There may be errors in spelling, grammar, and accuracy in this machine-generated transcript.

Roger Harris: Hello everyone. This is another federal tax update podcast. I'm Roger Harris and as if you have listened to this before, you know, I am normally joined by Andy Schwab. But what is it they say when there's somebody from the 6:00 news, it's not there. They're on assignment. Well, uh, and he told me to say that, but she's really skiing. So, uh, [00:00:30] it's spring break, so I'm going to rat her out. And, uh, as much as she wanted to be here, it wasn't more than taking advantage of the spring break and going skiing. But I am not alone today, because that would be cruel and unusual punishment. If you guys have to listen to me by myself for for 50, 60 minutes. We have some wonderful guests. And before I introduce them, I want to kind of tee up what we're going to talk about. Because if you've been in this business long enough, you realize that, [00:01:00] you know, I think we all recognize that we have to get guidance from the IRS. We have to follow rules. We have to track legislation. But but more and more, there's activity in our courts that impact us or create opportunities or perhaps, uh, change something that maybe we didn't know change. So we thought it would be interesting to bring two expert people in the legal side of our profession and talk about some recent court cases.

Roger Harris: And we'll talk just generally about, you know, when to [00:01:30] bring people like our guest here and just talk about our whole tax system from a little different perspective as we are recording this on what is the first deadline? It's March 15th, which is actually the 16th. It's a Sunday, but, uh, so, um, hopefully when you hear this, you have made that deadline and heading home for the final one. But let me introduce our, our guest today. We have, uh, again, Jessica Marin and Peter and they're [00:02:00] both from the Frost Law firm. And a lot of you have heard the Frost law firm. I think you guys have. And I'm not you personally, but your firm has been present at some IRS forums and we get a lot of writing from them. But first of all, let me welcome both of you, Jessica and Peter, and we're happy to have you here with us. Uh, I'm going to let you introduce each of yourself because I won't do justice to your background and and why you're here. And then we'll dive into some topics. But, Peter, why don't you welcome. First of all, Peter, [00:02:30] glad to have you. Why don't you talk a little bit about your background and maybe tell those that aren't familiar with the Frost Law firm a little bit about the firm.

Peter Haukebo: Sure. So the firm itself, uh, is deeply rooted in tax controversy. That's where we all got our start. Uh, tax controversy, of course, is sort of any dispute with the IRS. Um, and there's a whole cycle to it. So from examination all the way through to making sure that we can help folks with [00:03:00] collection alternatives. Um, and we do both white collar and criminal work as well. Um, my background and getting into tax itself was through a low income taxpayer clinic. I taught at the University of Maryland for 5 or 6 years, but have focused my practice almost exclusively in tax over the years. And I'm a former chair of the Maryland State Bar Association tax section, and recently have been doing a lot of [00:03:30] the pandemic relief stuff from PPP and IRC and Eidl and all this sort of alphabet soup stuff that's out there. Um, and our firm has focused a lot of that and a lot of its resources on that kind of work as well recently.

Roger Harris: Yeah. And you're located in Annapolis, Maryland. Um, and our other guest, Jessica Marin, who, uh, I'll ask to introduce herself is on the beautiful coast of Florida, uh, where I'm sure [00:04:00] the weather is beautiful today. A lot better than it is here. And I'm going to be in Annapolis. But Jessica, welcome. Talk a little bit about your background.

Jessica Marine: Thanks for having me. Um, I am in Florida, but I am a Maryland native. Uh, just a recent transplant to, to sunny, warm Florida. But, um, so I, I too started at a low income taxpayer clinic when I was in law school and fell in love with tax controversy. I didn't even know it was a profession that existed. So that was that was a shock to me. I've now spent [00:04:30] about two decades, um, representing taxpayers in a variety of, of ways against the IRS and taxing state taxing authorities. Um, during my career, I also spent a significant number of years at the US tax court. So I have some government experience in my role at the US tax court. I started as a law clerk for a judge and went up the ranks. And my most recent role there I was a deputy clerk of the U.S. Tax Court, so I've seen a lot at the court.

Roger Harris: Yeah.

Jessica Marine: See [00:05:00] how the IRS approaches things when it gets to court. Um, and I was very happy to help lead the court's response to the Covid pandemic and moving our workers offsite, figuring out how to do remote proceedings so that taxpayers still had access to the court. And I also helped build the court's new case management system. So I have a little bit of it background as well under my belt now. But, um, I've boomeranged during my career between private practice and, uh, working for the [00:05:30] government. And so now I'm in another phase of private practice where I'm representing, I like to say real people with real problems and helping them navigate their issues with the IRS. Um, making sure that they're well represented, especially in this day and age when the IRS is underfunded, understaffed. It's really, really hard for someone to navigate the IRS without help. And so that's where our firm comes in.

Roger Harris: Yeah. And that's probably always been true, but it's just gotten worse that figuring out how to navigate the IRS or get to the right person [00:06:00] and get the right answer or get an answer that you can trust has been difficult. You know, it's funny when we hear controversy, I think a lot of people who think if they know how to prepare taxes, are skilled to handle any controversy that may come up. But it's really a different world than just preparing a tax return, the rules and the way you operate. Uh, just because you know how to prepare a tax return doesn't know that doesn't mean that you know how to properly represent someone you know at different stages. Now, we can all [00:06:30] handle a lot of the basic stuff, you know, respond to notices, an audit, but it can become a lot more challenging and a lot more difficult. And that's where people like you guys come in. Um, one of the things that drove us to, to having this podcast today, and I'll ask Peter to, to, to comment on it, uh, was a case called I think, I think I've got it correct. Quan. Um, which again, I'm betting that most of the people with their heads down doing tax returns right now have no idea [00:07:00] what the Kwan case was, what it means, what it did, but it's going to revert back to some of the things during the pandemic and, um, create some, probably some opportunities for, for us and our clients or are you representing our clients? Because again, I'm not sure if this is something that the average person who prepares taxes would want to get into. But Peter, talk a little bit about the case and what what it does and what it says, and then we'll kind of dig deeper into it. And Jessica, you comment, obviously [00:07:30] whenever it's appropriate here. This is this is a Democratic podcast. Everybody can speak when they want to speak. There's no there's no order here. But Peter, why don't you kick us off?

