Steve Richardson & Company, Certified Public Accountants
September 14, 2015
Boy-o-Boy; did I ever have a rough day at work!
Wednesday of this past week, I had a remarkable day at work; it wasn’t a good day. In fact, it was awful; but it ended well. I’m exhausted! I will tell the story and how I managed the IRS induced client crisis; and, at the end, I will tell you how this affects you and your business.
The story goes like this: for no reason whatsoever and without any prior notices or warnings, the IRS froze a client’s checking account. This account has over $100,000 in cash on deposit. This is a crisis!
In two days, on Friday, this client makes payroll and must pay his sub-contractors. Without access to this account a hundred or more people are out of work and this client is “out-of-business”. A failure to make payroll and pay subs in a timely manner would have very likely caused his business shut down to become permanent. In any event, the damage done to him would be difficult to calculate and impossible to repair.
My task was to get the IRS to release the lien on this client’s checking account before Friday – within one day! On the surface, this is a daunting task. The IRS is a bureaucratic behemoth; to get the IRS to research and release a tax lien in less than two days is very nearly impossible. One obvious thing: I cannot deal with this matter through the US mail. I much prefer to deal with tax and financial issues through the mail, mostly because I like having a history of the transactions in writing.
The only possible approach to accomplishing my task is to use the phones.
The IRS’s phone systems is a nightmare!
First I call the IRS Collections Department (logical right?). I called at 10 AM; I was on hold for 2-plus hours. I talked to an IRS human person for less than 10-seconds only to hear this: “you need to talk to business taxes; I’ll connect you.”
My call is transferred; I’m on hold for 2-more-hours! All the while I’m listening to awful music – interrupted every two minutes by a recorded message, “all of our agents are busy helping other taxpayers – please wait” or “do not hang up; our calls are answered in the order received”. I’m going crazy!
Finally, a human being answers the phone! Thank you God! The agent says that she is with “business taxes”. I’ll tell her my problem. She tells me that she does not have the authority to lift a lien but she can research the problem for me. And, she also says that she must do the research to find the problem otherwise she cannot transfer me to the person who can actually lift the tax lien. Ok; she does her research; her research reveals that we do not owe them any money.
She is puzzled; I’m puzzled too. The tax agent says that she needs to transfer me to collections so I can get the lien released. (I’ve already talked to collections once – it did not go well.) So, my phone call gets transferred again; guess what – 2-plus hours later an actual human being answers the phone; I say to the agent, thank you so much; I’ve been trying to talk to collections all day. To which he replies, “Sorry, sir; this is not collections. This is business taxes. (This is the same office I just talked to – they transferred me back to the same office but a different person.) I am frustrated. I tell the business tax guy just how frustrated I am. (I was polite! I promise.) I ask him – please transfer me to whomever can lift a tax lien. “Sorry, Sir; I’m required to ‘research’ the problem before I can transfer you to collections”.
So we get re-researched and discover two things: thing #1, we don’t owe the IRS any money and #2, we have the same problem researched only 2 and a half hours ago; he knows because the first researcher left notes in the file. (If you are keeping up, I’ve been on the phone for seven hours!) I’m tired; I’m irritable. I get transferred – yet again.
We’re on hold – again. After 15-minutes, I tell Liz, my assistant, that we may hang up and deal with this tomorrow. As I’m reaching to disconnect the phone – Collections Answers!!! You know, God did part the Red Sea.
OK; the Collections Officer reviews the research and agrees that the lien is inappropriate and quickly agrees to lift the lien. All this takes about a half hour; half hour is quick by IRS standards. In the mean-time I ask him what went wrong. What he said was important.
The Collections Officer said this, “Mr. Richardson, you and your client did everything right; this is entirely our error. I’m so sorry this happened; I’m doing everything I can to make it right.” He went on to say, “This taxpayer’s history runs from the old computer systems to the new system. Unfortunately, the old system and new system do not communicate particularly well.”
I got the lien released! Finally!!!
The trigger event
The trigger event was that a Civil Penalty of about $8,000 was assessed for failing to properly file W-2 Forms in 2010; our CPA firm requested and was granted a penalty waiver due to reasonable cause in 2011 causing the penalty to drop to zero. Well, the 2011 computer did not tell the 2010 computer that the penalty was removed; the 2010 computer “automatically” issued a tax lien against this Taxpayer’s bank account. It was a 100% automated and totally ruthless response – no human being researched the problem; no warning letter was issued; no judgement was applied. The short answer is this: it was a computer error! Computer error or not; it was ruthless!
What this means to you
The simple fact is this: the IRS is reducing its manpower and increasingly relying on computers. The reason that the IRS is doing this is to control and reduce costs. A laudable goal. But, it is a goal that must have human oversight and judgement applied at crucial points in the process. Issuing a tax lien seems to me to be a crucial point.
I have a big problem with this; computers lack human judgement. Also, computers lack any sense of the humanitarian crisis that bad application of tax law can create. They rely on logic like this: if we make less than 2% errors issuing a tax lien on a bank account, then we have been successful. I do not agree with that logic. If you are one of the 2% and an inappropriate tax lien puts you out of business, well that is a situation that has huge consequences for an honest taxpayer.
What you can do to protect yourself and your business
My story above demonstrates that you can do everything right and still find yourself engaged in an IRS initiated financial crisis. That doesn’t mean that you are defenseless.
The most important bit of advice I can give any taxpayer is this: when the IRS sends you an official letter or notice – respond; and always respond in writing. To state that as a negative: do not respond to the IRS by phone unless you have no choice.
The reason is simple: it is important to have a well-organized history of your dealing with the IRS. If you do, and you find yourself in a crisis, your first line of defense is your written history. I faxed my written files to each person who took more than 10-seconds to talk to me. My written records were very important in allowing the IRS to quickly research the problem and, in the final analysis, the “quick” resolution I got to this problem was due in large part to the organized nature of how we approached the IRS. (I have to give Liz a thank-you for that – she did a great job!)
I’m so sorry this happened
One of the most interesting things about my talk with the Collections Officer was his clear statement: “I’m so sorry this happened” and “I’m doing everything I can to make it right.” In 40-plus years of practice before the IRS, I’ve heard a sincere apology, from the IRS, maybe a dozen times. Sincere apologies from the IRS are rare.
The Collections Officer I talked to was a real gentleman. He had a warm phone personality; he was sincere. I appreciated his attitude so much. After the intense frustrations of the day, it was a kindness that made me feel like we could work together to protect “our” taxpayer. I deeply appreciate his statements and his attitude.
The number one problem with the IRS today!
The number one problem with the IRS’s customer services right now is telephone hold time. Related directly to that issue is a lack of gracious telephone manners by IRS officers. It is brutal, frustrating, and, to a degree, it is dehumanizing. (In defense of IRS customer service personnel, if I was trapped on the phone for 8 hours a day while staring at a computer screen, I might be a bit terse myself.)
The IRS’s increasing reliance on computers is inevitable; no matter how much we may want to go back to the human touch, it is not going to happen. I hope the IRS will do two things: 1) cut down on telephone hold time, or in the alternative, allow for a scheduled telephone call back. 2) Have my new friend, the very pleasant and professional “Collections Officer” teach the rest of the IRS how to be gracious and kind on the telephone.
Saying, I’m sorry, goes a long way! Thank you Mr. Collection’s Officer. (I have your name and number but I will keep it confidential.)
O-My; O-My; O-My
I’ve got to go; the Bank lost the lien release paperwork. And, their telephone system is worse than the IRS’s. What a Day!!!!
Steve Richardson, CPA