Your Secret Weapon: Strategic Tax Planning for IRS Controversies

In this episode, we break down your ultimate financial shield: strategic tax planning. We move past the initial panic of IRS notices and dive into how forward-thinking tax structures can defuse controversies before they even start—and give you the upper hand if they do. Whether you're a business owner or a high-earning individual, it's time to step up your tax game and start taking control. Tune in to turn tax stress into your secret weapon. 

About Our Guest 
Charlotte Way, JD, LLM, CPA, serves as the firm’s Tax Counsel. Charlotte has extensive experience and success in helping clients manage tax issues and disputes, including IRS and state penalty and collection notices; penalty abatement requests; field and correspondence audit representation; post-audit issue resolution, including representation at appeals, requests for supervisor conferences, and fast-track settlements; Offer In Compromise – Doubt as to Liability; assistance with Taxpayer Advocate Services; research and risk assessment of tax positions before filing a tax return, and other tax compliance issues.

About Our Host
Brent Ullrich is a Partner with Mauldin & Jenkins, LLC, with over 15 years of experience in many areas of taxation and industries, most notably in healthcare, real estate, private equity, technology and professional services. He also serves as the Firm’s Tax Strategy and Research Leader, which offers technical guidance and identifies planning opportunities for the firm to support clients on complex issues across a range of technical tax areas.

Learn more about our Tax Controversy services here: https://www.mjcpa.com/services/tax/tax-controversy-resolution/

Transcript

Speaker 01 0:02

Welcome to Beans Talk, M&J's podcast where we are sharing and showcasing our areas of expertise through conversations with practice leaders on their knowledge and experience. Well, welcome back to the BeansTalk podcast, where today I wouldn't necessarily say I'm excited to talk about what we have to talk about. Nobody loves getting uh mail or correspondence or anything from the IRS, but it's uh as a taxpayer and actually one of the things that we have to uh deal with and address. And I'm very fortunate to uh have somebody like Charlotte Way, who leads our tax controversy team uh here at Mauldin and Jenkins to uh to help us got get it get us through this process. Welcome to the podcast.

Speaker 02 0:42

Thank you.

Speaker 01 0:42

Uh and for the listeners, can you please uh just go through a little bit of your background and what the tax controversy team does for taxpayers for clients?

Speaker 02 0:50

So my background is I actually am a CPA and I got my CPA license and then I went on to law school and I went to the University of Virginia Law School and got my JD. And I always knew I wanted to do tax. I knew that a minute, you know, the minute I was dealing with the CPA license, so I went on to New York University School of Law and I got my master's in taxation law from there. So we literally spent a year dealing with controversy work, penalties, timing, learning how to deal with the IRS. And at that point, I knew my true calling, and what I wanted to do was help resolve um taxpayers with their IRS controversy issues or audit matters.

Speaker 01 1:34

Yep. And so and and the the practice and procedure around just dealing with the IRS. I mean, it's so convoluted, and I don't think we're gonna get into much of that today, right? But it is just kind of, hey, conceptually, here are the ways that the IRS, you know, corresponds with you, here are certain of the things that, you know, that that we have to deal with penalties, interest, audits. And so I think we we're not gonna take necessarily a deep dive with any of that, but just kind of, hey, you know, just simple to to difficult, right? It's you know, we're we're getting letters from the IRS. Uh, what different scenarios can kind of cause taxpayers to to get letters? And and you know, generally when you're getting something, it's hey, you owe this, or you know, something's off. Like, can you kind of describe what hey, what what generally triggers an an an IRS letter to come to your door?

Speaker 02 2:20

Okay, so basically what happens is you will get a notice. And it's a good question because when you get the notice, the first thing I want to say is a taxpayer is scared.

Speaker 01 2:28

Yeah.

Speaker 02 2:29

When they get a notice from the IRS, it's scary.

Speaker 01 2:32

It's terrible.

Speaker 02 2:33

What's wrong? Yes.

Speaker 01 2:34

I'm in the field and I still don't like the taxes.

Speaker 02 2:37

So to explain, our TCR team, and I really didn't get into that, but Mauldin and Jenkins hired me and we started the tax controversy resolution team so that Mauldin and Jenkins can help their taxpayers through the notices, through the procedures, through the audits, anything that comes from the IRS and make sure it's handled. So when a client gets a notice, when a taxpayer gets a notice, they're scared. What they need to do is they need to know, don't be scared. Something's wrong, let's figure it out. So why would you get a notice? Well, maybe you made a mistake, okay? Maybe you filed something late. Maybe you paid something late, okay? Maybe you left out some information that was required to be attached. But guess what else could be happening? You could be getting a notice because the IRS made a mistake. Maybe they made a computational error and they think you owe something that you don't. Okay. Maybe they lost a payment that you made, so they think you owe, but they've applied it to the wrong account. Maybe the payment you sent never got there, but you don't know it never got there. Okay. Maybe the return you think got there never got there because they're sending your missing return notices. So the only thing is you don't panic. You reach out to someone that can help you, and you know I'm getting a notice because there's something off, and let's figure out what it is. Um, very important thing is because there's other notices that come besides the penalty notices, you always want to respond immediately. Don't hold on to that notice for six months because that causes more difficulty.

