Little-known Status 53 can be a lifesaver in times of hardship

Many clients that come to JK Harris seeking resolution for their tax issues are enduring some type of financial hardship. Sometimes it is the tax liability they owe that is causing the problem, but often other events in their life have left them unable to pay their tax liability.

For some clients, what’s known as a “Status 53” can offer them breathing room when they need it the most. A Status 53, also known as “Currently Not Collectible”, is available to certain taxpayers that meet the IRS’ determination for hardship. According to the IRS website (www.irs.gov), “a hardship can be due to financial, medical, or unpredictable events such as natural disaster or unemployment.” In other words, if paying their tax liability will cause undue hardship on the taxpayer (and their family), they may qualify for being placed into Status 53.

Status 53 allows taxpayers to defer making payments on their tax liability due to a lack of adequate income. Being declared “currently not collectible” allows them to provide for themselves and their family.

There are important considerations to think about before pursuing Status 53. Once placed in CNC , the IRS continually monitors clients under this provision and they may be changed back to “collectible” status if the taxpayer’s income increases enough. Penalties and interest continue to accrue during the period the taxpayer remains under Status 53.

Recently, the tax team at JK Harris got a Status 53 in place for the Martin family of Mt. Sterling, Kentucky. This family had undergone several traumatic events and already faced economic hardship when they received notice that they owed $56,649 in back taxes, interest and penalties. Working closely with their Case Specialist, they qualified for “Currently Not Collectible” status.

“I really don’t know how to express how much JK Harris helped us,” Mrs. Martin said. “Thanks for everything, JK Harris.”

As far as we’re concerned, the $56,649 we saved the Martins is thanks enough.

Patience is a virtue in the Review and Oversight Department

Chris DuBeau, Director of Support Division

It takes a special kind of person to work in an environment in which you hear mostly complaints and process refund requests. In general, the Review and Oversight Department (ROD) is not always a place of pure enjoyment. Though it happens, it is unusual for a client that is requesting a refund to be completely positive and courteous. We have to be realistic about the fact that a number of the clients who ROD deals with are not happy with our company by the time they get to us.

In order to work in ROD, you have to be knowledgeable about the work we do in this company. You also have to be detail oriented, inquisitive, customer service oriented and patient. Active listening is a very important tool. We allow people to vent while looking for key points to focus on, which will allow us to resolve the issues in an amicable manner. The best interactions we have are those where clients come to us with a negative perspective on things, and through the use of our knowledge, we find common ground.

Unlike going to a store to return a product for a refund, the process at JK Harris, like many businesses that provide a service, is not immediate. There are procedures to follow. First, the refund request must be sent to ROD in writing, via fax or mail. At that time, a thorough investigation of the case events is initiated. This initial investigation includes a determination of what work was completed on the case, addressing any complaints that may have been raised by the client and determining what the refund amount should be, if the client is indeed entitled to one. This process can take 30 to 45 business days.

After I review the determination for accuracy and applicable corrections are made, one or two documents are sent to the client. The first is a determination letter, explaining the findings of the investigation. The second is a general release, which is only sent to clients who are actually being offered a refund. This document releases JK Harris and the client from further claims involving the signed engagement agreement. If the client accepts the refund amount, they sign the general release and return it to us. Once the signed release has been received, it is forwarded to the accounting department to release a refund check.

And, of course, there are any number of situations which can cause a delay in the process. A big delay can come from the client disagreeing with the refund determination. If this is the case, the client can submit a reconsideration request. An individual not involved in the original determination reviews the case, considers the client’s points of disagreement and makes a final determination, which again must be reviewed by myself. If the client is still unhappy, they are eligible for legally binding arbitration through the National Arbitration Forum, an outside arbitrator who makes an independent refund determination.

