Understand the solutions, options and process involved in addressing each issue. Experience helps here. However, most firms don’t perform enough repetitions to understand, in detail, the process and solutions for addressing each particular issue. Notices can lead to more notices if practitioners don’t also understand related issues. In a simple example, if you filed a late return for a client but didn’t address the underlying reason for filing late, the IRS may send penalty notices next.
There are several effective steps you can take to take to address an issue. Responding to the IRS in the format that it expects can prevent delays. A common example is an IRS underreporter notice. Often, practitioners send an amended return to the IRS to correct the underreporting.
This actually confuses the IRS process because there are two active client transactions in separate areas of the IRS: the underreporter unit and a filing service center. Ultimately, the IRS has to coordinate the amended return with the CP2000 to post the correct changes. This often leads to long delays and incorrect assessments.
You can also create a central “situational” file of best practices for the most common notices and issues. Maintain situational standard templates, including letters and correspondence, analysis worksheets, interview guides, checklists, call scripts and forms, that use best practices for dealing with the IRS and states. Keep the templates updated and in a central file for access across your firm.
Establish a system for tracking progress, status and deadlines across your firm. The problem with post-filing work is that the IRS doesn’t set a date each year for all IRS compliance deadlines; notices and issues are a year-round problem. Deadlines depend on the type of notice or issue and the date the IRS demands a response. Therefore, each firm must develop process workflows and reminders to operate efficiently.
Technology can help. Some CPA offices use simple calendar reminders. Others use more complex workflow systems to monitor status, create accountability and track actions. At a minimum, CPAs should use calendar reminders and share these deadlines with other firm members when dealing with IRS and state notices and issues. Centralized file management also helps with organizing and accessing client documents.
Going forward, tax practices should look for firmwide workflow and practice management systems that can produce real-time reporting, status and accountability of client post-filing issue progress.
There’s no doubt that the IRS and state compliance environment has changed. As CPAs look to solidify themselves as their clients’ year-round tax advisor, they have an opportunity to improve client service and firmwide efficiency. Doing so starts with establishing a set of best practices for post-filing work that allows firms move from a reactive approach to a proactive process. Practitioners who take advantage of technology to centralize files and templates, track status and respond to the IRS quickly and efficiently will position themselves ahead of the curve.