Speaker 01 4:08

Yeah, and I think that's one of the things that's not not frustrating for for people, but you know, we'll sometimes get notices from clients and it's, hey, we got this a month ago. And, you know, it kind of constricts your ability to deal with it, right? That the later on in life. And so can you kind of talk about that timing, that progression, right? Like what are the real dates, you know, 30 days, 60 days, 90 days? Can you kind of talk through, hey, what are some important dates to consider when you get this notice?

Speaker 02 4:35

So the important date to consider is that's a very good point. Some notices will say 30 days to respond. Some notices will say 60 days to respond, some notices will say 14 days to respond. Okay. So the important thing is when you get that notice, you look and see what is the date on the notice, and you go to that. What am I talking about? Is it a 1040? You know, what am I talking about? And the last thing you want to know is when am I supposed to respond? Okay. So if you see the date on the notice and it says 14 days from now, you want to do it. 30 days from now, you get help. Then if you say there's impossible to do 14 days, as long as you contact the IRS and you let them know, hey, I've gotten the notice. I'm not ignoring you. I need a little bit more time. What happens is when you ignore that notice. So if they gave you 30 days and you didn't deal with it for 60 days, you've missed some time limit. Okay. And the IRS is on alert that you're non-responsive. Okay. And so they don't deal with you the same way as if you walk in immediately, say, I have this issue, let's figure out how to fix it.

Speaker 01 5:39

Yep. Yep.

Speaker 02 5:40

Yeah.

Speaker 01 5:41

Yeah, that makes sense. And I I that's always been my experience. It's like, hey, when you're more forthcoming, when you're more communicative.

Speaker 02 5:46

Yes.

Speaker 01 5:47 Speaker 01 5:47

With them, that they're more willing to deal with you and help you. So so let's take a step back and say, okay, I get a notice from the IRS or or any any authority, right? Any state or whatever that says I owe a penalty.

Speaker 02 6:00

Yeah.

Speaker 01 6:00

And I don't know if I owe it or not.

Speaker 02 6:02

Yeah.

Speaker 01 6:02

You know, and so so what are, you know, your first steps are obviously, hey, get with your get with your controversial team or your CPA or whatever. So what are my options at that point, right?

Speaker 02 6:10

And I'm gonna digress a little bit and explain when you said you're more they're more compute communicative with you. The problem is it can get deeper than that because we have taxpayers that hold on to notices sometimes and just either they're scared or they're busy.

Speaker 01 6:26

Yeah.

Speaker 02 6:27

And all of that we're dealing with life, okay?

Speaker 01 6:29

Yeah.

Speaker 02 6:30

So that's why we are here to help if you need us to, because we will deal with that immediately. You can move that aside and deal with the rest of the life. But what happens is, let's say you waited six months and all of a sudden you're getting this notice from collections, okay?

Speaker 01 6:45

Yep.

Speaker 02 6:45

That says, Hey, we want your money or we're gonna levy on you. And then we have that situation where they'll come to us, okay? Well, then we have a different issue because, which we're about to talk about initial responses.

Speaker 01 6:55

Yeah, yep.

Speaker 02 6:56

We no longer can do the initial response. We now are talking to collections and putting holds and saying, hey, please don't levy on them. Then we're talking to the IRS because they don't talk to each other.

Speaker 01 7:08

Yeah, yep.

Speaker 02 7:08

And trying to deal with the issue, okay? But then they're mad because collections is involved and it becomes more costly for the taxpayer as well because we're we're navigating two different issues.

Speaker 01 7:19

Yeah, so so talk through that progression, right? Where we're usually when you get a first notice, you're getting something that's assessed to you, but they're not actively trying to collect it because they expect you to pay, right? So that that's usually the best time to get it.

Speaker 02 7:29

Well, the best thing to say is they expect you to pay or disagree. So now we'll get into the notice, is exactly what you said.

Speaker 01 7:35

Yeah.

Speaker 02 7:36

So when you get a notice, it says, Hey, Mr. Taxpayer, we're looking at this for your 1040, we are assessing $17,000. Oh, we're assessing $120,000. We had one that they were assessing $2.7 million. Okay. So whatever it is, you don't worry about the number. Okay. I had to learn that real quick because guess what? It's the same tax law.

Speaker 01 7:59

Right.

Speaker 02 7:59

Whether it's $10,000 or $2.7 million, you have to go in and figure out what went wrong and how we can fix it. So when you get that notice, you've got to respond. What it will say on that notice is, um, and that's that's why it is more complicated. It is better to get someone involved so that they can figure out the steps to get it fixed. Because I have a lot of people that they try to fix it themselves and then they come to us and say, oops, we didn't get to fix it. No, no, and it just happens. And I don't think they're trying. But then what happens is they get denied. When they get denied, we'll talk about it later, but then we have to go to a whole nother level of appeals, okay? And it becomes more costly. It comes a two-year period. So the first thing you do is you get that notice and it will tell you, here's why you've got the notice, here's what we're looking at, here's why we've assessed something. And there's all kinds of, I'm trying to make it lay person talk, but it's all different code sections that you make it. Whether you were late, whether you didn't pay, whether it was for a 1040, whether it was because a W-2 wasn't filed, all kinds of things.

Speaker 01 9:02

Payroll tax returns, any sort of tax returns. Not just income taxes.