Peter Haukebo: Just real high level. The, the Quang case, uh, came out, the decision came out late November of last year. Uh, it was in the court of federal claims, and it addresses again like 10,000 foot view. What to think about certain deadlines and events [00:08:00] within the IRS that happened or didn't happen during the pandemic? And the case, by and large, and I think Jessica should jump in here a little bit. It is. Um. It's affecting the way people are looking at what happened basically between January 20th, 2020 and, uh, May 10th of 2023. And it's just applying in a very textual [00:08:30] way, uh, code that's that Congress wrote. And it's having some very interesting repercussions now that this opinion has come out.

Roger Harris: So let me say from a layman's term, this had to do with some deadlines. If I'm correct, where, uh, I'm, I'm, I'm, I'm, I'm going to butcher this because I'm certainly not an attorney. Uh. The way the IRS read it and determined deadlines to charge penalty and interest versus, [00:09:00] uh, I guess it's the intent of the law. And that's what you went to court to kind of get it cleared up. Am I getting close, Jessica?

Jessica Marine: Yeah, I can I can hop in.

Roger Harris: Yeah. Jump in and help me save me here.

Jessica Marine: It really is. It's about deadlines and how, uh, tax deadlines intersect with federal federally declared disasters. So, um, COVID was a, a long lasting, federally declared disaster. There's a code section in the Internal Revenue Code. It's [00:09:30] 7508 capital A, and it basically says that all deadlines are postponed during a federally declared disaster. And that's really high level. And so the IRS tried to cap it and say, yeah, but only for a year. And so what the court came through and said is, no IRS, you can't artificially cap it. So as a result, because the Covid pandemic officially lasted from January 20th, 2020 until May 10th, 2023, that's when President Biden [00:10:00] came and officially declared the pandemic over. The statute then tacks on an additional 60 days. So that got us to July 10th, 2023. So basically all tax due dates and all tax payment due dates that fell during that three and a half year period were artificially moved forward. And now they were due all due on July 11th, 2023. And so as a, at a as a practical matter, all tax returns for [00:10:30] tax year 19, 20, 21 and 22, they weren't due on their natural due dates of April the following year. They were all pushed to July 11th, 2023. Well, the IRS accrued or assessed taxes, penalties, interest rate on their normal.

Roger Harris: Normal due dates, right?

Jessica Marine: And so as a result, a lot of people got overcharged interest in penalties if they were late with those tax returns. And so what Quang [00:11:00] is allowing us to do is go back and recapture those overpayments for the taxpayers. Now I need to be very clear this isn't going to happen automatically. You have to file a form. 843. It's the claim for a refund, right? And it has to be done in a certain time. And where the window is very short here. So it's expiring in there might be some exceptions. Let me be very clear. But by and large. July 10th [00:11:30] 2026. So just what, four months from now, a little under four months is the deadline to file those claims. So if you or a client have have paid or accrued tax or, I'm sorry, interest in penalties for those tax years during that period, you really should consider going back and filing a claim to try to get this money back for your clients now.

Roger Harris: And I'm going to answer this question. Whoever wants to answer it, uh, feel free to does this just [00:12:00] apply to individuals? Does it just apply to income tax? Could it apply to payroll taxes, corporations? Or is it, you know.

Jessica Marine: We think it applies to everything.

Roger Harris: Okay.

Jessica Marine: Um, there's, there's a lot of, there's a specific code section that talks about the various things that it applies to, but, um, it definitely applies to income tax. It definitely applies to employment taxes, more than likely applies to corporate because that's also an income tax. Um, and right now, because the IRS hasn't issued any [00:12:30] guidance on this, I think you should think broad and file the claim and then sort it out later. What you don't want to do is wait and see, right? Because if you miss this window, you're not going to get it later.

Roger Harris: It it doesn't matter. And I guess the IRS is not in a hurry to issue guidance on this, given that there's a deadline.

Peter Haukebo: In the Quang case, was a further extension of this idea that had already begun within the tax court. So there was a prior case called Abdo. Um, and [00:13:00] I think 2 or 3 cases that came after that are just slowly building on this concept. And so when you ask, what is this available to? It's not entirely clear. I mean, as Jessica mentioned, there is an enumerated list. And generally we understand how that that list is supposed to work. But, um, trying to figure out every possible eventuality, like Jessica said, I mean, I think this is the opportunity to dig in with your clients [00:13:30] and evaluate whether or not something may apply to interest, to penalties, to the tax itself. Um, it's, it's leading to interesting results.

Roger Harris: Yeah. So if you've had anybody in that time frame get penalties and interest for late filing. Um, this is a good thing to look at before July of this year to see. Um, and did the IRS, I mean, I guess the court this was the IRS against somebody else, whoever. Quang. [00:14:00] I guess who brought the case? Um, did the IRS just say, okay, you're right or is there any pushback now or. I think there was an article in USA today. I think, Jessica, you were quoted in it where they appear to be recognizing it, but have they come out and said, yeah, this is new. I guess that would be guidance that we haven't seen yet.

