Tips for Promptly Resolving Employment Tax Notices

The key to promptly resolving employment tax notices is preparation, organization, and kindness, two payroll experts said May 14.

“If there’s a weird looking amendment, they’re going to come and ask you, ’Why does this look so weird?’” said Rebecca Harshberger, payroll expert and former payroll practice lead with Entertainment Partners.

The IRS and local tax authorities generally send employment tax notices for a variety of common reporting issues. Most notable among these are notices for incorrect reporting, frequent or odd amendments, delinquencies, or under- and overpayment of taxes.

Employers who claimed the Employee Retention Credit or the credit deferral can also expect to receive tax notices, said Mindy Mayo, managing director for KPMG. Together, the experts presented to attendees at PayrollOrg’s 42nd Payroll Congress, in Nashville.

Once a tax notice is received, employers should gather as much information as possible to create a clear timeline and detailed report of the company’s full exposure, said Mayo. A clear understanding of the tax issue, internal procedures, and the costs related to an unfavorable result should all be available for a speedy resolution. “Do a small internal audit and see if there’s something that internally triggered this [notice],” she said.

Before contacting the applicable tax authority, employers must fill out Form 2848, Power of Attorney and Declaration of Representative, to establish clear authority to resolve the federal or state notice. “Fill the form out, have an officer sign it, and be ready to fax it to the [agency]. Otherwise, you’ve just wasted time,” said Mayo.

Employers who fail to submit Form 2848 may still declare their representation by having an authorized officer of the organization confirm the employee’s representation via phone call to the agency. “That can happen too,” said Harshberger, “but in today’s world, I don’t know how realistic that is.”

Once the source documents and power of attorney are ready, it’s time to call the agency. “The trick to calling the IRS is to call them early or late,” said Mayo. “And do not call on a Monday.” For state and local issues, employers can increasingly rely on state portals to help promptly resolve their tax issues, said Harshberger, who noted that some notices may be resolved within four hours of contacting the local agency.

To avoid future issues with reregistering for a portal, Harshberger advised employers to use generic email addresses when creating portal accounts. “Avoid using emails attached to particular individuals in the organization, who may later leave,” she warned.

Employers are encouraged to note every detail in the call, starting with who you’re speaking with. Collection agencies generally lack detailed information on the issue at hand and should be contacted solely to ensure a hold is in place. “If you’re talking to a collector, ask for a hold,” said Mayo. An account hold will stop any liens or collection activity while a resolution is found. When requesting a hold, Mayo advised employers to “start high and start negotiating.”

If you’ve called and feel like you’re getting nowhere with IRS Agent, “hang up, and call again,” said Harshberger. “And If all else fails, ask for a tax advocate.” Employers with assigned agents, most common for larger corporations, can choose to escalate the issue in the event that no resolutions are found. “[Agents] have supervisors and bosses too,” Mayo said.

And never forget your right to appeal, said Harshberger. “Tell the agency why you think you don’t deserve the penalty, and why you disagree with it,” she said, reminding employers that an IRS denial may still be appealed, often by resubmitting a reworded version of your original appeal request. “Good cause” should also be explicitly stated in the letter, if any exists, along with any steps that are being taken to ensure the issue doesn’t come up again, Harshberger said.

Regardless of the type of employment tax notice received, Harshberger reminded employers of the two key ingredients to promptly solving tax notices – be kind and take detailed notes