Now not all refund requests are submitted because the client is unhappy with our service. There are instances when a client is genuinely happy but for whatever reason, usually financial, cannot proceed with their case. These are always the most pleasant people to deal with because they really seem to care about the company and it’s success. Nothing feels better than being able to get a refund check to these individuals in a timely fashion so they can address their personal matters. These are win-win situations because they result in a bond that can produce a future business relationship, or at least a positive word of mouth, which is our greatest method of advertising.

 

You Know the IRS Means Business When …

1.   They keep your Federal tax refund and apply it towards your current balance owed until that balance is paid off.

2.   They make threatening phone calls to you demanding payment by a certain date.

3.   They visit you, in person, at your home or place of employment demanding payment by a certain date.

4.   They file a Notice of Federal Tax Lien against your property or make a legal claim to your property as security for the payment of your tax debt. By filing this notice, your creditors are publicly notified that the IRS has a claim against all of your property, including property you acquire after the lien is filed. It is also used by courts to establish priority in certain situations, such as bankruptcy proceedings or the sale of real estate. The lien attaches to all property (house, car, boat) and to all your rights to property (accounts receivable of your business).

5.   They issue Notices of Intent to Levy giving you so many days to pay the liability in full or make payment arrangements before they issue a levy against you. A levy is a legal seizure of your property to satisfy a tax debt.

6.   They issue a bank levy, which attaches deposits that have cleared and funds that are available for withdrawal when the levy is received, up to the amount of the levy. Once the levy notice is received, the bank immediately freezes and holds the funds in all of your accounts and any family member’s accounts that have your name on them for 21 days. If the issue is not resolved in those 21 days, the bank must send the money plus interest, if applicable, to the IRS to be applied to your balance owed. This is a one-time occurrence, meaning every time the IRS wants to collect, they must issue a new levy.

7.   They issue a levy on your wages, salary, commissions or other payments for personal services. . The wage levy is issued to your employer, who must immediately begin withholding certain amounts of money from your paycheck to pay the tax liability. With a wage levy in place, you receive only a percentage of each paycheck. What that percentage is depends on your withholdings on your W4. The levy will remain in place until your balance is paid off, an arrangement has been made to satisfy the debt, or the time period for collections has expired.

8.   They seize your assets and sell them to pay your liability. The IRS will give a public notice of pending sale in the local newspaper and by posting flyers in the local post office or other public places. The IRS will deliver the original notice of sale or send it to you via certified mail to your last known address. After giving public notice, the IRS must wait at least 10 days before conducting the sale.

9.   They may serve you with a summons, an investigatory tool, similar to a subpoena, that will compel you or a third party to provide information, documents or testimony that will enable the IRS to determine or collect your tax liability. A third-party summons could be issued to financial institutions, third-party record keepers, person who are not available to cooperate on an informal request or any person with information that may be relevant to your case.

10. They can be assigned to a Private Collection Agency (PCA) for resolution. The IRS will send you a letter with the PCA contact information. The PCA will also send you a letter. These agencies will assist you in resolving payment of your tax liability on behalf of the IRS, advise you of outstanding tax balances or unfiled tax returns, and provide you with assistance for resolution of these matters.

10 things you can expect from the IRS when you owe a liability

1.   The IRS will continue to send you monthly statements and bills via regular mail, as well as any collection notices, such as “Intent to Levy” notices.

2.   The IRS requires financial documentation to show your current financial situation for an Offer in Compromise, Installment Agreement and Currently Not Collectible. In the case of CNC, the IRS will periodically review your status to see if you still qualify for the CNC.

3.   The IRS will continue collection/levy action unless a temporary “Stay of Collections” has been put in place or an Installment Agreement has been agreed upon. They will also place a lien on property in order to establish priority over creditors, judgment lien creditors and other lenders.

4.   The IRS believes if you can pay all the little extras, such as cable TV, Internet, cell phones, etc., you can pay them.

5.   The IRS will take all refunds until the liability of the client is zero.

6.   The IRS will require all tax returns to be filed because you may owe even more money on the unfiled years. Or if you are due a refund, they will put that towards your liability.