Jessica Marine: Well, I think so. Quang is interesting because it was a motion for summary judgment filed by Quang's attorney and the court issued [00:14:30] their ruling, which we're all relying on. The government has not appealed that ruling. Um, they could have filed an interlocutory appeal, which means while the case is still pending, they didn't do that. Um and the case has not come to a natural conclusion, yet with a decision where then the automatic clock for filing an appeal would start. The parties are negotiating settlement right now, so everyone expects the government to appeal, but they have not done so yet. Um, [00:15:00] but there was actually a very interesting development on Friday. Um, I as many tax practitioners in this area have been arguing. Quang whenever and wherever we can.

Roger Harris: Before the ruling that you still took the position.

Jessica Marine: Of course. And so, um, I had a case that was in tax court. It was a deficiency case where the IRS said my client hadn't reported some income on his tax return, and so he would be normally subject to failure to pay penalties and interest on that deficiency. [00:15:30] And I was, um, I brought up Quang when the case was with the IRS Office of Appeals, and they actually stipulated in a decision document that was just filed in the US tax Court this past Friday that he wasn't subject to penalties or interest for that period. And so I don't know if this is a one off or if it's a signal of the IRS starting to acquiesce to the Quang opinion. They have not issued any formal guidance on this. Um, I'll be honest, I've [00:16:00] sort of turned into a minor celebrity over the weekend because of that decision document.

Roger Harris: Be careful.

Jessica Marine: You know, I know I'm getting lots of calls from people, and what I'm telling them without fail is you should continue to push this issue. You should file the claims for your clients. And I don't expect us to have clarity in the near future on this. So despite that decision hitting the tax court on Friday, I don't necessarily know the IRS is going to release something today saying we agree. Um, my gut tells me they're [00:16:30] just laying low on this issue because the window is only till July and you know, after July, their exposure is limited. And so what I believe is happening is that they're not going to automatically issue refunds. They're only going to issue refunds to people who submit the form and claim them. And they're not going to take a position in the interim to just wait and see how many claims come in. Right. If they if they issue guidance today and said, we're acquiescing to this, they [00:17:00] would get flooded with.

Roger Harris: Requests, right? Yeah.

Jessica Marine: So I think it's in their interest to just stay silent on the issue and react to the claims that are filed.

Peter Haukebo: But but Roger, that was a shocking result. Like truly in Jessica's case, like I it's amazing. It's awesome. It's why you get tax attorneys involved to advocate, right? To, to, to pick these things apart and to, to really dig in. But that was an incredible result in that case.

Roger Harris: Yeah, I think it, I think the one thing we have [00:17:30] to realize sometimes it takes someone with deep pockets to go that far to get a ruling like that, but it can impact people at a much smaller level that individually would have never had the wherewithal financially to to push something all the way this far. But now that it's out there, I bet everybody can look back in their customer list and find somebody that has paid penalties and interest, you know that now they can get refunds. Is there any magic to the 843? [00:18:00] Do you just say, I need this money because of Kwan or. I mean, is there anything that we need to know to file the form? Other than that, this is available and it's out there.

Peter Haukebo: Yeah. I think you have to be very specific in, um, the grounds and facts for your case. And that's just the idea that if the IRS doesn't process these things administratively, you're going to have to go to court. And if you go to court, because the numbers are significant enough, the [00:18:30] judge is going to want to make sure and can analyze this independently because they have to make sure that they're able to even hear the case. And there's something called the variance doctrine. And if you haven't taken the opportunity to really put before the IRS a claim in stating all of the grounds and all of the facts that make you entitled to it, then you can't show up at court and surprise the government. So yeah, being careful about what you put in these things is going to be really important.

Roger Harris: So if it's if [00:19:00] it's a large sum of money, this again, going back to my earlier comment that just because you know how to prepare a tax return and you may have prepared an 843 before us, doesn't mean that this is something that you should try to do. If there's a lot of money involved, call one of these two folks or the frost firm in general and get some professional help. Because if you're going to go to the if you're going to try to get this money, you should do it the right way. And I'm guessing if you don't make the deadline or, um, [00:19:30] all right, I promise not to throw a curveball, but let me ask you this curveball question because I knew I wouldn't get by it. If you are aware of this and you have a client. Let's just say they they got $1 million in penalties and interest that they could get back if they knew what to do, and you didn't inform them of it. Do you think there would be any liability on the person who was aware of it? I'll [00:20:00] talk about a tax preparer here and didn't bring it to the attention of their client. Do you think the client would have any recourse for not at least being told about it? Or is this just kind of it is what it is. You either know or you don't know?

Peter Haukebo: Well, I don't think it's fully settled law at this point. I think that this is an opportunity for return preparers, accountants, CPAs, financial professionals to be the hero. Um, and to sort of come in and say, hey, have you heard about this thing? Let's, let's [00:20:30] go through and see what you got going on as far as exposure. I mean, I think the question always sort of comes back to what were you engaged for? You were engaged to prepare a return that's not necessarily advising on on, you know, subsequent legal action that may affect that. Um, but this is really an opportunity to go back through and think through, you know, I filed that balance do return for 2020. I bet they paid a bunch of penalties and interest related to that, but actually it wasn't due until [00:21:00] 2023. So it's sort of that opportunity I think to come in now.

