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

Roger Harris: Hello again everyone. It's another Federal Tax Updates podcast. It's Roger and Annie. And unfortunately we're not together again. We're back in our separate offices after a great trip to Washington, D.C. to record our last podcast. So anyhow, you today.

Annie Schwab: I'm doing good. It was super fun hanging out with you in D.C. last week. Um, I [00:00:30] know our podcast aired, the one that we did there aired this past Monday. Um, what's that the 11th? Um, but it was great seeing you, but now I'm back in Texas and I'm counting down the days when my kids are out of school. I'm not going to lie. Yeah. The month of May has flown by.

Roger Harris: Yeah. No, it was great to be in. It was a great event. I mean, just because we're probably going to refer to some of the things we heard there. But I mean, first of all, we heard from the IRS CEO Frank Busnardo and some of his comments in addition to the Assistant [00:01:00] Secretary of Treasury for tax policy. And we heard from a panel of journalists in the tax field, as well as a panel of Hill staffers, and about what's going on in the tax community. So it was just it was a fun event. And we got to do our podcast live only. It's the only time we've done it with a studio audience. So we encourage you to go back and listen. Uh, you'll hear what other folks in the industry, you know, were saying, uh, during our podcast because we really let them do a lot of the talking, but it was fun. It was great to see you. And we'll have to do it again sometime. [00:01:30] But something back in our home studios, to the extent that their studio.

Annie Schwab: So you got it. You got it. Well, today, Roger, I think we're going to kind of focus more on tax issues. Um, I know that may seem odd given tax season. You know, busy season is technically over, but really there's still a lot of returns on extension. And we do have some updates on various topics that we feel our listeners should need that need to be aware. So we're going to start with some notable observations [00:02:00] on busy season. And then we'll talk about some new stuff. And and I'm, you know, because it's a podcast, we're going to mention IRC at least once or.

Roger Harris: Twice at least once. We even got it in last week.

Annie Schwab: Yeah, we did, we did. So, um, let's go ahead and sort of get started. And I know we, you and I talked, you know, how did tax season go? We asked, you know, our franchisees, you know, what did you think. And and I think there was some positive that came out of it. But there was a lot of concerns, [00:02:30] um, mainly due to the lack of funding. Um, I mean, that's been significant challenges faced by the IRS. And it was like, you got all this money, this infusion with the, with the Inflation Reduction Act. And then it just like piece by piece, it gets clawed back a little bit and, and reassigned or earmarked for something else. So, um, I don't know. I think we're still struggling there. They've lost over 25% of the workforce. There's new tax law, which was complicated. And and we'll talk some about [00:03:00] that. And then there's just sort of this lack of, I would say, commitment by taxpayers. You know, they they know the IRS is understaffed. They're kind of like, well, nobody's gonna audit me. There's nobody working there. I'm just going to kind of nilly, Willy, get my tax return done. And that's definitely not the, the, the momentum or.

Roger Harris: That's not that's not the.

Annie Schwab: Thing that's going.

Roger Harris: To help.

Annie Schwab: Yeah.

Roger Harris: Yeah. I mean, I think it's you know, and again, we're reflecting back on some of the things [00:03:30] that we talked about last week. But I think if all you did was electronically file a return and wait for a refund, it was probably a very good tax season. I mean, refund.

Annie Schwab: If you put your direct deposit information.

Roger Harris: Right. If you yeah, yeah, we'll get back to that. But yeah, assuming you gave them your your checking account, it got a little more complicated when it came down to answering phone calls or doing other things. Now, one thing I will find interesting. I'm going to reflect back to what we heard from the CEO. And [00:04:00] he he strongly believes that he wants to make the IRS more of a digital organization. And he he will challenge any. You know, that a number of employees is the right number, that 75 is the wrong number. 100 is the right number. You know, I think what he he would tell you is it's a balance to find out what's the right number of employees and what's the right number of dollars to have to turn. But he's convinced, and I'm not sure he's wrong, that [00:04:30] we need to move to more of a digital agency than a human agency for things that some things humans have to do. But. Right. But so I think when all of us talk about loss of employees and loss of money, as I've said, and you've heard me say this probably to the point that you're sick of it, I'm not smart enough to know how many employees or how much money they need, but I am smart enough to know if something's working or not, and if something's not working, then you guys figure out if that's because you need more people need more money, or [00:05:00] you can get by. You're just not doing it right. So I think I know Air Sack came out again, everybody focuses on employees and money. And yet I think he's he's focused on and he's careful not to say modernization. He wants to talk about transformation. He believes he's transferring, transforming the agency into a more digital, uh, organization. But clearly that hasn't happened yet. And there was some challenges this filing season.