Speaker 02 9:06

Yeah, not just income taxes. So each one has codes in the IRS that that internal revenue code is what they have to assess the penalty under. So that's when we have to come in and we have to look at it and see, okay, how can we respond? And there's a different rule of how you respond depending on the code section. So what the letter will say is here's your penalty, here's the code section, here's what you owe. You can pay, and they tell you where to pay, which is what they'd love you to do. But then on every single letter, there's a section that says, if you disagree, here's what you do. And then it will say, if you disagree for a reasonable cause, and of course, the only thing it will tell you is if you disagree because you had a disaster or you had a death in the family or serious illness, you can have reasonable cause. We know there's other reasons, but that's all they'll tell you. So all we're saying is when you get that notice, you decide, do I agree and I want to pay it, or do I disagree? If you disagree, contact us and we'll help you go from there.

Speaker 01 10:06

Yeah. And so let's let's take it, let's kind of go down two roads, right? Let's say I I I disagree because I have reasonable cause, not because I don't owe it or something like that. So, you know, what are what are my options to request you know removal of those penalties just because hey, I either had reasonable cause and and maybe talk about first-time abatement a little bit and what that means. And you know, sometimes it's administratively easy to get rid of penalties, sometimes maybe you don't want to use first-time abatement. So it's you know, and and maybe now that even the IRS is kind of automatically applying this.

Speaker 02 10:35

Yeah

Speaker 01 10:35

So I think it'd be good to just kind of go through that landscape and and what all that means.

Speaker 02 10:39

Okay. So if you get a notice and you disagree, you can disagree for a lot of reasons of just I don't want to pay this. Do my facts allow me out of this?

Speaker 01 10:49

Yeah.

Speaker 02 10:49

I mean, and that's okay. And one thing I want to point out is of course everyone's scared of the IRS. And everyone sees the IRS as, oh my gosh, they're the enemy, and they've come out after me and assess this. Okay. My TCR team does not see it that way. And that's why we are successful. My TCR team sees the IRS as we are part of the same team. They're my team member. You know why I say that? I cannot go into the IRS and push the button. Without them to push the button and allow the penalties to be removed, there's nothing I can do. You got to go to court. So they are my team member, and we've got to be patient and we've got to explain the law to them. You've got to understand that all of these agents that are sitting there, whether they get the letter or whether you do the phone call or correspondence, they are sitting there and they're not assigned by being trained to a certain penalty or a certain matter. Every single one is new to them. So I've been told by multiple agents that a lot of the penalty removal is because they don't understand it. And you've got people calling in and they're just saying, hey, and this is professionals calling in and saying, hey, remove my penalties. And they're like, well, I can't.

Speaker 01 12:01

Yeah. Under what, under why, how.

Speaker 02 12:03

So instead, we give them the code, we give them the law, we give them the reasons, we give them the analysis, and we teach them why, in the end, basically our answer is the correct one, and the penalties need to be removed. So when you get a letter and you decide, let's look at it, the first thing you would look at is there are certain sections that allow penalty removal based on first-time abatement. Not everything can, but just certain ones do. And like failure to uh file, failure to pay for a 1040, for example, or a partnership. And so what you can do is you can call them. A lot of people think, oh, let's write in. Well, if you write in, that's gonna take six months before they read the correspondence. So my philosophy is our team says no, we want to call in because if we can do it immediately, we want don't want to wait six months. Um, first-time abatement means if you've had no penalties assessed in the last three years for the exact same subject matter, then they will, if you fall under the FTA, they will remove the penalty.

Speaker 01 13:05

Right.

Speaker 02 13:06

Okay. The reason you want to call is first of all, it's quicker. But second of all, if you wait the six months, so that's a that's something our team is now established. Um, but if you wait the six months and you get denied, then six months later you're just starting to deal with reasonable cause. If we get the denial the denial over the phone same day, we're dealing with reasonable cause. So it shortens the time period. Um, so the next thing is reasonable cause. What does that mean? It just means that for penalties, reasonable cause looks at the facts and circumstances of every single taxpayer. And they look at the scenario. That means they look at what notices came in, they look at how you respond. So if I've got a taxpayer that waited a year to get me, yes, we're dealing with collections, but also I'm dealing with a fact factual scenario that they did not respond for a year. Whereas if I have someone that tried to respond to every notice and didn't.

Speaker 01 14:04

It's just a better fact pattern. It's a you're you're you're communicating like, hey, I want to resolve this, not I'm ignoring this.

Speaker 02 14:10

Not I'm ignoring this. So what reasonable cause means is better fact pattern because it's how would a reasonable person act? Did you act with ordinary care? Did you do everything that you could in order to, you know, try to get things right? Um, I have one scenario uh where, and this was the $2.7 million one, um, but we have probably at least 50 clients that were in this situation. And it wasn't something we prepared. Uh, it was all those insurance forms, um, 1095 C's that was new for businesses. Um, and so they filed insurance forms. Well, anyway, it was a new law and they didn't understand the law, and they made a mistake and they filed. And first of all, they didn't realize they were supposed to file, then they found out they were supposed to file, then they made a mistake and they filed. But they didn't check to see if it was accepted because they got something that says, hey, we got it. They thought that meant accepted. Okay. Four years later, because they were in the middle of COVID, they get notices, and not only did they say, hey, we're doing penalties, they found out they've never been filed. Okay.

Speaker 01 15:15

Yep.