Roger Harris: Yeah, yeah. So so once you finish April 15th, take a few days off, do whatever you do after the 15th, go look through. Um, I think we all wanted to forget about Covid in the pandemic, but and we're going to talk about another topic related to that in a minute. Um, and look and see because I'm sure we all have clients that because of just the way we, the world [00:21:30] we were in filed late, didn't have the records, you know, filed late, you know, maybe got huge penalties and interest. We didn't know any better and told them to pay it and ah, they just paid it automatically. And this may be a chance to to to get it back. So it's interesting. Um, what else is there anything else other that you would tell a practitioner or a CPA or financial, whoever it is to do other than just look back and identify the people who paid [00:22:00] penalties and interest for late filing and get on this. Is there any is there any other little thing that they need to be aware of or look for, other than just the general high level penalty and interest reason?

Peter Haukebo: I mean, Jessica, I don't know your thoughts, but I think it goes beyond just penalties and interest related to an income tax module. You may want to have a pen module to look at, ACA compliance, fair to file, fair to furnish issues, [00:22:30] those types of things as well. Um, the enumerate.

Roger Harris: All of that, not just.

Jessica Marine: All of it.

Roger Harris: Yeah.

Jessica Marine: I think the other thing I know, I know maybe I narrowed it right to 2019 to 22, but there's certainly I've been talking to a lot of people over the weekend and people are really taking aggressive positions here. And because it's not settled law yet, they're like, what about an older year? Let's say you filed a tax return for 2017 and didn't pay it, and it [00:23:00] was still unpaid during this period. So you were accruing interest in penalties. And so there are and I think we're starting to move into that space as well that we're going to file. We're calling them protective refund claims, right? Um, for our clients who fall into that category. So I think practitioners should be looking just globally. Did you have clients that owed money during this time? Um, not necessarily limited to tax years, 19 through 22, like 19 through 22. Clearly the filing dates. [00:23:30] That's a.

Roger Harris: Pretty straightforward. Yeah.

Jessica Marine: But accrual of interest and penalties is maybe a broader issue here. Um, we're doing it right. We're looking through our clients that we have both current and former and seeing what opportunities there are. Um, and so, and we plan to, and we've started reaching out to them and explaining what's going on. This is your potential savings. Would you like to proceed with filing some sort of claim? Um, I think a lot of the tax practitioners I've talked to in this space are doing this work on a [00:24:00] contingency basis. Um, because as Peter said, it's sort of free money, right? You get to be the hero in this story. And if you can get money back for your client, right, maybe you get a percentage of that. Um, so there's no risk to the client in, in doing that sort of engagement, but there is a huge upside to everyone.

Roger Harris: So, um, let's, let's wrap up this and move to another topic, but it's look through for any reason that there was any of these penalties and interest accrued or paid during this time [00:24:30] frame. Um, take a shot, send it in. We don't know where it's going to finally land up and feel pretty good about returns in that time frame. We just don't know about anything else that might happen there. So go for the go for the big one and see where it travels.

Jessica Marine: And one last practice before we move on. The 843 is one of those weird returns that are forms that still requires an original signature. So don't have that little foot fault [00:25:00] and take an electronic signature on it and send it in. So if you're preparing the 843, make sure you and your client both have original signatures.

Roger Harris: Yeah. Good tip, because that'll just be that little technicality that kicks you out.

Jessica Marine: Yep.

Roger Harris: All right. It seems like almost every podcast we've done, we talked about employee retention credit and something about it. And I think a lot of us now have kind of put it behind us and not thinking about it, [00:25:30] though. We've I know we all have people who still wonder if their claims are ever going to be paid. Did they get paid to write them out? Was it rejected properly? Peter, I know, in fact, I got something today. You're doing a webinar tomorrow on Saint Patrick's Day about some IRC issues. And I know you've written some articles. What what is something that for those of us that kind of put it behind us, once we thought we got everybody paid or were told that after this date, there's nothing else, [00:26:00] you know, it's over. What are we missing? I know there's stuff about IRC that perhaps we need to think about for some of our clients.

Peter Haukebo: Yeah. And, and I guess just to pull us back a little bit to the topic, we were, we were trying to move on from in so many ways, both the RC and, and from Quang, because what Jessica said was interesting was to remind your listeners to think through, you know, people who may have owed tax during those periods. It's even worse than that and harder than that because they [00:26:30] may not have known they owed tax until outside of that period. And you're seeing that with IRC. So imagine a scenario where someone in IRC received refund checks prior to this July 11th date. To the extent they were then later audited and that credit was reversed and now balances owed. The government is going to try to run interest from the day that that refund [00:27:00] claim was initially paid. And, you know, query whether this is a scenario where that's appropriate or not. I would I would argue that it that it's not. Um, according to the same analysis for Quang. So if you're in a situation where you are having that refund clawed back in that you paid it, you're probably owed some additional interest. And that's certainly, um, something that we're looking at very closely because it could affect quite a few taxpayers. [00:27:30] As you know, the government made quite a fuss about IRC and inappropriate claims and enforcement and all that kind of stuff. So that's sort of the intersection with with the Kwong. Um, so.

Roger Harris: If you gave some money back voluntarily or through an audit, I guess either way, you know, and they charge you penalties and interest, this case could open up the door to get those penalties and interest back as well.

Peter Haukebo: Yeah. I think the you know, the voluntary disclosure program was done without interest or penalties applied.

Roger Harris: That's [00:28:00] right.

Peter Haukebo: That's right. You know. So there's certainly some exceptions as far as giving the money back. But yeah, if you were later assessed, um, and interesting question about whether or not that assessment was, was appropriate given some of the rules as well. And I think that's going to be an interesting place for, for challenges. Um, but if you did pay it back and were assessed interest, you probably have a right to get that back.

Roger Harris: I think you, I think I'm correct in this, but for people who had a [00:28:30] claim denied or told. I mean, can you reopen that? I mean, if you really thought you were entitled and didn't get your money or had to give it back. Have you guys been in that arena and found some success in going back and telling the IRS, you you got it wrong.

