How to Deal with the IRS and Other Government Agencies€¦ · You owe money on your taxes as a result of these changes. ... If you can’t figure it out—ask for more information

©2016 The Payroll Advisor1

How to Deal with the IRS and Other Government

AgenciesPresented on Monday, September 19, 2016

2©2016 The Payroll Advisor

Housekeeping

©2016 The Payroll Advisor

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Credit QuestionsToday’s

topicSpeaker

To earn RCH credit you must


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Stay on the webinar, online for the full 60 minutes

Be watching using your unique URL

Certificates delivered by email, to registered email,

by October 19th

Our Focus For Today


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How to determine what is—and is not—an IRS notice

Step by step instructions on how to respond to an IRS notice

Dos and don’ts of corresponding with the IRS or any government agency

What is a DOL audit and how does it work

Tips on preparing for an audit

Best practices for payroll departments to avoid audits

About the Speaker


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Vicki M. Lambert, CPP, is President and Academic

Director of The Payroll Advisor™, a firm specializing

in payroll education and training. The company’s

website www.thepayrolladvisor.com offers a

subscription payroll news service which keeps

payroll professionals up-to-date on the latest rules

and regulations.

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Dealing with the IRS


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What exactly is an “IRS Notice”?

What steps should be taken when an IRS Notice is received?

Writing the reply

Asking for help

What is an IRS Notice?


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Any communication from the IRS to the employer is considered an IRS notice

For Example:

CP 108 - Problem With Your Federal Tax DepositInforms the recipient the IRS couldn't determine the tax type or tax period for which a federal tax deposit was intended and explains how they applied the payment.

What Steps To Take To Handle The Notice


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First, don’t panic

Second, don’t procrastinate

Third, don’t ignore it or assume nothing is wrong because you know you didn’t make a mistake

Finally – handle it!

Read…


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Read the notice very carefully

Make sure it is for you

See where and when the IRS says the error or mistake or whatever occurred

Understanding the Notice


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Usually called a Business Filer Notice

IRS sends Math Error notice to explain the changes to the taxpayer who filed the return

Notice explains the nature of the changes and includes an account statement showing how the changes affected the tax return

Includes a short description of the changes

Understanding the Notice


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IRS uses the letter/number code to identify the error

For Example: You got a CP 102 for a math error on Form 941

CP 102: We made changes to your return because we believe there’s a miscalculation. You owe money on your taxes as a result of these changes.

You need to “see what they see” and ask “are they right or wrong?”

IRS Sample Notice13

IRS Sample Notice14

IRS Sample Notice15

IRS Sample Notice16

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IRS Sample Notice


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IRS Sample Notice


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IRS Sample Notice



Examples

of some of

the codes

used

Current list can

be found at: https://www.irs.gov/individuals/ir

s-notice-or-letter-for-business-

filers




Verify and Investigate


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Verify the information in the notice

If they say a tax deposit is missing, is it?

If they did not receive a return, was it sent?

Not necessarily an error on your part

Could be misapplied deposit or ???

Handling It…


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If the money is owed pay it immediately

If there is nothing wrong on your side write a letter and let the IRS know

If you can’t figure it out—ask for more information

Owe the Money


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If the money is owed pay it immediately

Do not send with the notice but make as you normally do –EFT

Send letter explaining the deposit was made and when and include backup

Don’t forget to pay the penalties and interest that is included with the notice

Or ask for an abatement

If Nothing is Wrong on Your Side…


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If your research turns up an error on the IRS

Deposit applied to wrong quarter

Deposit not applied but was sent

Deposit misapplied or in wrong amount

Must tell the IRS how to fix it—they won’t figure it out themselves—that’s why you got the notice

Write a letter!

If You Need More Information


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Your research cannot come up with why your records and the IRS records don’t match

Write a letter!

Ask for a print out of your account

Ask that all penalties and interest be suspended until the information is received

Corresponding with the IRS


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Always in writing-gives clear audit trail

Be brief, concise and clear

State the problem, state the information needed if any or state the solution

One page or less

Identifying information in body of letter

Note attachments in body of letter

Corresponding with the IRS


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Proof of mailing

Be courteous and polite– it comes in handy later

Keep all correspondence in chronological order with all supporting documents attached

Authorization is important

Respond to further requests with same letter

Taxpayer Advocates Office


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Available if the problem cannot be resolved through the normal means

Must have proof of trying to resolve issue by normal means—this is where the paper trail comes in

Must show that there was a good faith effort to resolve – this is where being courteous and polite comes in

QETP Initiative and Audits


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QETP Definition:

Questionable employment tax practices (QETP) are employment tax schemes or practices that have no objective other than to avoid federal and/or state employment taxes.