Speaker 02 15:16

So we are literally filing something four years late. Okay. So we are asking for a reasonable cause, and we are having to say the taxpayer made a mistake, they forgot to check, they are four years late, they have penalties three years, and when you do it three years, they say, uh-uh, we'll only do it for one year. Um, they were ignorant of the law and didn't realize they were supposed to check. So all of those things that they're saying, here's why we're denying, guess what? They were right on every single one. Okay. But we went through the facts and circumstances. We went through everything and we explained to them. We responded to this notice. We didn't do this one, but the minute we knew, we fixed it. And so we went through all the scenario and explained that. And then we pulled out our last thing that was a 1999 Treasury report that said, Hey, um, Treasury, Congress wants you to distinguish between negligent and non-negligent mistakes. Okay. So I went to the agent and I said, I know you said we made a mistake, but I need you to see what Congress has his intent. And they were like, Oh, okay, let's let this 2.7 million go. So that's what we can provide for taxpayers, is just the ability to work it through so that by the time we're finished, the IRS can agree with us and think it was the way that's.

Speaker 01 16:32

I just see the whole perspective. And I think, and and that's a great example of, hey, how broad reasonable cause can be, right? If you and it's it's funny, just going back to first time abatement, it's funny how quickly that can work where they are just pressing a button on the other line and then they say, Oh, it went through, you, you're you're you're abated. But to start that reasonable cause process immediately after that is something a a a you know prudent taxpayer would do. Yes. And and just working through that with clients and in y'all's relationships with the IRS, I think, is what's what's paramount, right? Is hey, we're not adversaries, we are working with you to help, you know, help us both, you know, establish a reasonable cause and and you know make sure we're interpreting this this issue correctly.

Speaker 02 17:12

Yeah, and that's a good way to put it because actually what I tell them, I said, what we're doing is working to find the right answer. If the answer, whatever it is, and so we work through the facts and circumstances to find the right answer, another reasonable cause is to explain. We've talked about filing late, explain paying late. Okay. We have that a lot with 1040s, 1120, I mean, partner, not partnerships, but 1040s, um, but then also 11 um with corporate returns, but we have it a lot with um payroll returns, which okay, everyone says it is impossible to get penalties removed for payroll returns, okay? Because you're dealing with trust fund money. And the IRS takes that very seriously. And what I mean by that is trust fund money just explained to everybody else, trust funding money means you're dealing with the employees withholding.

Speaker 01 18:04

Well, this is social security, and this is this is things that get passed out.

Speaker 02 18:09

And I've had eight revenue officers explain to me not only is it the trust fund money, the IRS has to go ahead and pay it out. So they have lended it out for you, and now you owe it to them.

Speaker 01 18:20

Okay.

Speaker 02 18:20

So it's very important. So we deal with that a lot. We had one issue that was 1.5 million, dealt with a reasonable cause, got rid of that. We had another one that was dealing with about 800,000. That issue was they were one day late. One day late, okay. $800,000 for being one day late. And so they denied it. And so then they denied it at the initial level, and we were supposed to go to appeals. Well, our position is, and we got them fully removed, but our position was we explained the facts and circumstances. Their situation was actually they had gotten hacked. So we explained the situation that they got hacked, and so they had to redo their computer. When they did redid their computer, something happened and the computer defaulted to the old situation. Once it defaulted to the old situation, they were late. They didn't find out about this for about six months because the IRS didn't send notices. We explained that. We say, you know, if you had let us know earlier, we would have known. But then the minute they knew, the next day they changed their system.

Speaker 01 19:24

Yep.

Speaker 02 19:24

So when the IRS understood the entire facts, and under the facts and circumstances, they acted reasonably, and we say this a lot in our correspondence. The taxpayer did everything they could possibly do. Each time they knew it, they acted responsibility responsibly before, and then they acted responsible after they became aware, and then that is how it's removed.

Speaker 01 19:48

Well, I want to hit that home, right? Because it is just, hey, and and for anybody listening, right? It's hey, and you said this right at the beginning. It's when you get notices, don't ignore them because how you act after you get that notice is just as important as how you acted beforehand. And so keeping that in mind as hey, I I want to work through this, and you know, we'll obviously help you work through it as best we can. And and you kind of touched on this a minute ago about appeals and and all that. I mean, what let's take our first case further down the road of hey, I've got a penalty uh notice, couldn't get first-time abatement. Reasonable cause didn't work for whatever reason. Is that where, you know, is that where appeals comes in? Like what are my other options after reasonable cause is denied at the first level? Take me the next step.

Speaker 02 20:33

Your other options, and just so you know, um, when you mentioned being um you had to be mindful and you had to act responsible before and after, there is actually a provision, and we quoted a lot, in the IRS penalty handbook that says we want, we will focus on how you acted before and how you acted after. So what you just said is very important. So what happens Who knows? Yeah. So you think you've done this before.

Speaker 01 21:04

Yep.

Speaker 02 21:04

Um, but so what happens when all of a sudden you get denied? Okay. Well, if you get denied, first of all, we have a way that while we're dealing with it, if we realize it's gonna be stuck and maybe they're not looking at it correctly, we can also get, and that's a step that we would do before we go to appeals. There's something called taxpayer advocate service. Okay. So I want to bring that up. We call it TAS, and we are very involved with them. We will go to places where we can actually, when we have something that is very stuck, we will go to places where we know that they will have a live meeting and in person. So we will come with our suitcases.

Speaker 01 21:44

Yeah, IRS conferences.