Peter Haukebo: God bless your listeners who have been able to get out of IRC. Um, we are still very much in it and doing the audits and doing the protests and doing the, the responses [00:29:00] to the Idrs. It's not been in a situation where I've had to reopen anything. These things just have not closed. Um, so.

Roger Harris: They were still open.

Peter Haukebo: I mean, they're still open. I mean, I think the recourse for many of them would be court action. Um, we're seeing a lot more post appeals, mediation opportunities. So even though, uh, alternative dispute resolution has been around at the IRS since the late 90s, it's not been pushed in a big way. It's [00:29:30] our understanding that the Office of Appeals is is pushing these post appeal mediation opportunities. So it's sort of like a half step before you're getting into litigation and trying to resolve some of the disputes. So these are very much ongoing. We have hundreds of these cases that we're still working through.

Jessica Marine: And one of one of the things that we're starting to see, unfortunately, is that the IRS is just issuing blanket denials. And so it's forcing taxpayers to move forward with filing the protest [00:30:00] and going to appeals and doing the the mediation that Peter's talking about. And it's unfortunate because that's not what should be happening here. Um, and in fact, we had a call with the taxpayer advocate this morning who was sort of expressing their displeasure at the IRS handling of this. And it's clogging appeals up appeals, I think has almost a six month backlog now to even have a case heard, which, you know, appeals was intended to be a quick [00:30:30] resolution. Right? And it's just because so many claims were filed, they're just routinely denying them, forcing everyone through the appeals channel. And so and I think what's most important there is just to make sure that you're meeting deadlines. These are very strict deadlines. You need to file your protest on time. You need to keep an eye on your, um, the claim for the date, the claim was denied. So you know exactly how long you have. You have the two years to file a lawsuit if you want to go the [00:31:00] the lawsuit route. But if your case gets stuck in appeals for six, nine, 12 months, right? That's eating that time up. So unfortunately, as Peter said, we are a long way from done or moving on from IRC claims.

Roger Harris: Yeah, yeah, I think I know the IRS is sick of IRC and just wants it to go away. Um, I think a lot of them all like, yeah, just go ahead and pay them. Just pay them and they'll all go away. Well, some of them. But yeah, I mean, it's the whole thing [00:31:30] was, you know. And again, if you've listened to this podcast, you know that Andy and I have thought that it was well intended. You know, we got to think back and remember we were in a pandemic. We didn't none of us knew if we were going to survive the pandemic or businesses were going to survive. And Congress acted quickly. But gosh, there were some things that could have been done that would have made this such a better program from the beginning. And, you know, I have to say that the IRS was told about some of the things, but some of it's Congress's fault. But this [00:32:00] thing may never die. I mean, I don't know that we're ever going to put it to bed. So if you still think you're if you're in the middle of one of these battles, this is something that you guys are, I think, you know, I want to say that's the first thing I heard of Frost was through IRC. I mean, is that just is that just me or is that kind of where you you know.

Peter Haukebo: I think it really elevated us, um, to more of a national, uh, brand or firm. Um, and we're, [00:32:30] we're, we're soup to nuts on the IRC stuff. So it's, it's still audits and appeals, but also litigation against the government. A big issue that a lot of these folks are still getting jammed up with is their relationship with their POS, Cpos or other third party payers. So we're really trying to hold those folks accountable. Um, again, Congress didn't make it easy on anybody. I agree with you. Um, but some of these third parties are, [00:33:00] are making it worse for themselves, for everybody. And so that's another area that we've been working, um, pretty extensively in.

Roger Harris: Peter, you mentioned peos talk to our audience isn't familiar what that issue is talk just high level. What is the issue with Peos if that's where you went to get your IRC?

Peter Haukebo: Right? So the IRS has been consistent in their posture that the relationship for them, as far as who is the taxpayer, is going to be the [00:33:30] p e o p e o files, an aggregate return schedule, and you could have tens or hundreds of of schedules attached to A. 941 so all of that credit work is running through the p, e, o and if you did anything with the CRC, you know that there's just very little information that's reported about anything, right? And then just a number.

Roger Harris: Just give me give me this much.

Peter Haukebo: Yeah, yeah. I mean, they're not even capturing NAICs codes right on schedule R so it just makes it really hard to analyze [00:34:00] anything.

Roger Harris: So for that reason, you're kind of hung up if you're one of those 100 people on that one. 941 and you're at the mercy of the p e o potentially.

Peter Haukebo: But what's happening is the Po's are not communicating, not sharing status, right? A taxpayer, a taxpayer client, customer of a p e o P.O.. Can't go to the IRS and figure out if they'd been paid. And you're seeing situations where Po's third party [00:34:30] payers have received the refunds and sat on them. Um, generating a ton of interest. Um, depriving, you know, taxpayers of the use of those funds. Um, frustrating, you know, the will of Congress and what, what it was trying to accomplish through these programs. And so it's those situations, but sometimes it's even worse where a P.O. could have a balance due to the IRS. And the IRS has said we believe we can offset that.

Roger Harris: Yeah, we're going to offset it. Yeah.

Peter Haukebo: And, you know, so [00:35:00] that has has generated some some major issues as well.

Roger Harris: So you could be having an issue with the P.O. or the IRS or both.

Peter Haukebo: Correct?

Roger Harris: Yeah. Well, there you go. That's a nice simple little solution. Anything else we need to think about on IRC? I mean, I mean, is this kind of where we are? This is the last remaining place where we're dealing with IRC is the kinds of cases you're talking about. Is there anything else still lingering out there? I mean, I know they said they've processed [00:35:30] all the forms the IRS has. I don't know if I believe that because all I hear is I never got an answer on mine. But are we over with this or down to 1 or 2 lingering? Not that they're going to be quick and easy to solve, but where do you think we are in that program at this point?

