Once a week, I get together with other CPAs and industry experts to talk about IRS and state trends. This is a great time to compare notes. Our theme on yesterday’s call seemed to be “What on earth are these states and IRS auditors thinking?”
Or maybe it should be, “Why on earth don’t our clients call us before they get into a hole we can’t get them out of?”
In this case, a colleague’s client got an IRS notice. He ignored it. Finally, he couldn’t ignore it anymore and he and his wife decided to save a few hundred dollars by doing it themselves, and not calling their CPA. They figured the best course of action was to go down in person to the IRS office and find out what was going on. His wife had more business savvy, but the IRS agent who came out to meet with them said she had to leave because they had their kids with them.
The taxpayer wasn’t really sure what was going on, but the IRS move to kick his wife out of the building made him think that the IRS was pretty powerful indeed. Who knows where they would tell him to go! (I mean, like as in to jail)
He said that he thought he ought to bring in his CPA to talk to the agent. The agent said, “You can do that, of course, but that means you have something to hide and it’ll just go harder on you.”
Anybody think the IRS agent has seen too many Law & Order episodes?
Anyway, the taxpayer was really frightened now and since his wife handled the business end of the business he really didn’t know what to do. Finally, the agent said that he could make this whole thing go away if he would just sign this piece of paper.
He did and left, relieved that the IRS notices were going to stop.
But they didn’t stop. Only now, the IRS was no longer after him for some missing paperwork, they were now saying he had admitted he owed almost $30,000!
He couldn’t sleep and so was channel hopping on TV one night. He found his answer! There were some very sincere looking lawyers saying that they could help him with all of his tax troubles. So, he called them. He said they told him they were lawyers. They also said that CPAs weren’t allowed to negotiate for him and so it was a really good thing he had called them instead of his CPA. It would have just been a waste of money.
He sent them money and that was the end of that. No, not the end of the IRS notices, just the end of any more contact from the late-night television ‘experts.’
And then on Friday, his business bank account was wiped out. The IRS levied and seized approximately $30,000. He has no money to pay his bills, to pay his employees, to pay the rent, to pay his payroll taxes. He is out of business.
That’s when he called his CPA.
So far, his CPA has called the IRS and confronted them on the nonsensical agreement that they frightened the taxpayer into signing. Their point is that it doesn’t matter whether he really owed it or not (he didn’t), they now have a piece of paper where he agreed he did owe it. And they have every legal right to seize assets to make sure they get the money.
His CPA called the television ‘attorneys.’ Guess what – they aren’t attorneys. And they do deny ever saying that they were to the taxpayer. They aren’t CPAs either. They don’t have the credentials, but what they do have is the taxpayer’s money. Hopefully he gets it back soon.
Oh, and what was the mistake the taxpayer had made that caused all this? He closed down one of his businesses and on the final Form 941 (quarterly payroll report), he failed to check the box that said ‘final.’ All it would have taken is a letter or a quick phone call by his CPA and none of this would have happened.
CPAs do have the right to negotiate with the IRS on your behalf. You have the right to refuse to be present at an audit and instead appoint your CPA to stand in for you. None of this needed to happen.
Morale of the story: If you get ANY kind of notice from the IRS or state taxing authority, call your CPA right away. Don’t wait and don’t try to do-it-yourself.