and conference them in or something like that. But they’re doing less and less. They used to be able to give you many documents at one time and they would fax them to you. They won’t fax them to you anymore. Now they will put them into your e-services account.

However, there is one thing that they are still able to do and, for many people, this is a lifesaver: the power of attorney, the Form 2848, or the Form 8821, the Tax Authorization Form that we normally would fax to the Centralized Authorization File [CAF] unit. When they go there, it is now taking weeks to get processed. If we call the PPS first, fax it up to them, they will be able to pull the records that we need immediately. They’ll put it into the system. It will still take quite a while.

The IRS had this whole webinar last December about how they’ve improved the electronic signatures for the Forms 2848 and 8821, but they admitted they did not improve the processing speed. We’re still hearing from people who submitted their documents eight weeks [or] 12 weeks ago.

I’ve been told by people calling PPS that they will ask have you already submitted your power of attorney to the CAF unit. They won’t accept it, so don’t submit it to the CAF unit. First, call them, submit your power of attorney via fax, and they’ll be able to pull whatever you need. That’s the best way to do it.

Jeffrey Schneider: It used to be you were able to get your Forms 2848 online directly. Then they went into this identity theft thing and we understood that, but they asked the practitioner for their CAF number of course. They asked for our date of birth and our Social Security number to see that we are who we are.

I was a member of the Internal Revenue Service Advisory Council for three years, and one of the questions we asked if the PPS or the ACS people are asking this question: Why can you not put a verification thing in the system with your — the same information? Nobody can come up with an answer. To me as a non-computer person, it was a no-brainer.

As far as the issue that Eva mentioned about if they ask you if you’re Form 2848 or 8821 has already been sent, they won’t accept it. They’ve been asking me the last three months after the fact. After we go through the whole thing, they said, “Do you want me to send this to the CAF unit?” And I said, “Sure. Save me a fax.” They’ve been answering my questions because they asked that question after I already sent it and they started working on it.

I still don’t understand why they can’t let practitioners use these tax accounts, and all this and that. They say it’s coming. I’ve heard that for the last year and a half. That’s a big issue to me. I think that’s ridiculous.

But like I said, I’m not a computer techie. I’m not a coder, but it is a pain. You got to tell the story, fax the Form 2848 or 8821 if you’re just doing transcripts, and then go tell the story again. If I find the IRS person on the phone isn’t totally wrong.

When I had that with an OIC reviewer, he thought cash in bank meant just cash in the person’s pocket, as opposed to it meant bank. I have to talk to somebody else. I call back using Call enQ and I waited another three minutes. I didn’t care I had to go through it over again. I wanted to find somebody who knew what they were talking about. I don’t do that a lot, but I do it enough times that you can tell that it’s a totally different personnel over the past year.

Eva Rosenberg: We’re running into people when we call whatever IRS department who may not be very cooperative. By calling two or three or four times, we might end up with the right person who maybe can identify with the situation. Whether you’re a taxpayer or a tax practitioner, don’t hesitate.

If you don’t mind waiting to call three or four times until you get somebody who will listen to you, and it works. Jeff is so right. It works. Sometimes doing that you will get the resolution that you need.

William Hoffman: Jeffrey and Eva, let me generalize little bit from what you’ve been saying and other things that I’ve been hearing as a reporter. It seems like there is this tension of the IRS on the one hand between live support and live assistance and the IRS’s increasing tendency to rely on electronic support and electronic communication. They certainly complement each other, but they are also in tension with each other.

I wonder if you see it that way, Eva. And if you do, whether it’s been a net positive for your practice, a net negative, or a wash.

Eva Rosenberg: For the work that I do, I’m able to reach the people that I need to reach electronically on a regular basis. If you know me, you know that I’m a serious pest and that I actually do reach out to the various contacts I have at the IRS sometimes two or three times a day with information updates, corrections, and so forth. That saves me a lot of time because it gets directly to the right place.

For a very long time, we have been advocating for online access for taxpayers and tax practitioners to be able to associate documents that we’re sending to the IRS directly with the taxpayer’s account with the correct year, the correct audit, offering compromise, or whatever. I’m really encouraged that sooner or later, we’re going to have a good system that’s going to work. They’re starting to work a little bit with that, but here’s the problem if they don’t do that.