Speaker 02 21:45

IRS conferences. There's a conference in New York. So there's certain ones that you can go, and we will bring maybe eight each, you know, and it'll be our most difficult that maybe we've been dealing with for two years, or it's been a year, and then all of a sudden they get to us. I have a good example. Of taxpayer advocate. We've talked to a couple of law firms that cannot believe we got this resolved. They we cannot believe that we didn't have to do a refund suit. So I want to explain that's one of the reasons Mauldin and Jenkins has gotten a tax controversy resolution team so that our taxpayers aren't having to sue the IRS over issues that we can help them get resolved. So we had two res.

Speaker 01 22:22

But before I go into that, because I want I do think it's very special that, you know, when we're talking about the IRS, it's like we're dealing with this big body, but we're really dealing with people and the relationships y'all have established in the taxpayer advocate office, right, has helped. And I know you're about to talk through this, right?

Speaker 02 22:37

Yeah.

Speaker 01 22:37

Has helped push through things that other people can't, right? And so you know, I I think I think understanding that, hey, it's it it kind of is a relationship business to a degree just to help you push through things that should get pushed through, but it it's it's useful for the client to get a a refund or a penalty abated in year one versus year four, right so?

Speaker 02 22:56

Very useful to explain our relationship. Um and it's because Mauldin and Jenkins is putting an investment into us for the client, okay? And so they allowing us to go to these places that we now have a personal relationship, not only with the taxpayer advocate service, but we have a relationship with the national taxpayer advocate.

Speaker 01 23:15

Yeah.

Speaker 02 23:16

Darren Collins. If I need something, I can email her. I don't do that often, okay? It's got to be something very rare, I've only done it twice, okay? So it's got to be something very rare. But then also when we go up there, she knows the only thing we take, we have tried every single way to do it. So I have an example of the relationships we've built. There was a taxpayer, um, actually we had two different taxpayers that were owed refunds, okay? About $300,000 each. And it had been a year and they never got their refunded. Right. Okay. And so of course you have to, you can't just go to taxpayer advocate because, hey, I'm going to jump in line. You have to show we have undue hardship because we've tried everything.

Speaker 01 23:55

Right.

Speaker 02 23:55

So our CPA tried to do it themselves. Okay. And so then this spring reached out to me, reached out to our team and said, Hey, we can't get the refund. Can you help us? So then we don't just jump to taxpayer advocate. We say, okay, we're going to try. So then we did it for about two or three months, and then we discovered that it was stuck in some department because it was labeled as, and that's what people need to know. You never know why yours is stuck. Okay. It's not just because you did something wrong, it could be because the IRS did something wrong. And which I told you at the beginning, yeah, you don't know what that notice is. It was stuck because it was marked as a frivolous return. Okay. So there we are.

Speaker 01 24:36

And even the IRS agent sometimes doesn't know why it's marked.

Speaker 02 24:39

And they had no idea, and we explained and we worked with it, and they said, once it's marked as frivolous, we are not allowed to work this. And I said, So are you telling me this is stuck forever? And the IRS agent actually advised me and said, No, I'm telling you that your taxpayer needs to sue the IRS for a refund. And I said, Okay, so you want to sue your boss? You know what I mean? And so, but anyway, he was saying it's never gonna come out of here.

Speaker 01 25:06

Yeah.

Speaker 02 25:06

Okay. And he was right. So what we did was we immediately we do the form and we applied for the taxpayer advocate. And so we got a notice, and we were already going to New York for one of ours, take the most important cases, and um, that are just stuck. And the day before we were going, these people weren't on the list because we had already gotten our request, and you have to do it in order. So these people were on the list, and all of a sudden we got a notice from Taz, very timely, and it said, Hey, Taz, taxpayer advocate, is not allowed to accept this case because it is marked as frivolous. And so then I turned to one of my team members and I said, Let's prepare the documents. We got to take this to Taz in person. So we get there. And so we've divided up, and I thought that was an easier one because some were more complicated to explain. And so I gave it to my associate and just said, Hey, tell them it can't be fixed unless they help us. So once we finished and we got back together, the manager had come over and explained, hey, we can't accept this because it's frivolous.

Speaker 01 26:11

Right.

Speaker 02 26:11

So there we are, and we're like, uh-uh, we're gonna get this.

Speaker 01 26:16

Like there's gotta be a path for it.

Speaker 02 26:16

Well, we knew there was a path. Okay, and so what we did, and and so we do have relationships, and those relationships are important. So then we hightailed it to a meeting that we knew the National Taxpayer Advocate was gonna be speaking at. And so then when she got off the stage, of course, walked up to her and said, Hey, I've got an issue, and I hate to do this to you, but you're the only one that can help. And she said, Come see me after. So then we explained, and we had and and the thing is is with Mauldin and Jenkins, we take all the steps first, and so they take that seriously. So we showed her the letter that they denied it. Then we showed her the letter that Taz denied us. Then Maggie explained that the manager denied us, and that the manager said to reach out to the Congress. And so then the national taxpayer advocate said, and then the Congress is going to send you to me. We said, exactly. So with that, she said, let me help your taxpayer. And in less than two months, she had one of her advocates, she did assign it to an advocate herself, she oversaw it. And in less than two months, the advocate reached out to the IRS and said, There is nothing frivolous about this return. And we even include you on this. If you remember this summer, we had you look because we also wanted to do everything and see if we saw anything.

Speaker 01 27:34

Right.

