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IRS Tax Problems

Interview with Sharon Morgan: How to navigate through an IRS notice.

by
Lee Reams II
on
9/3/2015
Interview with Sharon Morgan: How to navigate through an IRS notice.

This Google Hangout interview with Sharon Morgan, IRS tax problem specialist, covers how the IRS notifies you of an action through a CP2000 notice, IRS phone scams, bank levies, offer in compromise, IRS budget cuts and when you should work with a qualified professional.

Learn more about Sharon Morgan, EA, CRTS.

Lee Reams:

Hi, today I’m joined with Sharon Morgan and we’re going to discuss navigating through an IRS notice. Good morning Sharon, how are you doing today?

Sharon Morgan:

Good morning Lee, I’m great, how are you?

Lee Reams:

Very good, very good. I kind of want to start out before we get into the questions and what we want to talk about today. Give the audience a little bit of background of who you are and why you focused your career, we’re going to talk about the IRS and solving IRS tax problems. I want to give the audience a little better understanding of who you are and why you do what you do.

Sharon Morgan:

Alright, well my original background was marketing and we used to place national TV spots on radio and TV, and we ended up with a couple of our largest clients were the tax resolution company out of California. We were doing those national radio and TV campaigns for pennies on the dollar, settle your taxes. It took me a couple of years to realize these were salespeople answering the calls and making promises that were not real, and basically ripping off the taxpayer that was having tax problems. So I decided to become a federally licensed Enrolled Agent and start my own company in the tax resolution industry.

Lee Reams:

Explain to me a little bit about for the consumer side, what exactly are these pennies on the dollar institutions? What are these companies trying to do? Are they more sales factories and call centers or are they actually trying to help people? What is your experience?

Sharon Morgan:

Most of them were just trying to get the money upfront, they were salespeople. They had no idea how to resolve tax problems or even understand tax problems.

Lee Reams:

That’s a good point to kind of red flag number one is be careful who you work with if you do receive an IRS notice, and that kind of goes into my next question. Right now the IRS phone scams are grabbing headlines, everywhere you’re seeing different scams and how many people are affected, but how does the IRS notify you in case of an audit or some sort of collection action?

Sharon Morgan:

The IRS, 99.9% of the time is not ever going to call you. They’re only going to call you if a Revenue Officer has been assigned to your case. Their first line of communication is mail and then more mail and then more mail and then certified mail. Calling you is not generally something that’s ever going to happen.

Lee Reams:

Okay, what are the obvious signs that there’s a scammer contacting you? Please elaborate a little bit on ways they try to trick you.

Sharon Morgan:

This is a huge, huge problem right now. It is happening widespread. If you get called by someone claiming to be with the Internal Revenue Service and they threaten you that you do not go put money in their random bank account right now, they are sending someone to arrest you, it is 100% a scam, you need to just hang up and block that number.

Lee Reams:

Okay, it would be common sense you would think but I know that a lot of people are tricked so the techniques they’re using seem to work. Let’s go to a real IRS notice. What would be the first advice you would give a taxpayer who receives a government letter?

Sharon Morgan:

I get clients all the time that hands me a stack of IRS notices that they’ve never even opened. My best advice is open it and read it. If you can resolve it quickly and easily which most of the time you can, they’re just asking for additional information, do it. If it’s something you can’t handle on your own then seek professional tax help on the best way to handle it.

Lee Reams:

You say a lot of people get the letter and they sit in their inbox, so you’re saying respond quickly or within a certain period of time. Does the notice tell you how long you have to respond?

Sharon Morgan:

Yes the notice will give you a timeline, it’s generally 30 days, and they will almost always follow up with a second letter giving you 30 more days. Usually you should just open it and respond. A lot of times it’s something you just mail right back to them.

Lee Reams:

The notices are computer generated or something like that?

Sharon Morgan:

Most always the first few letters are just computer generated, there might be an under-reporting of income, they might just be telling you they made an adjustment to your account.

Lee Reams:

Okay, then what are some tips if actually it does take it to another level? What are the main reasons that the IRS is starting this audit on you?

Sharon Morgan:

The number one reasons that you’re going to be on IRS’s radar is under-reporting of income, if you have foreign bank accounts, if you are self employed and are claiming high business deductions, and anyone earning over $200,000 is more likely.

Lee Reams:

What are some tips then in preparing for an IRS audit, tax audit? What would be your best tips for people?

Sharon Morgan:

Be prepared with your records, your supporting documents, to be able to claim whatever exemptions and deductions you claimed. That’s most important. If you can’t justify those exemptions and deductions then you might end up owing some additional taxes.

Lee Reams:

What would be an action, let’s say that you do respond. When do they put a bank levy on, there’s a lot of news about bank levies and I want to get an idea of how do they do a bank levy and then two how do you get a bank levy lifted?