Started November 7, 2007

What Is QETP


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Collaborative, nationwide program seeking to identify employment tax schemes and illegal practices

Increase voluntary compliance with employment tax rules and regulations

The Internal Revenue Service, the National Association of State Workforce Agencies, the U.S. Department of Labor, the Federation of Tax Administrators and the state workforce agencies of California, Michigan, New Jersey, New York and North Carolina worked together to develop the QETP initiative and endorse the memorandum of understanding (MOU) as a tool to help increase employment tax compliance at the federal and state levels.

What Does the MOU Do?


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The MOU allows the IRS and the state workforce agencies to exchange audit reports and audit plans, and to participate in side-by-side examinations, when appropriate

39 agencies from 37 states so far are involved

What is the Purpose of the MOU?


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The MOU facilitates cooperation and information sharing between the IRS and state workforce agencies

Increases compliance with federal and state employment tax filing and payment regulations

Increases compliance with Form 1099 and Form W-2 filing

Increases collection of federal and state employment/unemployment tax debts

What is the Purpose of the MOU?


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Enhances efforts to reduce the tax gap at the federal and state levels

Ensure that businesses are all operating on a competitive level playing field by ensuring that everyone pays their proper share of employment taxes

Leverages IRS, state and other federal agency resources to improve compliance with employment tax laws.

Employment Tax National Research Program Initiative ( ET NRP)


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Focused on independent contractors and fringe benefits

Fringe includes company vehicles and housing

Self-check to see if looking in all the right places

Audited 6,000 employers over 3 year period

DOL’s Misclassification Initiative


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MOU between DOL and IRS

Agencies work together and share information

Share info to decrease misclassification of workers as independent contractors

Reduce the tax gap

Improve compliance with federal labor laws

Coordinates efforts with participating states

Began in 2011—34 states are now involved


Nebraska added as of

9-6-16

Best Practices to Avoid Audits


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Taxation

File reports on time

Avoid deposit errors

Reconciliations are a must!

Wage and Hour

Monitor practices when checks are short to determine problem areas

Watch for nonpaid lunches and overtime

Tips on Preparing for a Real Audit


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Question why so you can prepare for

Who will handle the audit

Appearance is everything

Everything but not the kitchen sink

It’s a matter of time

Works and plays well with others

Go tell it on the mountain

Question Why


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When initially contacted ask why the audit is being conducted

Auditor should be able to tell you what specifically triggered the audit

SUI claim from independent contractor

Just your industry’s turn and you won the pick

This gives you the focus of the audit

Who Will Handle the Audit


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Will Payroll?

An outside CPA or firm?

Decide and let the auditor know up front

Appearance is Everything


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Looking prepared is important when faced with an auditor

Office—clean is a must!

Organization of material before auditor arrives

Business attire for entire staff

Everything but not the Kitchen Sink


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Give all that is asked for

Make sure to clarify what the auditor needs if there are any questions—in writing if possible

Do not assume

Do not give more than is asked for

Records should not include any information that is not specifically requested.

Even if you have to cut and paste

Everything…


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Set an office or conference room aside for the auditor

Don’t let them sit in the middle of the payroll office amid all your records

He/She gets what they asked for and no more or less

Everything…


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Never volunteer

If you think the auditor could use it—don’t ask!

If you think it is pertinent and falls within the scope of the audit but the auditor didn’t ask for it—keep it to yourself!

It’s a Matter of Time


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Begin preparing as soon as the notice is received

Plan it out

Create a master check list

Assign tasks with completion dates

One person in charge of audit

Works and Plays Well With Others


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Cooperation with auditor is essential

Be polite

Be respectful

Be professional

Make sure staff is too

Go Tell It On the Mountain


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Management should be informed of the audit as soon as possible

Legal counsel should be included in every step

Including approving the final paperwork to be given to auditor

Are There Any Questions?


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How Can Ascentis Help Me?

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Process payroll

• Real time flexible processing

• 100% accuracy

• Reduce processing time by up to 30%

Employee portal

• Paycheck data

• Paystubs

• Tax forms

• Paycheck simulation tools

To earn RCH credit you must


53

Stay on the webinar, online for the full 60 minutes

Be watching using your unique URL

Certificates delivered by email, to registered email,

by October 19th

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Watch from anywhere, at anytime, at no cost to you!

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How to Deal with the IRS and Other Government Agencies€¦ · You owe money on your taxes as a result of these changes. ... If you can’t figure it out—ask for more information