Annie Schwab: Yeah. And [00:05:30] there was some improvements. I mean, I think there's been more access to the online accounts, both business and individuals. Um, I do think that they've made some progress with the callback feature on the phone, the phone lines that seem to be better than in previous years. But I mean, there's still IRC claims that haven't been processed. We've had so many concerns about, you know, answering the phone, getting somebody who who can actually assist. We've [00:06:00] seen notices going out randomly. Um, so I like you said, there's progress, but still concerns. Um, would be my, my summary.

Roger Harris: And I think you hit on something that that is people related. Uh, again, I don't know if 75,000 or 100,000 is the right number, but they did lose a lot of their institutional knowledge and experience in the layoff. And it's going to take a while for any new people to come anywhere near, [00:06:30] you know, the knowledge that of the that they lost. So even if even if the 75,000 is the right number, it's a different level of history and experience and knowledge than we had before. And, uh, some of that was going to happen anyhow. There was a lot of people that were able. One of the reasons it made it so easy to go down is you had so many people eligible for retirement.

Annie Schwab: Right.

Roger Harris: This just kind of put them over the edge to go ahead and do it. So those folks were leaving at some point. [00:07:00] I don't think anybody anticipated they'd leave all at once.

Annie Schwab: All at once.

Roger Harris: Great numbers. But I think a lot of it is that the people we're dealing with now are still, I'm not going to say in their infancy, but they're certainly, you know, new and learning as opposed to people, you know, like us. I mean, we look back to when we started in our career. I mean, we weren't near as smart.

Annie Schwab: Knowledgeable.

Roger Harris: Knowledgeable as hopefully we've become over time. And so I think there's [00:07:30] some growing pains that's going to we're going to have to work through because yeah, filing season, if you just wanted a refund was fine. But to all the things you listed, there's clearly things that need to be fixed.

Annie Schwab: Yeah. The calf, you know, the calf, the centralized authorization file, you know, they had significant delays. I saw a stat that was generally. It would only take. You know, they shoot for five days. Historically, it's been five days to kind of process these authorizations. Now they're more of an average of [00:08:00] ten business days. And there's been reports like over 26 days. Um, so, you know, all of it is they're trying to streamline it, but there's barriers that are, you know, making it more difficult for tax practitioners to be able to get transcript availability or access to data. So it's like just one, one hiccup sort of after another, in my opinion.

Roger Harris: Yeah. And that problem is not new. It's just getting worse.

Annie Schwab: It's just getting worse. Right.

Roger Harris: And, and you know, it [00:08:30] can sometimes when you need to get access to somebody's records or to a person. We know our clients don't always bring us notices right? The minute they get them and we're facing a deadline and we need to do something. And yet we can't get the calf unit to process our authorization forms in time for us to meet the deadline so it can create some real hardness. So again, some of that clients should be better at getting us there. Sure. But that's just not the real world. I mean, you know, we're lucky if [00:09:00] they open it and read it. I mean, there's still the people who are afraid to open a letter from the IRS until we're there. Like, you know, something bad's going to happen that if we're there, won't happen. But, you know, so again, there's things like that, that, um, that really need some attention. And you hear a lot of groups saying that and, uh, I don't know that anyone has said what we're going to do differently to speed it up, but something's got to speed it up.