7.   The IRS will take into consideration any equity you have in real estate that you can borrow against and retirement accounts that you can either cash in or borrow against. They will expect you to use that money towards your liability.

8.   The IRS will not, under normal circumstances, release levies without setting up an IA to at least pay them something on a monthly basis. Bank levies will not be released unless you can prove hardship with foreclosure or eviction notices, final disconnection notices on utilities, etc. As for businesses, a bank levy may be released if the business can prove the money in the bank account is for payroll purposes.

9.   The IRS will continue to add penalties and interest to accounts unless an OIC has been accepted and the terms of the OIC met and paid.

10. The IRS expects you to pay your debt in some way, shape or form.

Audit is not necessarily a bad word

Ralph Havens, Director – Professional Services

As the Director of Professional Services, I am responsible for JK Harris’ Licensed Taxpayer Representatives group as well as the Tax Preparation, Audit Representation, and the E-file Departments. I deal with a variety of issues on a daily basis. From employee concerns to IRS issues and updates, tax preparation questions to audit cases, there is never a dull moment.

Although I have many issues to juggle, audit cases are my “pride and joy.” This is mainly due to the fact that I built this department, with help from some really dedicated employees, from scratch. I would like to give a lot of credit to our Chief Compliance Officer, Charlie Jones, for his help in this department. He has worked with me continuously and is still the person I go to when I need to pick his brain.

I got started in audits when I was in private practice, although I did do OICs and tax prep as well. Audits just require a high level of detail and close contact with the client. You get to know the client much better than you would in a simpler case. Our audit department is also a close-knit team, which makes the work enjoyable.

To the average person however, when you say the words “IRS audit” instantly you can sense the fear that those words bring. When one of our clients receives a letter from a Revenue Agent informing them that they are being audited, it usually puts major fear into them. As soon as a client contracts with JK Harris for representation, a Licensed Taxpayer Representative contacts them to discuss the issues involved in their case. This is particularly important with audits. Our audit team members must have an accurate picture of the client’s case and how they are being audited. While the IRS will audit a full tax return, sometimes they will only audit a portion of it, such as itemized expenses.

I am proud to say that my department acts with great professionalism in working with these clients. We are able to assure them that our team will handle the issues presented by the Revenue Agent so that the client will not feel that they are left out on their own. The Audit Team often displays its great knowledge and skill; they reduce the tax liability on a lot of clients that we help. I wish I had enough room in this posting to brag about each team member. From putting in countless hours to getting cases closed to saving clients significant sums of money, each team member has a particular skill they contribute to the Audit Team. JK Harris and I are fortunate to have such a great crew!

Top 10 things clients can expect during tax resolution process

1.    It may take 7-21 days from the date the client signs a contract before the contracted work begins as it pertains to the services contracted for by the customer. During this time, though, work is being conducted for the client as the Power of Attorney (POA) is being filed with CAF (Centralized Authorization File) and the Master File is being requested. The client should begin gathering documentation that will be needed by the IRS as soon as possible.

2.   Throughout the entire process, the client will still receive correspondence from the IRS via mail. The IRS is legally obligated to send the client bills, monthly statements, etc. Once the Power Of Attorney (POA) is on file, the client should not receive anymore phone calls from IRS.

3.   The company name is not on the POA on file with the IRS because a company name cannot be on the POA. The POA has to have an individual’s name on it. Thus, the POA that is on file with CAF will have the name(s) of the authorized representative(s) working for the company.

4.     If the client is in collections with the IRS, levy notices will be sent to the client. It is up to the client to let the company they are working with know about these notices. Collection/levy activity cannot be stopped. However, a Stay of Collections (SOC) or a temporary delay in the levy process can be requested so the file can be worked and an OIC, IA, etc., be completed and submitted to the IRS. If a levy is put in place, an attempt can be made to get the levy released. The final decision on a release of the levy is up to the IRS.