Speaker 02 27:35

That looked unusual. And we had already done that, but we had you do that. And so we do our homework. And so, anyway, um, six weeks later, we got something that said the IRS was going to release it and they got their full refund. So the relationships do help, and that's how TAS and that prevented us from going to appeals or to tax court.

Speaker 01 27:55

Or to court, right?

Speaker 02 27:56

Yeah.

Speaker 01 27:56

And so, yeah, I mean, it it it is it's all it's great seeing the net. I mean, obviously, you guys have a good handle on the practice and procedure and seeing the progression and and using the relationships when you need them. It's just great that we have those ability to kind of say, hey, this we've done everything we can.

Speaker 02 28:12

Yes.

Speaker 01 28:12

We we really need your help, and you know.

Speaker 02 28:14

And any other lawyers they, you know, I mean, that's what she's there for, and that's what we're there for.

Speaker 01 28:20

Yeah. No, I think that's great. And so I I think, you know, again, just seeing y'all's team be able to work through all that and and everything has been has been good. Um, I I I do want to switch gears a little bit.

Speaker 02 28:29

Yeah.

Speaker 01 28:29

And kind of talk, you know, we've kind of talked about notices and

Speaker 02 28:32

You want to explain appeals, what would be the next step, real quick?

Speaker 01 28:35

I think that, yeah, that'd be great.

Speaker 02 28:36

Okay, because you had done that, and then I pulled off. So if you get denied and Taz can't help you, and you get denied and you move on, the next step is you don't just have to pay. You basically decide, I disagree with the IRS's position. So if you go to appeals, they're called the Independent Office of Appeals, and their position, and the first thing in their letter is it says, hey, we are here to reach a settlement. So they will look at the hazards of litigation and they will determine, okay, is the IRS more likely to win 60%? Are you likely to win 40%? It's very rare that they find 100% for either case. Okay. Um, I will say in our four years in appeals, and um, I've done 31 appeals now. Um, I've had 100% resolution as a taxpayer. Okay. But, and I've been told um by a former IRS agent um that's a bit that's a big law firm, he said, wow, what you do is risky. And I said, I don't consider it risky, it's honest. I I believe in being honest, okay? And so the first thing I will tell appeals is, I need you to know I am not looking for a settlement. I am looking for full resolution. And what I'm gonna do is during our conference, I'm gonna go over the facts and circumstances, and when we're done, I am gonna prove that under these facts and circumstances and the law and the analysis that applies, um, the taxpayer fully deserves penalty removal and the hazards of litigation are fully in service. And that can't happen. I'm not gonna say that can happen every time, but so far it has because we have our plan, we make sure we figure it out, and also we are able to show the response. Okay. I right now have not had to deal with a situation where someone hasn't responded for two years. Okay, I've had lots of those, but luckily I've been able to resolve those at

Speaker 01 30:31

Before appeals yeah.

Speaker 02 30:34

Before appeals and so, anyway, so appeals basically comes in, they look at it, they decide, and then what happens is if they were to decide, um, like we had one where they decided 65% for us and 35% for the IRS. So I requested a conference and they said, okay, you see all that, and now you're gonna agree to this, and you see what I said. And I said, Yes, ma'am, I just sent you something in writing five minutes ago, so let's look at it. And so then we went through different things and we went through her concerns. I said, tell me what your concerns are, because if you had them, that means we had them in getting through that point. And so then again, we're a team member. We work through those concerns, we explain how we got to that point, because to me, it's a black and white thing. If you did it, there's a reason.

Speaker 01 31:22

Yep.

Speaker 02 31:22

And then it gets settled. If someone was not settled at appeals, if they were denied, I just want to explain that scenario. If someone were denied at appeals and it was in the favor of IRS or it was a settlement they didn't agree with, there are other options. They wouldn't pursue that with us, but they could go to tax court and suit.

Speaker 01 31:42

Yes.

Speaker 02 31:42

And just wanted to point that out.

Speaker 01 31:43

And so we have you ever been a tax court, just out of curiosity.

Speaker 02 31:46

Well, no, because I have always settled.

Speaker 01 31:49

You've always settled.

Speaker 02 31:49

Yeah. Well, yeah, you're on the I've always had full residence. 100% success rate. Yes.

Speaker 01 31:53

Haven't had to go to a tax.

Speaker 02 31:54

Yeah, and out of 31 appeals.

Speaker 01 31:55

Which is pretty amazing.

Speaker 02 31:56

I mean, don't yeah, I've had 31 appeals.

Speaker 01 31:58

Yeah. Wow.

Speaker 02 31:59

But most of them, and that's over 30 years, so we don't do appeals much, you know. Um, but um, most of them we can resolve at the initial level.

Speaker 01 32:07

That's great.

Speaker 02 32:08

Yeah.

Speaker 01 32:08

Um, well, we've talked a lot about notices and and and kind of dealing with that. I mean, uh does does the controversy team, do y'all do y'all support, can we talk through audits, you know? I mean, because it's kind of a different subset of of you know, dealing with the IRS, you know, a lot of the correspondence, I mean, people don't realize this, but a lot of it's automatic, you know, and and it, you know, just kind of the the nature of dealing with that is a little bit differ different than the nature of dealing with an audit. Uh, can you kind of talk through, you know, the controversy team's kind of audit process, you know, supporting taxpayers from that perspective? You know, what what what happens when, hey, I just got notified to be an audit? What's the first thing that we need to be thinking about there?