Annie Schwab: Well, there's got to be some kind of, you know, [00:09:30] they've got to speed it up. And then now that they've got the expanded online accounts, I mean, having that authorization to access is going to be a game changer. We've had the individual accounts for some time now. I don't know how long but but recently the business tax accounts have also been made available. And that that's crucial because it helps you. You can look at tax balances, make payments, see history. Um, you can go get notices. You can download things out of their, um, [00:10:00] transcripts. I mean, that's some, sometimes that's crucial to being able to, you know, be able to prepare a return. If the records aren't there, you're going to have to be able to go somewhere to get it. Um, and then little things that just take time, like changing a business name or an address on file or, you know, who's the responsible party. I mean, all of those things, if you can do it online and, you know, five minutes, um, much easier than sending in a form, waiting for it to be processed, you know, or responding [00:10:30] to notices with snail mail.

Annie Schwab: I mean, there's just, it's very, very difficult to keep the ball rolling when there are fewer workers and it's taking long, longer times to solve the issues. Um, it just, you know, it's difficult for the taxpayers. It's difficult for the tax practitioners. And and I think the IRS thrives on being able to say, we got out so many dollars in refunds in this many days. And it's and it is that is great that they are doing that. But then [00:11:00] it's the kind of one off things like you said, if you just filed a return and got a refund, probably none of this, you know, affected you. But it's the it's the dealing with the, the one off the mismatch notices the we didn't get your return. You know, we hear it all the time. I get questions all the time. I mailed a check on. I have a client right now that mailed a check on 415 and it hasn't been cashed. Now, I know the IRS wants the money. I know they're going to take the check. I could.

Roger Harris: Post office. That could be the post [00:11:30] office is probably yeah, I mean, they're they're probably worse off than the IRS right now.

Annie Schwab: Yeah. And so it's sort of like this, you know, now, should the client have sent the money in via, you know, online account or whatnot. Electronic payment, of course. But but here we are. And we've talked about this, Roger. Like there's the modernization is great, but some of the older generations are really struggling or people who like aren't banked, for example, [00:12:00] they're really struggling with sort of, why can't the IRS just send me a check? Like I always just get a check? Why can't I just get a check?

Roger Harris: Just get another one. Well, I think one thing that's, you know, we've got taxpayer accounts, we've got business, business accounts, we've got tax pro accounts. I mean, clearly that's the direction everything's going that we're all going to have to. For those of us that are resisting or waiting until it gets better or perfect, you know, you might as well go ahead and get in now because this is clearly the direction the IRS [00:12:30] is going. We'll talk a little bit about the problem with paper checks. And even the direction there puts you directs you to your online account. But you're right, we've got people and it's not so much the online account is hard to navigate. It's the ID me part of getting set up that it seems like people are having difficulty with, but for. I think all of us need to work with our customers to say we need an online account. That's just the way this is going. [00:13:00] You can not like it. You can say it's too hard, but ultimately we're going to have a hard time functioning if we and our customers don't have online accounts because that's, I believe is clearly the direction the IRS is pushing us to. And they're going to win that battle.

Annie Schwab: Yeah. They are. Um, and, and that's something that tax practitioners can, can assist, um, you know, and, and charge for, you know, get the client in the office, get on a Zoom call if they can [00:13:30] do that and help them walk through the ID me, um, talk to them about the benefits of it. Um, you know, I get it, you know, my parents don't do online banking, and I've been doing online banking for years. My dad still, you know, balances his checkbook. Yeah, totally. Um, and so I do get it. And nobody likes change, but I don't, I think if you're going to want to, you're going to have to do something at least. Baby steps, like, you know, go to your tax practitioner [00:14:00] and ask them to help you do this. Explain to you how it works kind of thing. Um.

Roger Harris: Yeah, I mean, it's just, it's just the way it is. But yeah, when you laugh and you talk about your father, I think one of the worst experiences in life is being in the checkout line at the grocery store to somebody who right after they tell him, well, it's $112.97. And then they reach into their pocket or purse or whatever, and pull out a checkbook and have to write it. And you're thinking, pick the wrong line again. Yeah, yeah. But I mean, you know, we're [00:14:30] all going to I mean, most of us don't carry cash anymore. We don't carry checkbooks anymore. I mean, we do everything through accounts of some sort, uh, online and, and it's unfortunately in the practitioner community. We're going to kind of be the people that are going to have to help and nurse some people through that process of moving them up to the way the world works now, because it's not going back.