5.   The IRS requires the most recent three months of financial documentation. It is often suggested to clients that they continue gathering this documentation on a monthly basis and send it to the company hired to prepare their case so the most current months are always on file. The figures from the financial documents need to be inserted into the correct IRS forms, which are submitted to the IRS with the client’s signature. The IRS may then ask for additional, updated documentation to continue.

6.   The ultimate decision to accept or reject an Offer in Compromise, Installment Agreement or Currently Not Collectible Status rests with the IRS. The successful submission of any of the above is not a guarantee that it will be accepted.

7.    The dollar amount for an OIC comes from monthly income and expense documentation supplied by the client. The allowable monthly expenses are subtracted from the monthly income to equal the Monthly Disposable Income (MDI). The MDI is multiplied by either 48, 60 or the number of months remaining in the statute to come up with Future Income Potential (FIP). Any money in bank accounts or retirement accounts, as well as equity in real estate, vehicles, etc., is added to get the OIC amount.

8.   Not every bill is considered an allowable monthly expense by the IRS. The IRS will not accept bills for cable TV, the Internet or cell phones unless these are needed as a term of employment and are not reimbursed by the client’s employer. Medical bills without proof of payment will not be considered, nor will federal student loans for anyone other than the client, or charitable contributions unless it is needed as a term of employment.

9.   The IRS retains the right to impose a monetary penalty for “frivolous submissions.” The penalty applies to frivolous claims made on tax returns, requests for a collection due process hearing, applications for an Installment Agreement or Offer in Compromise, and Applications for Taxpayer Assistance (ATAO’s/Form 911). The IRS recently increased the penalty from $500 to $5,000.

10.   Once the IRS has the OIC, the customer and company preparing the case for the customer are on the IRS’ timeframe. The Offer Examiner (OE) may request additional or updated documentation. Once they have all of the documentation, they will send out a preliminary analysis, which states whether they are recommending the OIC for acceptance or rejection. The OE may also counter with a different dollar amount, depending on their analysis of the client’s financial situation. If it is recommended for rejection, the client can supply more financial documentation within 14 days to counter the rejection. If the Offer is rejected, the client may or may not have grounds for an appeal, depending on why the OIC was rejected. An appeal can take up to another 90 days. If the OIC was recommended for acceptance, it still has to have final approval. Additional updated documentation may be requested again. There really is no ETA as to when the IRS will have a final decision.

Tax Resolution Can Be a Very Rewarding Business

Christy Pepper, Director of Primary Tax Services

I am sure that most people don’t call a fast food restaurant and tell the manager what an excellent burger they just had or what wonderful service they received at the drive-thru. No, they call to say that the person was rude and “you forgot to put cheese on my sandwich.” The same holds true for any business, including JK Harris and Company. The perception of what I read on the Internet and when I talk to some of the clients is that we are not providing the kind of customer service they expected. Unfortunately, most clients don’t call me to tell me what a wonderful experience they are having with our company and how we saved them from their overwhelming tax dilemma.

It goes without saying that every case is different. Where we feel we have been very successful at resolving a client’s tax problem, the client may not be satisfied with the results at all. I remember us helping a client settle a $100,000 tax debt with an accepted offer of $50,000. Despite cutting the liability in half, this client was absolutely dissatisfied with the settlement and, in fact, requested a refund. However, just recently we settled a client’s tax debt of approximately $35,000 for $10. That’s right Ten Dollars. Of course the client was absolutely ecstatic, and it was worth the tension and frustration along the way.

What many people may not understand is that settling a tax liability is not a quick and easy task. In most cases, we are in negotiations for many months. I think clients can get worn out and tired of gathering all of the mounds of documents that the IRS requires, and they get frustrated. A lot of times, we’re there for them to vent their frustrations. It can take its toll, but we know we have been hired to represent our clients’ best interest.