Sharon Morgan:

One, bank levy takes a long time that means you have ignored all of their previous notices, basically, and they will generally send you a certified letter at that point letting you know that you’re in jeopardy of a bank levy. If you don’t contact the IRS at that point and enter into some sort of arrangement with them, like an installment agreement or currently not collectible status, or provide them a financial statement that they’re requesting, they will just have your bank seize whatever funds are in the accounts. The bank has to hold that money for 21 days before it hands it over to the IRS, so during that 21 days you once again have another chance to enter into an installment agreement or work out some sort of resolution with the IRS to have those funds released back to your bank account.

Lee Reams:

Basically then there’s a bunch of different ways that you can negotiate with the IRS, is what you’re saying. To get an actual bank levy on you means you haven’t really been communicating with the IRS at all?

Sharon Morgan:

You put your head in the sand and you have ignored them and not given them the information they’re requesting, so then they give you a nice little wakeup call by seizing your bank accounts or contacting your employer and putting a wage garnishment on your pay.

Lee Reams:

Alright, it gets embarrassing and even worse.

Sharon Morgan:

It’s horrible.

Lee Reams:

I do have a question, going a little off track, is there a statute of limitations on trying to collect back taxes?

Sharon Morgan:

Yes, there is a statute of ten years and that is ten years from the date the tax was officially assessed, not from when you filed your tax return or when your tax return might have been due, it’s when the tax was assessed to your account.

Lee Reams:

I guess you could wait about ten years is what you’re saying, so instead of negotiating, if you put your head in the sand, ten years later if they seize everything you could theoretically wait them out.

Sharon Morgan:

You could ride out the statute clock but that’s hard to do, the IRS does not want you to do that so they ramp up their aggressive collection tactics way before the statute clock runs out.

Lee Reams:

I was half joking. I do have a question here.

Sharon Morgan:

It does happen.

Lee Reams:

It’s there, right, so let’s talk about something I hear often though I don’t know if everyone understands what it is. What is an offer in compromise?

Sharon Morgan:

That is for people that owe a lot of money that they have no ability (00:08:46 - livefeed glitch) compromise. It is a very unique formula that determines whether you qualify and what amount your offer should be. You can’t just barter with the IRS, you can’t just say “oh, I owe $100,000 can I pay you $10,000” you have to look at your equity, your assets, your reasonable collection potential over the statutes dates. It is not a simple process to go through.

Lee Reams:

At that stage I think if you owe a certain amount of money, what would be the difference between trying to handle or negotiate with the IRS on your own? We started off this interview talking about these pennies on the dollars advertisers, so I’m looking at that’s an option, people hear it all the time. If you have a certain amount of tax debt and you actually do owe it, at what point do you work with a professional? What type of professional do you recommend in dealing with the IRS?

Sharon Morgan:

Well it depends on how bad your tax problem is. If you’re going to do an offer in compromise, I do not recommend going it alone because it is a very complicated process and it usually takes about two years to go through. If it’s just a simple installment agreement and you owe less than $50,000 you just call up the IRS and request a payment plan. You take your total liability, divide it by 72 months, and that would be your monthly payment.

Lee Reams:

Okay, so depending on the complexity and whether you’re fighting what they’re coming at you with for whatever reason that will be your guidance. If you do owe it and it’s under a certain threshold you can try and negotiate on your own, otherwise if it’s more complex or a higher number you definitely need professional help is kind of your guidance here?

Sharon Morgan:

Right, if you know you cannot make that monthly payment on an installment agreement and you need to look at a partial pay installment agreement, a currently not collectible status, or an offer in compromise, then you should really seek professional help to help you through that process.

Lee Reams:

Okay, let’s just kind of close this up and the overall feelings about dealing with the IRS and the budget cuts that they have now. How much more difficult is it for a taxpayer to reach somebody in the IRS or even for a professional representing you. Give me some idea again with the cuts in the IRS in the budget, what’s happening there?

Sharon Morgan:

It’s horrible, it’s a nightmare, it takes forever to get through. They are even doing what we call a courtesy disconnect. They say “we’re disconnecting on you because the wait time is too long” and they’ll just disconnect you. Even for me who supposedly has what we call a “priority practitioner hotline” it’s not so hot either. My average hold time could be an hour to two hours just to get transferred and wait all over again.

Lee Reams:

We read some stories about that, it gets a little political there, but it does make it even worse when you have an action on you and low and behold you can’t even talk to anybody.

Sharon Morgan:

It’s horrible. You would think if they’re going to send out all these notices you’d be able to get hold of somebody to work something out with them but it’s nearly impossible, you can never get the same person twice if you have to call back. You have to start all over again, it’s a challenge.

Lee Reams:

Wonderful Sharon, we appreciate all the insight you’ve given us today and I hope this has helped the normal average taxpayer and maybe it will take a little bit of stress out of them if they do ever receive an IRS notice. Again, thank you very much Sharon.

Sharon Morgan:

Thank you, Lee. 

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Lee Reams II

Lee Reams II

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I am a tax and business news junkie who has spent the last 20 years developing and executing "best in class" word-of-mouth marketing campaigns for tax and accounting professionals. With TaxBuzz and CountingWorks we have taken that same commitment to quality content directly to the consumer. Keeping you up-to-date with the latest tax law changes, business growth tips and planning strategies to help you reach your best financial outcome.

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