Speaker 02 32:44

And so basically what will happen is of course it will come to your partner, you know, whoever's deal whoever you is in charge of the client. And so they will get with us. And basically, it's kind of becomes a team effort because what we do is I mean we manage the process. We make sure we get all the IDRs timely. We make sure it's understandable. One of the things is we make sure, I mean, we have literally an outline for them. We have a cover page to everyone, um, everything. I have agents that say, wow, you did all the work for us. Okay. You make it easy for them, you make it understandable for them. You make them see they've gotten everything they requested. I cannot tell you how many times I've been told we never get everything we record we've requested. Okay, we do it the first time. Again, they're more favorable and when you they know you're working with them. Um, the other thing is our job is not only to help with the correspondence, but it's very important that we represent the taxpayer. We make sure that the IRS, um, it's in the manual where it says, if you can, even if there's a POA involved, we found this in the manual. It's called the Internal Revenue Manual. Okay that is.

Speaker 01 33:53

Which basically talks about how the IRS is supposed to, you know, supposed to act, supposed to interpret things, supposed to

Speaker 02 34:01

The instruction manual for the agent of how to do that. Okay, it's not only for us, we do the code, but it's the instruction manual. And so there is a section in there that actually says, if you can try to get with the taxpayer and talk to them alone. Okay. And we were on an audit, and so I'm very aware of that. I tell them, hey, when we go in and you have to answer the questions, if I don't like a question that's asked, or if you're not sure of it, I will butt in and say, okay, wait, why are you asking? Let me clarify this. And so we protect the taxpayer to make sure this only the right questions are being asked. Also, you've got to make sure they don't do a fishing expedition. What that means is if they're doing a 1040 and then all of a sudden they start asking for other questions at the initial level, they can ask more information if they discover something.

Speaker 01 34:47

Right.

Speaker 02 34:47

In your first. But we had a situation where someone got to me and they said, Hey, I need help. They're asking me questions about the partnerships.

Speaker 01 34:57

Right, trying to open up new cases, basically.

Speaker 02 34:59

Yes, and basically saying, you have to give me every partnership return that you were done. And so it was very timely, again, with connections. I was going to a conference with all tax controversy litigators, and there was actually a past IRS commissioner there that was speaking. I got up to them, I talked to him on behalf of this client, and I said, Hey, I need you to know what they're asking. We haven't even had the first meeting. And he said, Oh, this is phishing. You need to refuse. You need to tell them they can't ask for that. And so we did. So they got their manager involved and they said, No, we can't ask for that. And I said, Okay, let me show you everything that it says you can ask for. So I gave them the IRM and I said, I am only gonna give you what I see that you can ask for. So if you show me in writing that you can also ask for that,

Speaker 01 35:47

Yeah

Speaker 02 35:47

So that's how we protect them. And then, you know, 24 hours later, they said, Um, yeah, we're not gonna be asking for that right now. And so that's kind of how we do it. But then another example is we had to do a tour. We were walking through. Next thing I knew, the agent had pulled the taxpayer away, and we had three different taxpayers away.

Speaker 01 36:07

A tour of the taxpayer office.

Speaker 02 36:08

A tour of the taxpayer's facility. Sometimes they asked for that. So they had pulled one of the taxpayers, was getting starting to ask them questions. I got over there and I had to assign during the tour the three of us to each individual to make sure it doesn't happen. And these are rare circumstances, but it's an example. And then one more example, and an agent went in the wrong direction, and all of a sudden, I'm looking at the two CPA partners and they're like, no, no, no. And finally, he was talking about the wrong thing and saying we did something on the return that we didn't. Let's say he was saying we were cash basis and we were cruel bases. He was interpreting everything wrong, and we had to stop him. We had to pull everything and say, your interpretation is wrong. So we just protect them because if they're doing it on their own.

Speaker 01 36:56

Yeah, I mean, it's really important to have, you know, representation in any penalties aside, but any for certainly any audit, right? Because, you know, a a a taxpayer's answer to a a technical question doesn't necessarily necessarily jive with the actual tax or technical answer, right?

Speaker 02 37:14

Yeah.

Speaker 01 37:14

And so I think being there is their just being in their corner as hey, either A, you don't have to answer this or provide this, or and and and B, just hey, let's make sure we we make sure the response is accurate and technically correct before we just before we just provide this to the IRS. So just kind of that first line of defense there, I think it's been good.

Speaker 02 37:31

And your point was good because we actually our team is providing support to their CPA because their CPA's job is to go into the tax return that they prepared and provide all that information. And so we then can come in and help with the other technical things of wait, they're going too far, they can't do that. And so we can work as a team to protect the taxpayers.

Speaker 01 37:56

Well, yeah, just to just applying all that policy and procedure perspective, pardon the alliteration, yeah, to to the whole audit, you know, and and making sure they're yeah, they're operating with the confines of what they're supposed to be operating in.

Speaker 02 38:07

Yes.

Speaker 01 38:08

And yeah, it's it's surprising how uh not how often, but but sometimes they'll just overreach just because they don't know, right? Because you know, IRS agents are still learning and and you know, especially with especially now they're they're kind of you know cut a little bit, their budget's cut. And so I I guess talk a little bit more about that, right? I mean, we're talking about an IRS, you know, agency that's kind of been cut down a little bit and government shut down every now and then. How is it working with them now? Is it is it different? Is it more difficult?