For the most part, clients aren’t taking time from their busy schedule to flood us with complimentary phone calls. Over the years, I have had a few clients call to make sure that upper management knew what a “gem” so-in-so is and we better keep our eye on that person. We also get written testimonials, singing our praises on a consistent basis. I’ve also seen clients send their Case Specialist gifts over the years, such as flowers, ties, candy, money (which we promptly return back to the client), ‘Thank You’ cards, and even a box of AFLAC talking ducks. The weirdest gift was a box of smoked salmon we received recently from a customer up North.

It can be perceived sometimes that our hard work goes unnoticed by the uninformed, but tensions are high and we do work under extreme deadline pressure every hour of every day. Everyone around here celebrates when a client goes out of their way to say “thanks for all your help.” In the end, the relief we provide our clients is our biggest source of satisfaction.

Kelly Scott dedicated to providing Excellence in Customer Service

For this week’s blog entry, I wanted to try something different. I am posting a conversation I had with one of our new directors at JK Harris, Kelly Scott. Kelly was recently promoted to Director of Training and Customer Service and has been with JK Harris since our early beginnings. We discussed Customer Service and her new role in leading the training and customer service departments at JKH.

John: Kelly, congratulations once again on your recent promotion! With this promotion to Director of Training and Customer Service, what are the immediate challenges you face with regards to Customer Service?

Kelly: Thanks, John. Probably the most immediate challenge is attempting to change (via the internet) the perception that some clients and former clients have about the level of service we are able to provide. In the past, our systems did not always support an immediate response to client requests. Our new goal is to have a 24-hour or less turnaround on all client messages, whether they are by phone, e-mail, or through the internet. For live calls, the results should be immediate. Another challenge is to expand our customer service training to include additional tools such as videos and hands-on role-playing activities. These methods will help insure that our new hires fully understand our commitment to customer service right at the outset of their employment and continue to see that commitment throughout their careers.

John: You have been working for me almost as long as the firm has been around. How do you feel your previous positions have prepared you for this new position at JK Harris?

Kelly: The overall goals for retail industries, where I worked in the past, and service industries such as JK Harris are essentially the same. The company’s product must be supported by quality customer service personnel who are able to assist the customer with his or her needs. Customer Service should also strive to address the customer’s concerns efficiently, while still encouraging a mutually beneficial outcome. Over the past 10 years, I have held numerous managerial positions at JK Harris, from Team Leader to Director of Operations, and I have had a hand in writing many of our policies and procedures, so I feel very comfortable stepping into this role.

John: What goals do you personally have for future improvements to Customer Service at JK Harris? How do you plan to achieve these goals?

Kelly: Aside from improving our initial in-house training, policies, and procedures, I am currently still looking for new ways to improve the department in the short-term. Long term, I would like to see the company add some additional staffing to the department so that we have the ability to be more proactive in our approach to servicing our clients’ needs. For example, customer service staff could monitor telephone calls, then make outbound calls to customers to address any additional concerns they (the customer) may have. The staff could also review past client histories and follow-up with clients who have had a concern in the past.

John: I know how much offering great customer service means to you, Kelly. Can you tell me about any specific time when you went above and beyond to make a client happy?

Kelly: I know there have been several times over the years when I’ve had to take down a client’s information and contact them from home after regular business hours, or I’ve come in on days off or on weekends to work cases that had deadlines. However, I’m not by myself. We have many other staff members who have done the same thing many, many times. I also prepare tax returns or do other things outside of my regular job duties, in some cases simply because it is more efficient. My current employees all share this same level of commitment and do everything they can to help customers when necessary. If they can’t help, they’ll find someone who can. Our Consultant Liaisons have offered to work split shifts so they can better assist our clients, which is a possibility in the future.

Kelly’s dedication to providing excellent customer service to our clients is obvious. Insuring our clients’ needs and expectations are met, if not exceeded is important, not only to Kelly, but to all of us here at JK Harris. If you feel your expectations have not been met, Kelly asks that you please contact us today at clientmessages@jkharris.com so that we can offer you a resolution to your concerns.