Even before COVID-19, if you mailed something into the IRS, for instance in response to an audit — they’re big on the correspondence audits because it costs them pennies instead of hundreds of dollars. If you send in materials, some live person has to open the envelope, scan the documents, associate them with the correct files. Even before COVID-19 it took three months. And you’re responding to a timely notice. It has to be in the file. The examiner, for instance, doesn’t get the response because it hasn’t been scanned in, so the notices start and so forth.

Now with COVID-19, as Jeffrey pointed out, Rettig said they’ve opened all the physical snail mail they have, but they haven’t actually read it, processed it, or scanned it because they are totally short-handed.

The word is, according to Erin Collins, the national taxpayer advocate, recently they’re 25 million tax returns behind from last year that they haven’t processed. Those are the ones that were mailed in since last March. I am really looking forward to better security.

The IRS has a team — they’ve got two czars that are handling converting everything to the modern era and electronically making things available. That is a huge priority, and it’s part of the Taxpayer First Act from a couple of years ago that they do this.

I’m really looking forward to seeing that start getting implemented more and more within the next year or so. I know when we talked I said 10 years, but I really believe within a year or two we’ll have better stuff.

William Hoffman: It seems that you’re saying that the electronic communications haven’t gone far enough yet.

Eva Rosenberg: Not yet.

Jeffrey Schneider: I totally concur with that. They are so far beyond what they tell us they’re going to do. We’ve been hearing a lot of this for several years now. Now they’re saying COVID-19 is a problem. There’s always something that is causing this delay.

The IRS wants us and they call us stakeholders. They want the practitioner to be their eyes and ears, which is OK. Normally that’s an efficient tax system. Except in my opinion they’re not giving us the tools to be effective. A lot of my clients say, “Well, I called customer service and they said this.” I said, “Well, yeah. Who’s the person on the phone’s customer? You or the IRS?” People don’t realize that.

They’re not looking out for your best interest. They’re looking out for the government’s best interest. You have to be careful when you’re dealing with them even from a practitioner standpoint. Who are you talking to? You need to stand firm in your case as long as your case is a good one.

William Hoffman: Well, it seems Jeffery, that part of what you’re saying is then that while electronic communication needs to advance, customer service can’t be left behind.

Jeffrey Schneider: Yeah. I haven’t been on the straight Form 1040 number in a number of years basically because I use this Call enQ. I had to get a lien released due to a sale so I did a 911 and dealt with the taxpayer advocate. They are so short behind there. There’s just so much they can do. I had to deal with the Puerto Rico office as opposed to a local office. I would never get a call until after 6 p.m. when I was dealing with this. And the person who was doing the lien release was transferred to another department, never told me, came back.

A 30-day process took 65 days. My client who wanted to sell their house was almost sued because it was past the contractual deadline. The IRS — because of their downsizing and because Congress won’t give it the money for this or for that — they are actually in a worse position, which makes us in a worse position, but taxpayers don’t care. We’re the person in front. You know don’t kill the messenger? Well, they killed the messenger.

Eva Rosenberg: Let me tell you about something that I went through entirely electronically. I’m TaxMama®. I get people writing to me. One woman wrote to me and said that she was just catching up filing about 10 years worth of tax returns and that she was owed about $100,000, but they were out of statute. If you file the tax return more than three years late, you’re not going to get that money back. I started asking her some questions and found out that she had been ill — number of different things going on.

I decided that I thought she would qualify to get that money back. Through my contacts at the stakeholder liaison and the Taxpayer Advocate Service — well, first I tried to do it through appeals and appeals just blew me off. Through my contacts at the taxpayer advocate’s office and IRS stakeholder liaison here in Los Angeles, we connected with the right person at the taxpayer advocate by phone, and electronically, and by fax. They started investigating the case. Although it took about a year to do the entire investigation and to give them the letters and documentation that they required, everything was done by phone and fax and email, and she got $100,000 back.