Peter Haukebo: Well, there's a couple hundred cases that are in the federal court system now, and you're starting to get opinions coming out. Um, so how that sort of impacts the thousands, tens of thousands, [00:36:00] 80 something thousand claims were disallowed, uh, and are potentially working their way through appeals. Yeah. I think they've said all but 20, 30,000 have been processed, but, you know, those are likely to end up in exam or, you know, review of some sort before they get pushed out. So there's still a lot going on and some pretty consequential issues that are up for summary judgment consideration [00:36:30] before courts. There's a bankruptcy decision that I think most of us in the practitioner community thought was, was not, uh, well reasoned, but that's on appeal. Um, and so it's, it's going to just continue to go, uh, until these, these cases work themselves out.

Roger Harris: So it could be like Kwan, we could get a court case that opens up a whole new place for us to go that, you know, maybe we didn't consider. So it's, you know, it's not over. And you may not [00:37:00] know this, but one thing I know a lot of people in our community are interested in how much effort or success is the IRS having going against some of these, what we call ERC mills, that created a lot of the problems. Is this particularly given the IRS's lack of resources, people, money. You know, that's this. Are the bad guys just going to get away with it, or is there really any real.

Peter Haukebo: There was an indictment last week, uh, on a $52 million, [00:37:30] uh, tax loss. I think that there's still quite a bit of activity going on in the criminal space that you'll start to see more and more of these play out. I think that that stuff is, is probably still happening by and large, criminal enforcement has gone down. Um, sure. But hopefully the Mil is the true bad guys here, the truly fraudulent and fake stuff. Um, you know, they're held accountable. [00:38:00]

Roger Harris: Yeah, yeah. Uh, again, general question to the two of you. I know the people in the preparation field, you know, they have a lot of, they're feeling some of the impacts of the IRS budget cuts and people cuts and layoffs and all that. Are you guys seeing the same thing in in where you're interacting with them? I'm assuming this is agency wide, but are you guys having some of the same problems? I mean, ours is more a little basic. Nobody answers the phone. If they [00:38:30] do, they don't know what they're saying when they do sometimes. So, but are you guys having the same struggles from your point of view, dealing with the IRS 100%.

Jessica Marine: I think it's everything. The IRS is already hard to navigate, and now it's even harder to get someone on the phone or get someone on the phone who's willing to help you, who is not stressed out, overworked, if they even answer the phone. Right. I'm I'm finding myself filing more and more taxpayer advocate [00:39:00] requests, which I don't love because now I'm clogging that pipeline.

Roger Harris: And they're getting overwhelmed.

Jessica Marine: Exactly. I will say they have changed their way of assigning cases, which I've been very pleased with. It used to be that you would send a taxpayer advocate request into the local office based on the taxpayer's location. And so if you have, I don't know, a busy area, you have a lot of work, but a less busy area. So they've changed that. And now everything goes through a centralized point [00:39:30] and it gets pushed out based on capacity. So I am finding that taxpayer advocate case advocates are being assigned to the cases faster than before. They're not necessarily, um, in a location similar to the taxpayer anymore, but I don't think you need that. Um.

Roger Harris: No, that's one thing we did learn through COVID is we don't have to be in the same office to get things done.

Jessica Marine: That that is true. Um, hence me in Florida. That's right. But, um, [00:40:00] no, I, and I try to explain to, to folks and it's very frustrating for our clients where it should be. And I say to them, you know, under the normal circumstances, this would be a very simple issue to resolve. However, the nothing is normal anymore. Or maybe this is our new normal. Um, I have a I'll give you a real brief example. I have a client where, uh, she purchased a property from a non US citizen. She did the proper withholding, remitted it, and [00:40:30] somehow the IRS did not, um, attribute that payment in to her social and she's been getting notices for six years basically saying where's our money? And we're sending them a copy of the, the document that was sent, a copy of the canceled check that the IRS negotiated, that has the IRS tracking information on it. And we still can't get them to just acknowledge and apply the payment and stop the notices. So everything is so much harder, longer [00:41:00] people say, how long will something take? I, I give them like my best guess, but anymore I multiply it by three at least to try to manage expectations.

Roger Harris: Yeah, I mean, I feel bad because I think there's a lot of really hard working people at the IRS and the taxpayer advocate for many part of my career was the one place you knew if you went to, you could get something done and get it done quickly. But they're just being overwhelmed because everybody wants to go there now. You know.

Jessica Marine: One [00:41:30] thing that I always try to do when I get someone on the phone, I try to be empathetic because I know that almost everyone that is calling is angry and it's no use. And I, I felt, I feel my grandmother used to say, what's that? That you catch more flies with honey or whatever that saying is. I've always.

Roger Harris: Taken vinegar. Yeah. More than honey than vinegar. Yeah.

Jessica Marine: So I've always taken that to heart in my career. And it costs nothing to be kind. So when I'm calling the IRS or dealing with people with the IRS, I know they're stressed, I know they're [00:42:00] overworked. And so I try to be empathetic. I try to, you know, play, not play into that, but like you get more when you are when you have that type of dynamic. I don't yell or curse at people at the IRS. They're just trying to do their job and we're trying to do our job.

