I. Life at the IRS -- "Who's Your Daddy?"
Compared to the agency that existed in the "good ole days" before "reorganization" [seems like just yesterday, doesn't it?], today we are dealing with a demoralized, centralized, mechanized, computerized, and very frustrated group of individuals who still work there.
Many feel impotent, unsure, and unhappy; many are just counting their days until they can retire - even early. Many veterans - some of whom were accustomed to (and capable of) making decisions have taken "early retirement" because they did not want to become "re-engineered" along with their jobs.
So who are we left with? In many cases, we find ourselves working with less-experienced employees who are often far away from us (geographically). Or, if local to us, often their group managers may be in other states, other timezones, and in some cases, even in other worlds!
Since so many processes and procedures have been centralized, cases that would have previously been worked locally, must first be sent to their central processing site, and only if they meet exceptional criteria, might they be sent back to our "neighborhood"...
So what type of culture is the result? What is the impact?
Both practitioners and IRS employees are frustrated! It is becoming harder and harder to get cases resolved, more time and effort is going into managing these cases (at least on our part as practitioners) and more of our hair is turning gray (i.e., if we still even have our hair!). We are spending more time documenting IRS employee names, "badge numbers", telephone numbers, and other contact info. Whereas in the past we may have only dealt mainly with one "service center", today we must deal with several "campuses"; each case could involve dealing with IRS personnel all across the country, and we are likely having to pay attention to timezones in different parts of the country, and we most certainly must learn to live with voicemail.
Documentation is now our best friend. At a bare minimum, we need to be copious notetakers. Even better, is to become a "memo-maniac". It would be so much easier if the IRS would permit us to communicate via email, but, unfortunately, that is not yet a tool that is permitted.
It has certainly become harder and harder to find those brave IRS individuals who can really help us; those who are not afraid to make a decision now, when management may be located far away and quite removed from the field, and therefore, it is much easier to hurl criticism and havoc on those who may be trying to "do the right thing". What incentive does an IRS employee have to actually help us now?
We can lament, we can reminisce about the "good ole days", and we can complain amongst ourselves, but we must accept the reality that the IRS has changed. For better or worse, welcome to the wonderful world of tax controversy ...
II. Becoming the Best Advocate For Our Clients
Here is the "secret" key to success: Be (or become) proactive, NOT reactive. What do I mean by this? Communicate. Document. For those of us who are tax return preparers, we can begin by using our clients' tax return. Use notes, footnotes and statements [what I often refer to as "white paper" disclosures] for situations that are not "routine". First of all, I do understand that this may pre-empt electronic filing, but it sure works well when you can point to a "white paper" footnote or schedule to explain a transaction or a position taken on the tax return. This has the added advantage of helping to mitigate any problems that may rear themselves with potential preparer penalties [perish the thought], as well as documenting your clients' facts, circumstances and analysis in the (increasingly more probable) event of an audit. They must be thoughtfully and intelligently written, which means more work and more research and more time and greater cost (does this mean greater fees for us?)...
Beyond the preparation of the "proactively prepared" tax return, we must be able to respond to sometimes confusing correspondence from our government. Even when the IRS letter is not confusing, just receiving any letter with the return address from the IRS, is enough to truly frighten even the most macho of our clients.
III. Opening The Lines of Communication - Writing Effective (and Persuasive) Letters and Memos
In the light of all of the changes to Circular 230 and its "bestpractices", one could not possibly disagree with the importance of writing letters and memos. The key, however, is to write letters and memos which are EFFECTIVE.
The truth is, there are undoubtedly some instances where your finest letter will not be read, or if it is read, it will not be understood, or even if it is understood, it may still be ignored.
Therefore, some of the cynics among us may ask, why put too much effort into these writings? The answer is: because it is important; and more importantly, because it is smart.
Writing effectively to the government taxing authorities will make you look professional to both the government and to your client, and is the ideal way of documenting how you are keeping your client informed, as well as establishing a "paper trail" of your efforts. Although you may not always be successful at receiving a response from the addressee, your letter will help you to get help from the Taxpayer Advocate, should it become necessary.