You can do this all without sitting on hold forever, but knowing the system and knowing the laws — and it’s really important if you’re doing representation like Jeffrey and I do, a taxpayer has to thoroughly know how to use the Internal Revenue Manual. That’s the IRS’s employee policy manual, their entire operations manual. If you know how to use it, you’re going to find the solution to practically anything. I don’t think I’ve ever had a penalty not abated because of using that except maybe a late payment penalty.

William Hoffman: You bring up a interesting issue. Tax professionals have access to some tools that aren’t available or generally known to the public. You mentioned the IRM. Jeffrey mentioned earlier on Call enQ, a subscription phone service for tax preparers to advance in line, apparently saving hours on hold.

Tax professionals also have access to IRS phone directories that put them in direct contact with agency staff who can resolve problems or more effectively point tax pros to other help.

In this internet age that seems to empower people to think that access to information makes them experts, how do you make the case for the special access that tax professionals have?

Jeffrey Schneider: A lot of the tools that we use are available to the public. They just don’t know about it. That’s the difference between a self-prepared return or a self-represented pro se taxpayer, and using somebody like an EA, a CPA, or an attorney. The IRM is there. You just have to know where to go to find it.

Now once you find it, the hard part is knowing what to do with it when you see it and how to interpret whatever they say. Again, anybody can buy Call enQ, but a taxpayer is not going to buy it. There are a lot of tools that are still open to people to do it themselves. Just like you can buy a $49 TurboTax to do the tax return. Is it advisable? No.

I have one client that I’m dealing with now. The revenue officer who’s dealing with, the collection agent, said to me, “Well, your client said XYZ.” I almost died. Because once a taxpayer says something, you can’t put it in, you can’t take it back. You have to work around it.

Tax practitioners, if you’re doing representation as Eva said, you need to express upon your client: Don’t talk. Even if you think it’s going to help because generally it doesn’t. And use the tools that are available, whether it’s out to the public or not.

I belong to about nine Facebook groups. Seven of them are EA tax groups. Even if I don’t participate answering questions, I just read the threads. And you say, “Oh, that happened?” Not everybody knows everything. Use whatever you have at your disposal no matter how simple it is.

Obviously you can’t quote as precedent the Facebook quote, but once you get that, you can do your Google search. You can check the regs. You check the IRM. And then you can go on and support your case.

William Hoffman: Eva, I just wanted to ask if you had any experience with these internet know-it-alls who seem to pop up claiming that because they read something online they’re now an expert in medical procedures or tax law.

Eva Rosenberg: TaxMama® has been answering questions for the public for literally 20 years now. It’s actually the 21st year. People will come in and they’ll say, “Well, I heard this or that or the other.” I ask them to try to give me the reference for where they heard it or read it so that maybe it could turn out to be right. Most of the time it’s absurd. It’s a myth or whatever.

Earlier this year somebody brought up a question and the article that he referenced was by a journalist. It was a rare article where she didn’t quote any experts at all. She didn’t identify the source of the information, but after I did a lot more digging — and I really spent three days digging — I found out that her information was actually correct and I found the citation. So that was a rare instance where somebody came up with something and they turned out to be right. It was something I didn’t know was in the law.

Jeffrey Schneider: You have to be careful what you’re reading. I always tell my client, “If anybody tells you anything, ignore it.” Because like Eva said, 99 out of 100 times whatever you heard is wrong. We call it the telephone game. It goes in one ear, goes through the brain, comes out your mouth totally different than what you heard of the first time. You have to be very cognizant of who you’re talking to and what the topic is.

William Hoffman: People have always come to professionals with bad information of one type or another long before the internet came around. I’m wondering if then the tax business, in your experience over your careers, whether you think the internet has made misinformation worse in the tax business or in tax law.

Eva Rosenberg: It’s not just the internet. It’s also the do-it-yourself returns that have expanded. Several years ago when I came out with the first edition of Small Business Taxes Made Easy, I was talking to Intuit about getting it included in their business TurboTax software. They wanted to know if I would be a spokesperson for their software.