Roger Harris: Yeah, I mean, that's just a good thing in life. I just I'm always amazed when I'm at the airport and somebody's yelling at the gate agent because the plane's got a problem. Well, they can't go fix it. You know, just we should all try to put ourselves in those people's position [00:42:30] and understand that. I think they want to do their job and they want to, you know, get it done. Most of them do. Some maybe don't care, but most of them do. And it doesn't take much for us to be nice and try to get them to cooperate, you know? Uh, and be empathetic, as you said, because, but we've got people who just think yelling makes it better, you know, and I guess they think everybody they deal with is deaf. So if they just yell louder, they'll, they'll hear them. Um, [00:43:00] so you're experiencing the same thing. Well, that didn't make me feel any better. I was looking for somewhere that, you know, we could go. Um, I don't think this topic probably directly impacts a lot of our clients, but it gets a lot of publicity, the whole idea of tariffs.

Roger Harris: Uh, you know, the Supreme Court ruled that the authority that the administration was using to charge tariffs was the wrong one or I don't know, I'm you're the lawyer. So correct my stupidity, stupid remarks I'll make here. And then immediately [00:43:30] after that, we got into this whole discussion about refunds, you know, so if you can't charge a tariff and you did and I paid it directly or indirectly, I got I know Fedex came out almost immediately after the Supreme Court and filed something to get all their money back and said they would give it to their customers. I mean, is that I don't know. I mean, I don't even want them asking other than when people say, how do I get my tariff refund? I go, well, there's no form for it yet. [00:44:00] So don't don't worry about it. What, what is the is this ever going to get solved? Or are they just going to say, well, from now on you can't do it? Or do you think they'll be refunds? And if so, what in the world do we going to have to do to get that money back, if ever.

Peter Haukebo: Well, it's interesting because after the Supreme Court struck down this this particular these particular tariffs, the president added some additional ones. So these in particular were related to the International Emergency Economic Powers [00:44:30] Act. So there are situations where Congress has ceded some authority to the president. Uh, the Supreme Court, the federal circuit, the Court of International Trade all disagreed that this is one of those circumstances. So the levies that the tariffs that he put in place, um, related to this particular act were deemed, uh, invalid. And so you had a case called learning resources that was paired with another [00:45:00] case called Voss selections. Those two cases came up through different courts actually. Um, but the Supreme Court dug in and said, no, you can't do this. And, uh, sent the the case back down to figure out what the heck they are going to do. Um, and the way that the process with customs works is a, is a, is a liquidation situation. Imports [00:45:30] are either liquidated or, or not. And the timing of which was starting to press up against the idea that these would be liquidated and folks were starting to file a whole lot more lawsuits in the court of international trade. I think you've had 2 or 3000 in the last 30, 45 days, something like that. And so it's a major issue where these in the first instance, the importers of record are coming [00:46:00] back like Fedex and saying, um, you know, time to time to send me a refund.

Roger Harris: Yeah. And you know, again, I, I guess I've paid terrorists, but it was never been something where I looked at an invoice and said, tariff $10, so I didn't. I have no idea how much I'm paying in tariffs, but I guess if I'm going to pay everybody, let me get in line too.

Peter Haukebo: Um, well Fedex you might right. They were sort of saying, look, if you want this, we've paid it for you, but you've got to turn around and pay this [00:46:30] tariff. And so that's particularly interesting case because they've already sort of come out and said, we will make these refunds available to the actual payers. Um, acknowledging that, you know, they didn't actually foot the bill.

Roger Harris: Yeah.

Jessica Marine: But there's a lot of companies, right, where they paid tariffs and just pass that along. They increase the price of their goods and passed it on to their clientele. It is unlikely that the people who bought the end user or the end buyer of that is unlikely to [00:47:00] see any money coming to them. Now. We might, over time, see prices start to come back down as tariffs are removed. Um, but I think one thing I will say is, unlike Quang, where I think a tax practitioner could potentially a tax preparer could potentially navigate figuring out the amount to put on an 843 and filling it out. I do not think tariffs are necessarily somewhere where tax preparer should feel comfortable, um, navigating that space. Um, there's a lot of nuanced [00:47:30] timing rules with the customs enforcement, the Court of International Trade. So I do think that if you have a client who has been charged tariffs, either as the importer of record or as the secondary purchaser from that importer of record, you really should be recommending to them that they seek legal counsel on how to timely file these refund claims.

Roger Harris: Yeah, and that is a perfect segue to how I wanted to kind of wrap up our time together, talk a little bit about talk to the [00:48:00] people. I mean, I'm speculating here. We don't have a a perfect list of who our listeners are, but my assumption is they're, you know, they're primarily tax firms preparing taxes. You know they can. I'm sure there's some small ones of 100,000 up to, you know, millions of dollars. When. And then I'll let you put a plug in for frost. You know, when is it the right time to contact someone like you? Is it based on the. And maybe it's all of the above. Is it based on the facts? Is it based [00:48:30] on the cost? Is it based on knowledge? It could be all of these. But if you were talking to them of when they should call you. And then let's make sure you tell everybody how to contact Frost, because I know you're not just in, uh, Annapolis or Florida. I mean, you're, you're pretty much all over the place, but how would someone make the judgment and, and when is it appropriate? And can you just pick up the phone and call and say, I think I got a case or I think I got something? Or do you need to be specific in having more information? [00:49:00] So educate our listeners to, to when you guys can particularly be of help to, to them. So I'll let you decide which order to go in.

Peter Haukebo: No, I mean, my answer is early and often, but not every touchpoint has to become a case, right? Like at the end of the day, I want to see people do it right. I want to see taxpayers get the right service and the right answer. And if that means I jump on a call for 5 or 10 minutes to walk you through something or talk you through an issue, great. [00:49:30] That doesn't need to result in in any fees or representation or anything like that, right? Beyond that, it's a question, I think, of what value are you adding to the case for your taxpayer and what's your comfort level? And it's going to be a different answer for everybody. Um, I think the first point you have any concerns about something going criminal. You you run to your nearest tax attorney as fast.