Annie Schwab: No, no. And I, I actually think the, the idea of phasing out paper [00:15:00] checks was a great idea. I just don't, I don't think they're I think it was like in September of 2025, it was like there was this executive order and it was sort of like everybody's moving so quickly. And then tax season came along and yes, the softwares were prompting you to enter this information in. But I think there should have been maybe a longer transition period could have helped. Right. Um, just, just to get the communication out. Um, and, and the notices that are coming [00:15:30] out. So if you don't put a direct deposit information on the tax return, it, you can technically file it, although most, most professional softwares were, you know, prompting you.

Roger Harris: Or at least telling you you left it off and you need to put it in there. They would let you file it, but they would.

Annie Schwab: They would let you file it. Right. Um, and so once it gets filed, it basically it just gets held and then a notice goes out, um, to, to, to the individual saying, you know, and it was a little confusing [00:16:00] and it did look a little different. The notice, the notice, it's a CPE 53 e um, but it's, it had a, it has a QR code on it. And so when the notices first went out, there was a lot of skepticism of whether or not this was legit. And a lot of people didn't want to, you know, scan the QR code. They, they would rather go on their online account. And so while the IRS was still going to eventually process the return, the wait times [00:16:30] for getting a paper check or, or requesting a paper check We're like six weeks. And so it was confusion about, okay, well, what if I don't have an online account? Do I have to do an online account? What if I really don't have banking information? Do I scan the QR code and some people who were not getting a refund. So let's say you owed money. They were getting these notices too. And so that that caused some confusion. Um, you know, why am I getting this if, [00:17:00] if I'm not getting a refund, I sent you my check. Like, why am I getting a notice? Um, and so I don't, I think it was maybe rushed a little, um, probably could have been handled more of a transition year. Um, to avoid.

Roger Harris: I agree, I think that's because I think, I think we all probably underestimated the magnitude of the problem. This would be in terms of people who don't have bank accounts or situations like you thought you owed money, so you didn't include it, and then you made a mistake and it turned [00:17:30] out you didn't claim an estimated tax payment that you had made. So you went to a refund. Now you're caught in all this. And I think, you know, had we been able to take an extra filing season maybe, and kind of use this as a, you know, the software companies could have probably gotten engaged and, and identified these unbanked people at the filing of the return and bypassing all these notices going back and forth.

Annie Schwab: Yeah.

Roger Harris: And, but still, um, and I know there are alternatives, but the, if I were the [00:18:00] letters and this has become, uh, we haven't been to any kind of IRS or practitioner meeting where this topic isn't discussed. And that's why I think, I think we, we underestimated the magnitude of the problem from the standpoint of how many people this impacts and telling people to go to their online account, enter their bank information. I don't have an online account, you know, um, maybe we didn't do enough job pushing people to give us their bank account if they the people. I don't have any sympathy for people who have bank accounts and just said, I don't want to give it to them. [00:18:30]

Annie Schwab: Well, yeah.

Roger Harris: You're you, you're in it by your own choice. But, you know, I think they'll figure this one out because, you know, paper checks. Now, they'll never make you pay electronically because what are they going to tell you? I won't take your money if you mail me a check. I don't know how they.

Annie Schwab: Think you'll be. I think there'll be a lot of encouragement to do it. And some of it is not just, oh, we don't want to cash your paper check. I mean, a lot of it has to do with I entity theft and and scams.

Roger Harris: Yeah.

Annie Schwab: You [00:19:00] know, and all that kind of stuff. But this was just like it caused it caused confusion, but it also a waste of time for the IRS employees having to deal with this frustration on the taxpayer side, you know, and delay in their refund. And then there's a lot of clients like that. There's also a practitioner impact. You know, the clients are confused and they're like, why do I have this? What did you do wrong? You know? You know, so it's sort of like they're losing, you know, not faith, but, you know, they're kind of questioning the practitioner like, well, I [00:19:30] don't understand why do I have to do this? Why do I, why do I, why am I getting this notice? So all in all, probably not the smoothest rollout. Um.