General "tips" for effective letters and memos:
1. Avoid addressing letters to P.O. Box addresses. wherever possible, obtain the most direct street address (with the correct "Mail Stop");
2. If you do use "certified mail", understand that it is a waste of money UNLESS you reference the Receipt Number on the Letter or Memo (or other enclosure) in the envelope. Without it, the IRS has been known to slyly suggest that, while they received your envelope, as far as they are concerned, it was empty!
3. If you fax your letter, maintain a master log and all transmission receipts.
4. Write in the style of an expository essay with a respectful tone - and try never to be condescending -- and G-dforbid, never personally attack or try to insult the addressee. KEEP IT PROFESSIONAL;
5. Be succinct. I try to keep my letters to one page;
6. Write plainly without using too many "$5 words", unless you are writing to an Appeals Officer or District Counsel lawyer [in which case, invest in a good thesearus and bring out the "$50 words"];
7. When trying to persuade, use legal arguments wherever possible. Emotional arguments should be your very last resort. Use citations and references to the law, regulations, revenue rulings, revenue procedures and court decisions freely;
8. Always copy your client on each letter, and consider who else should be receiving a "cc" and who should be receiving a "bcc" [but be careful to preserve client confidentiality on disclosure to third parties];
9. Present the fact that you are writing letters on your billings to clients. There will be some letters which will undoubtedly be billable and your diligence should be appreciated by your clients;
10. Find the time to take a class in tax research and legal analytical writing and/or ask a lawyer friend to "train you" in writing simple briefs. It is an enormously powerful technique for communicating with the people in Appeals!
IV. Managing Client Expectations
In countries where bullfighting is popular, they will tell you that sometimes the bull wins the bullfight.
This is certainly true, and it can happen for a variety of reasons including simple bad lack.
Especially in our current recessionary economy, desperate clients may be more inclined to sue a practitioner that they view [read that as: 'an attorney views'] as "incompetent" or "negligent", regardless of whatever oral warnings, admonitions or disclaimers we may have given
Therefore be careful to manage the expectations of the client, and never ever give a client a "guarantee" as to any specific result. I recommend using a Disclaimer document for this purpose, and have the client "sign off" on it before you begin the work.
A copy of my Disclaimer document is included in the Appendix.
V. Finding HARMONY - Can you Make the IRS Work WITH You Instead of AGAINST you?
The Current IRS Priorities
It is ALL about MONEY - more and more of it. More funding for the IRS so that they can focus on increasing compliance, increasing enforcement and increasing collections!
This translates into MORE audits, greater intensity of collections and the enforcement programs that accompanies each of these.
The mandate of the current IRS Commissioner, Douglas Shulman, has proved to be quite consistent with Former IRS Commissioner. Mark Everson, whose mantra [in own words] was: "At the IRS our working equation is service plus enforcement equals compliance. Not service or enforcement; we have to do both ". [Remarks of Commissioner Mark Everson before the National Press Club, Washington, D C, IR-2004-34, March 15, 2004].
A word on "Attitude Adjustment"
Before we get too far into the discussion of the functional areas, I think it is critical to remember that, as with all conflict resolution, we must be sensitive to understanding the human interactions that will still occur. We will be working with other humans and we should try and make these relationships/encounters - however brief they may be - as pleasant and as personal as possible. In the past, I have sometimes used the metaphor of a "dance" to describe this phenomenon, and I continue to extol its virtue; the "dance" should be choreographed with great sensitivity to our own attitudes, and to engaging our "partner" to dance with us as gracefully as possible. I believe that we must balance our responsibility to zealously represent our clients against our responsibility to the "tax system" and always behave with each IRS Revenue Agent, Tax Compliance Officer, Revenue Officer, Appeals Officer, Technician and all other Service employees, with the greatest integrity. Our individual reputations as well as our "collective reputation" (as a profession) will be our greatest legacy.