Roger Harris: Exactly.

Peter Haukebo: But [00:50:00] you know, if you're going through the rounds on an audit and it's a sticky situation. Like keep at it. Um, if there's something you want to talk through, the one thing that I'm reminded of in the opening conversation here is tax controversy. Attorneys are a little bit different, and it is a little bit different than filing a tax return. And it's because of the language that we speak. We're speaking a procedural language and understanding [00:50:30] the ins and outs of dealing with a bureaucracy, the most powerful creditor in the world, like, you know, those types of situations. And we know how to communicate what we need to communicate through a financial or through whatever it is that's a little bit different than just, you know, a tax return.

Roger Harris: Yeah. You're again, I'm an oversimplify this. You're the expert in the process and, and how to make that process work. And, [00:51:00] um, I think that's important. That's something there. Jessica. Anything else that you would add to that? Or how do they get in touch with you guys? Or how does it how does it work?

Jessica Marine: Sure. Um, yeah, I think Peter's absolutely right. I think your comfort level really plays a lot into this, right? We're not all experts at everything. Um, we have strengths and weakness. I'm not a return preparer. I wouldn't I wouldn't prepare a return. Right. So yeah, perhaps a return preparer shouldn't take someone through an audit if they're not comfortable in that space or litigation, etc.. Um, [00:51:30] and so I, and the other thing that I'll add with Peter said, sometimes he hops on a five minute call, I do too. Um, we generally do free consults to clients. Um, we also do paid consults, right? So if it's just a narrow issue, we can do a one hour, half an hour paid consult or we can do a full engagement. Um, so we really, it's not a one size fits all. We really try to diagnose what the issue is, how we can help and what our involvement looks like. And we have lots of CPAs return preparers who refer [00:52:00] work to us all the time. Um, to get in touch with us, you can go to ask frost.com. And there's ways to schedule consults to our phone numbers on there. I'll just shout it out for everyone. It's (410) 497-5947. Um, but we basically, if we and also if we can't handle your issue, we normally can provide a referral out. So that's the other thing that I think we add value. We have a, a strong network [00:52:30] of referral partners. Um, and so some things aren't a good fit for us and we're quick to help people point in the right direction for that.

Roger Harris: Great. Thank you guys. This has been great. Um, this is something that we need to have you guys back or you need to make sure that if there's another Kwan or something out there that we need to know about, please let us know because I think that, again, it's just not an area where we probably pay as much attention. You know, we kind of rely on somebody telling us about it. You know, it's not something we look for every day. [00:53:00] And yet there probably is opportunities that we're not seeing. So again, I want to thank both of you for doing this. This was great. I know you guys are busy. You didn't and you found some time to to do this. And I really appreciate that. And again, I'm serious. Let's let's have you back and, uh, as you see things and, um, hope to hopefully one day we can run into each other face to face and, uh, talk more about our business.

Jessica Marine: One thing I will just, I will highlight for your listeners [00:53:30] is they might start seeing SBA loans. That's a new hot topic that's really coming up that folks who took the economic disaster, what is it? Income loan.

Peter Haukebo: Economic impact, disaster.

Jessica Marine: Yeah. They, um, and so they either not kept current with their payments to SBA or whatever. And their, their loans are now being referred to Treasury for collection and Treasury is being quite aggressive in their collection, um, their imposition of penalties and [00:54:00] collection of those liabilities. So that's a space that our firm is very. Quickly and aggressively moving into because we're seeing it all over the place. So I think if, um, if you're if the listening base here is having people coming to. Them and they're like my SBA loans defaulting, I don't know what to do. That is definitely an area that we're moving into.

Roger Harris: That's great. That's good to know. Yeah. Because I know some of that's going on.

Roger Harris: So.

Jessica Marine: Next big thing.

Peter Haukebo: If I can just highlight.

Roger Harris: Oh, sure.

Peter Haukebo: Part [00:54:30] of the tariff issue, um, is what to do for folks who aren't the importers of record. Uh, meaning imagine a scenario where you, um, buy a, buy a boat from overseas and that importer is going to bring it through, going to pay that tariff and charge it immediately to the boat owner and they go on their merry way. They have no motivation to go and [00:55:00] seek any sort of refund because they've already been made whole. They don't want to hire an attorney. They don't want to go through the process for whatever this is going to be. And the question becomes, well, what is that person who purchased the boat supposed to do? And what is their relief? And the Court of International Trade has made itself or made it known that it believes that the ultimate payer of those tariffs has [00:55:30] standing to sue. And that may be the situation where you can help a client, if you know that they made some sort of a purchase like that. To Jessica's point, it's not every Costco customer who bought a tube of toothpaste. But in those situations where you're, um, maybe you're a dealer of automobiles or motorcycles or something along those lines where you can sort of trace it back. Um, it's going to be a two step process because [00:56:00] the government is not going to pay you directly, but you may, through your own efforts and standing before the court, get that importer of record paid. In which case you need to go get those those refunds from them if they're not going to turn them over.

Roger Harris: Okay. All right. Another good piece of advice again, guys. Thank you. I'm not sure if I heard right as Frost. Com that's how to find you guys. And, uh, again, thank you so much for doing this. I think this was, uh, a great hour. [00:56:30] And, uh, I hope we do this again.

Peter Haukebo: Thanks, Roger.

Jessica Marine: Thank you.

Roger Harris: Thank you. And guys, thank you for listening. I hope you enjoyed today's federal tax update podcast. If you did, tell some friends about it, and we'll be back in a couple of weeks with another federal tax update podcast. Thank you.