Roger Harris: But I mean, I'm assuming the executive order told them they had to do it for this filing season, but it would have been much better had they said by next filing season, we need a comprehensive plan to eliminate the paper checks. Because honestly, I feel sorry for some people who count on this money and they need it. And they [00:20:00] weren't told or didn't understand that they won't get it as quick as they used to get it, and now they're scrambling around because they've still got to pay their rent or they gotta, they got to do whatever they got to do, and now they're going to have to wait an extended period of time to actually get their money. And I hope it'll get better. I know that service and some of the. And again, let's remember, they didn't come up with this idea. They didn't ask for this. They were told to do it, and they had a short period of time to do it. I hope and think it'll [00:20:30] get better, because I think the software companies can be a real help here if they give them time to go ahead and tell somebody, I don't have a bank account, so just move on. Don't you don't need to send me something and ask me to put a bank account information in. I don't have one. So just put me in the queue for a paper check and at least eliminate the back and forth and hopefully shorten the wait time. But it's not going away.

Annie Schwab: No, no. So that definitely was, was, uh, frustration, um, for this [00:21:00] filing season. And you know, we also, at least on our end and we've heard too, you know, there was a lot more, um, e-file rejections. This, there was this really, there was a big push again, to prevent fraud, um, identity theft, avoid the scams. Um, so there were a lot of it was weird. It was like these name mismatch, um, or these schema errors. Um, and it was enhanced measurements that had good purpose.

Roger Harris: It was a basis for [00:21:30] what they were doing.

Annie Schwab: Yes, but let's say you filed, I don't know. I'll use an example, a partnership return. So you've been filing this partnership return for the last five years. Never had an issue with oh, the name or the EIN. Does it match? And there were a lot of you know, they got really picky. You know. Was there a comma LLC? Were there periods between LLC? Was there an Inc with a period without a period. So it got really granular. Um, and, but they were, you [00:22:00] know, sending e file rejections as a result. And then you had to call a one 800 number to verify this is correct. And so it's time consuming, annoying, probably on the IRS side saved, I don't know, however many dollars, um, in fraud because, you know, things were getting matched. But again, I think that was something that we didn't anticipate. And some of it was part of the, the Trump accounts. Like there were, they were very specific on It had to match the child's social [00:22:30] security card. Exactly. So that was, you know, all of it. Again, good purpose, but just tedious, annoying little things that we didn't anticipate for for tax season.

Roger Harris: Yeah. Trump accounts are interesting. And we'll we'll probably have to do a show on it. But that seems such a simple idea that.

Annie Schwab: I.

Roger Harris: Just give everybody an account. The government will put $1,000 in it and we'll move forward. I mean, who would have ever thought there's potential gift tax implications to all the interest earned? Right. Yeah. And I mean, [00:23:00] it's like, gosh, I mean, just things just can't be simple. Mhm. And, uh, and then there's the matching and the fraud and all the different things. And you've got private sector people matching and states doing things differently.

Annie Schwab: Yeah. The states are sort of piggybacking on that. Um, and so it will be interesting to see kind of what evolves because I 2025 was like, I don't know if they called it a test or a, a pilot, so to say, of the program. And so I guess we'll hear whether or not [00:23:30] it was. I know there were millions of of children who were signed up. I guess we'll have to wait for some feedback on, you know, how these are going. Will it be expanded to additional ages or matches or what the states can do or can't do? So that will be interesting to see.

Roger Harris: Yeah. There's one other interesting thing because, I mean, you don't think it's late when the OB got passed, but it is late for a lot of states and we're [00:24:00] still going to go through. I've noticed seeing some states just now for next year conforming or partially conforming to the no tax on tips or whatever you call it. So, you know, your state return this year may not have even had a deduction for any of those OB provisions. Now next year.

Annie Schwab: It depends on the state.

Roger Harris: It depends on the state. Next year you may get some of them because the legislatures weren't in session until after. So we've still got a whole nother year of figuring out where the states are going to fall on all this, [00:24:30] and how much of all these deductions are.

Annie Schwab: By the time it expires in 2020, it'll go away.