Speaker 02 38:36

It works well for us because of our team policy. We are very respectful to agents. We understand what they're going through. We are, I mean, the shutdown happened and we spent two weeks apologizing to agents for what they went through as we started, okay? And they were appreciate that respect. We don't come in and just make demands. I had an appeal that got canceled. Everybody else, the auditor was telling me, or the appeals agent was telling me, was just screaming and saying, when we're gonna get scheduled, okay? And I was last on the list. We were supposed to be, it was 40 days and we were day 41, like the day after. And so I kept on telling her, I don't want to do this until you're ready. I understand that this may not be able to be done for a while. Please understand. Yes, my client has waited two and a half years, but I also understand the difficulties you're dealing with. Right.

Speaker 01 39:29

And you're there people too.

Speaker 02 39:31

Yes, we're a team. And guess what she did? She called me and she said, I need you to pick a date. She goes, because I want you want having first choice.

Speaker 01 39:39

Yeah.

Speaker 02 39:39

Okay. And she said, because I'm worried that the end of the January, they weren't accepting any until January 6th. And then we took the January 6th, okay? And so anyway, and she said, I'm worried that there could be another shutdown at the end of January, and I don't want you falling. So one of the things we do is we're very respectful for that. And so, and we're just very understanding. You've got to understand they're down, they've lost, you know, callings. Um, it's hard when people will call and think, wow, you've been on vacation for 40 days. No, I didn't have pay for 40 days. I was stressed. And so we just again see them as a teammate, and no different than if I walked in and knew you had been on leave for 40 days because of an emergency, whatever it is, and I ran into you, I'd say, Hey, how are you?

Speaker 01 40:26

Yeah.

Speaker 02 40:27

We do the same thing with them.

Speaker 01 40:28

Right.

Speaker 02 40:28

And it's a respect situation. And for that reason, we've had no difficult. Um, it's it's it may take longer, but it was already taking a long time.

Speaker 01 40:36

Well, I I think that approach, just combined with y'all's just intimate knowledge of what to do at every step of the way, has it's been great to see. And and I think your track record speaks to it, right? I mean, we're we're penalties are abated left and right, and and appeals and refunds are handled in a timely, as timely a manner as they can be. And so just having somebody there that that knows the ins and outs, um, like like you and your team, I think has been a a huge asset to the firm and our clients. So if I'm taking away anything from this, it's hey, let's let's be proactive, don't be scared. When we get a notice, we know what to do. You know, please reach out to us and and we can we can hand we can hold your hand every step of the way, you know, to the extent you need it. So anything else to add or anything else to take away?

Speaker 02 41:18

And well, and same thing for an audit. It's scary and it's a pain.

Speaker 01 41:24

Yeah.

Speaker 02 41:24

Okay. And we tell I tell the clients that. I've always telling my own clients that, you know, it is a pain, but the way I explain it is it is just a part of being in business.

Speaker 01 41:38

Being a taxpayer, that's right.

Speaker 02 41:38

And being a taxpayer. You know if that you are signing this and if you're submitting tax returns, either 1040s or business returns, then that means they are gonna have to audit, or else if they don't audit anybody, then everybody can put whatever they want. And so it's just a nature of being in business. And so what you do is you don't worry about it, you make sure you apply, and you can't really have it, the fear, but you just know you've got to respond. And in the end, it's all gonna be okay. The one thing I explain to my taxpayers, we're gonna make sure they don't ask more than they can, that they're asking within the confines, that they're asking the right questions, that we're giving the right answers. So if everything is done right, then it's all okay and we get a clean bill of filth. I've had so many that they end up getting a refund because as the taxpayers digging for information, they go, Oh, I just found these receipts, I forgot to give you.

Speaker 01 42:30

Could be happy, I guess.

Speaker 02 42:31

And so that has happened to me. And also with audits, you need to know people aren't necessarily aware of this. A lot of our people weren't aware of this. Um, and I've got the experience is if the agent is doing right, is not doing right, and you know it, you can ask to speak to a manager and you can get the manager involved. And at one time I actually had to close the whole thing out, go to a manager, and they had us owing about $150,000 for two different years. And it was all wrong. So we went to the manager and didn't have to go to appeals. You have a right to go to a manager first and not go to appeals. So it's knowing all those ins and outs, which we do. Okay. So we went to the manager when we finished, guess what? It wasn't much, but they got a refund for both years. One was 10,000 and one was 21,000. And so, um what I explained to my taxpayer is just like you could find something that you forgot to give us that helps you, what if you find something that hurts you? Okay, then I also say that the purpose of this audit is to find the right answer. So if it is something that should have been included in the first thing, you're not losing because we're just correcting that. And so that

Speaker 01 43:47

Everybody needs to be made whole.

Speaker 02 43:48

Yes, and so that makes them feel good, and then we explain about penalties.

Speaker 01 43:51

Yeah

Speaker 02 43:51

And so every you're just trying to find the right answer as a team.

Speaker 01 43:54

Yeah, yeah. I I I love the approach. Um, it's been a great value add for the clients, obviously. And I appreciate you stopping by and giving us a little more insight into it.

Speaker 02 44:03

Okay.

Speaker 01 44:04

And uh and thank you everybody for listening. Uh if you do have any questions or or need any help, please reach out to Charlotte and the uh tax controversy group here at uh Mauldin & Jenkins and or visit uh MJCPA.com. Thanks.