I said, “No, because you’re software for business people doesn’t work. They need to have a tax professional helping them and guiding them through their business accounting and their business taxes, so I cannot endorse that because it doesn’t make sense.”

There’s all of this do-it-yourself stuff. Somebody was just complaining to me that they were trying to do something in one of these tax software systems. We gave them advice on how to do whatever it was that they were doing. He says, “Well, the software doesn’t do that. I have to make all these manual entries myself to do what you’re telling me to do. So what do I need the software for?”

That’s the whole point. It’s not just about filling in and punching in stuff. It’s about you have to know an ever increasingly large body of knowledge. Right now I am updating material for the EA exam course, the question database, and I am changing and updating practically every question in the 2,000 or 3,000 questions in the database because information has changed, all of the IRS links have changed.

The IRS has just removed about half of Pub. 17, which has been like the taxpayers’ reference material for decades. Everything’s changing. As Jeffrey admonished the other day, the publications are not a substantial authority. But for the taxpayers they are the best tool they have available to summarize information.

William Hoffman: Jeffrey, what is the role and extent of your in-person contact with IRS personnel in the service of your clients now compared with say three years ago? That is pre-pandemic?

Jeffrey Schneider: I have not met anybody face-to-face. I met one — we call it a Form 4180 interview, which is when there’s payroll issues and who’s the responsible party. Usually I conduct that myself, but I thought it was for the benefit of the taxpayer because of what he does to explain the technicalities of what he does and that’s it. That’s all he did. We came up to a mutual agreement. The manager was there and we basically got it settled face-to-face.

Are face-to-face meetings better? Absolutely. I wish they would go to a different platform that we can talk face-to-face, even on the internet like we’re doing in Zoom. They don’t like Zoom. They said it’s not secure. Well, I don’t know anything about that. Doctors even used virtual, on-the-phone, different platforms. I don’t know why the IRS can’t.

I think face-to-face is very good, except I haven’t had any in the past three years except that one. And that was just before the pandemic hit. The pandemic made the IRS go more electronic than they ever saw before. They haven’t gone far enough in my opinion.

You have to remember even though Rettig was in the field for 30 years as an attorney out from Los Angeles, even though he’s the nicest of guys, he’s commissioner. But he’s [handcuffed] in a lot of things.

The First Families Act, they require some things. Did they make them all? Make the deadlines? No, but it’s forcing them to look at different processes, just like any business. The IRS is a business. They’re required to collect money and they need better processes and they’re coming along. I’m not the only one who thinks it’s not even close to being where it should be.

William Hoffman: What do you and your clients miss by not having an improved level of face-to-face communications with IRS personnel?

Eva Rosenberg: Well, let’s put it this way. When I was able to do audit representation here, physically in southern California. First of all, I knew most of the examiners in my general geographic area, the San Fernando Valley. Within a 10-mile radius we have about three IRS offices where we have examiners or appeals people. I could walk in, sit down with a fully prepared file, hand them the documents they need, and I could be out of there in two hours with a resolved audit one way or another.

If I sit there quietly with my book and don’t make a lot of noise and interrupt them, I can walk out with the audit determination letter and maybe even sign it if it was no change or a refund. I can’t do that now. Now everything takes significantly longer because we have to do everything remotely.

But I wanted to address something about the changes that you were asking about and whether it’s going to go back. Think about the budget the IRS has, and how much they spend on rents in the buildings that they have been paying for. About 10 or 15 years ago the IRS and the CPA firms started not providing permanent office space for their staff. They started testing having people work from home and only come in maybe once a week, use a shared desk, and so forth.

They were able to eliminate an entire floor or two of a building or an entire building facility. They were able to reduce rents dramatically by doing that and instead paying for a secure phone line and maybe a secure fireproof filing cabinet in the person’s home.

I think that now that they have gotten the phone lines already set up to reach people remotely, and they’re going to expand on that, I think we’re still going to have fewer and fewer people in offices and the budget will use that money perhaps for something more electronic.

William Hoffman: Well, I think that does it. Thank you, Eva. Thank you, Jeffery, very much for your time.

Eva Rosenberg: Always a joy.

Jeffrey Schneider: My pleasure.

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