Roger Harris: Figured it out. It'll all be gone. Yeah, I just was reading in Georgia. They're they're coming up with adopting some of the deductions for tips and something to deduct overtime. But it's not exactly like the federal. And there was nothing last year. But this will start next year and same thing. I mean so it's just, you know, it's it's it's a mess. And I read one really interesting article this morning. I haven't even told you about this. We didn't talk. It was a panel of [00:25:00] people, half of them favoring OBB and half of them not. And it was really interesting to hear how the people opposed to everything in the big beautiful Bill were harping on the fact that saying no tax on tips, no tax on overtime, no tax on Social Security. It's just a lie. And they're technically correct.

Annie Schwab: Play on words. It's a play on words.

Roger Harris: It's an election term, not a tax term, because there is tax. There's at least Social Security and Medicare. And um, so [00:25:30] I don't know who knows where this will go. We've got elections coming up.

Annie Schwab: I mean we're getting the new W two, the new 1099 the new W four. I mean there's there's still new say parts of this that have to be implemented and things are going to be treated differently going forward for because of the retroactive ness of the the bill. So it's I mean, it's not over. Um.

Roger Harris: And it's all scheduled to not all of it. A lot of it is scheduled to expire right [00:26:00] when we'll have the new presidential election. And if you have a change in parties controlling Washington, they can let all this stuff go away. So by the time we got all the forms and got everything figured out, then it just goes away and who knows what replaces it. So that's that's life in the tax world. This is not the first time this has happened and it won't be the last I agree.

Annie Schwab: All right. Well, how about some new news? Let's say, um, you know, while most of our [00:26:30] tax practitioners were heads down preparing tax returns, there were some things that that happened that will affect in the short term and some in the long term. So, um, Roger, why don't you tell us about the Quang case? We have spoken about this on at least one, maybe two previous podcasts, but I feel like you get a little twist and a little something every now and then. So bring us up to speed, if you would, on, on the Quan case and what it means for us.

Roger Harris: Yeah. And the reason that we keep [00:27:00] harping on it is because this case was, you know, ruled on at the end of last year. And there's a July 10th of this year deadline. So if this is the first podcast you've listened to, I want to bring you up, but basically what the Quan case did, and then I'll get into some of the finer points that you need to consider and kind of our advice as to how you need to deal with your clients about something that's kind of up in the air or unknown. The coin case basically was a case saying that when there's a disaster, deadlines [00:27:30] are extended until the disaster is over. So if we go back to COVID, there were some extended deadlines during Covid, but basically there were still deadlines. But this court case said that, wait a minute. We were in a federally declared disaster, and until President Biden declared it over, none of these other deadlines really mattered that the real deadline became July the 10th of 2023. So what does that mean? [00:28:00] Well, what that means is that if there were penalties associated with action about a deadline during this January of 2020, am I right?

Annie Schwab: January, January 20th of 2020 through.

Roger Harris: July the 10th, well through May. And then it was automatically the Automatically statute extends it extended 60 days or something. Yeah. Yep. So if you were charged a penalty and I'm going to go over a list of some of the things that aren't, that are obvious and aren't obvious based [00:28:30] on being late, based on a deadline that wasn't July the 10th, then the court ruled that you were entitled to a refund. And because your real deadline was July the 10th, not whatever.

Annie Schwab: Penalties and interest or refund.

Roger Harris: Penalties and interest. Yeah, the penalties and interest. It wasn't specific to income taxes. It covered income taxes. It covered business taxes. It either it [00:29:00] covered failure to pay the right amount of estimated tax penalties because the deadline wasn't whatever the deadline was, you know, it was by the July the 10th.

Annie Schwab: So you actually had more time to make estimated tax payments during that time frame.

Roger Harris: It turned out right. Um, it even covered certain things like failure to file W-2s on time or 1099. So I mean it. Payroll tax deposits.

Annie Schwab: Payroll tax, IRC.

Roger Harris: Yeah, okay. We can't get by. We'll get our season and everything. And there's [00:29:30] some new news on that that Danny will cover. But so anyhow, it covers all of these things that are subject to that were subject to penalties. And yet because of the three year statute, if we don't do something by July the 10th of this year, 2026, yeah, you lose that, you lose it, you're out.

Annie Schwab: And I'm sure and I mean, I've seen so much in the news very recently, but nothing from the IRS. It's like they're just pretending [00:30:00] we're not going to say anything about it. They I mean, they obviously could challenge it.

Roger Harris: Well, they threatened to appeal it. We haven't seen it yet, but they haven't appeal it.

Annie Schwab: But, you know, they're not providing any guidance to help, let's say, help the taxpayers do this, get this money. Um, and there I, in my opinion, I think they're just sort of letting the clock run, hoping that, you know, whoever doesn't file by July 10th is done. Um, but go ahead because that's not the case.

Roger Harris: Yeah. Well, and the taxpayer [00:30:30] advocate, to your point, uh, put out some guidance. Number one, I encourage you to go look at it. It's one of their blogs on Quang case from the Taxpayer Advocates Office. But I think the main purpose of her blog was to be critical of the IRS for not putting out guidance and not doing something automatically, but leaving it up to and, and this is kind of where I think we can separate ourselves as good tax professionals. But basically, her conclusion was, if you weren't working with a good, strong tax professional, you [00:31:00] are never going to know about this and you were going to miss getting this money back or penalties abated, whatever the case may be. And it shouldn't be that court cases are decided based on the quality of the tax professional you work with. And so that was really kind of her message. But she also did a really good job of, of getting into the details of because there's two choices on this. And then we'll talk about the business side. One is if you know for a fact that your due $5,000 [00:31:30] on a penalty for a late filing payment and the amounts clear, everything's clear. You can file an 843, but you have to file it on paper. Um, you have to file it by July the 10th. You have to.

Annie Schwab: Signature.

Roger Harris: Oh. What signature? You have to reference the Kwan case and you file an application for a refund. But if you can't calculate the exact amount or your situation's maybe a little [00:32:00] iffy, or you're concerned that the courts will flip it. She recommends, and everybody recommends, that you file a protective claim on the 843, which it gives you. You don't have to have as much detailed information. So. So the message is if you have people that this covers by July the 10th, you either file the refund on the 843 or you file the protective claim on the. 843 now there's some advantages and dis. We're not going to spend a lot of time getting [00:32:30] into the great details, but a protective claim, I mean, it's better than doing nothing for sure.

Annie Schwab: Nothing.

Roger Harris: It's not as good as filing a claim if you know that you're entitled to it. But here's the problem, nanny. You've expressed it a couple of times that we're hearing from our people, and I'm sure you're doing the same thing. Let's say you're going to get the client's going to get $1,000 back, but you're going to charge them $500 to do it, or you're going to charge them $500 to put a protective claim up. And they [00:33:00] may never see a dime.

Annie Schwab: Right?

Roger Harris: How do we deal with our clients in that situation? What do we do?

Annie Schwab: It's really the I mean, the client's decision. I mean, accessing. So online accounts are going to be the best place to go to determine, you know, where the notice is and look at the notice to see how much was penalty and interest versus tax, because you have to break all that out when you file the form. 843 and so, you know, if you if you can, if the client can log in and they can get this and it's a big dollar, it's probably worth [00:33:30] the five, I'm just using $500, $500 tax, you know, prep fee, um, and take the chance that you might get 15,000 back or something. But there is going to have to be some discussion with the client in the sense that this is what is current right now. And we have a deadline of July 15th, July 10th, and we can do this. I can't promise you that you're going to get it because, uh, you know, the IRS is not providing guidance, but.

Roger Harris: And they may appeal [00:34:00] and win.

Annie Schwab: Right? But it's going to be up to the client. Do you, do you want to go for it or do you want to take a pass? And I will say for tax practitioners out there. I strongly recommend and we're doing this with our offices. Um, some form of communication that this exists that there's an opportunity out there. You don't need an angry client coming to you on July 11th, let's say, and saying, well, I did, I paid all this stuff and [00:34:30] my friend got this and I heard about this and you never told me about this, and now it's too late and, you know, blah, blah, blah, blah, blah. I think for us, we sent out a basic communication outlining very briefly, if you had penalties and interest or you had these things during this time frame call, call me, you know, call us, let us talk to you about it and see if it's worth doing. Um, and I think that's, I think that's worthy of, you know, a tax practitioner to, to do for their [00:35:00] client.

Roger Harris: Yeah. I think that's the minimum we need to do because I, you know, I'm not going to make the I mean, look, if it were me and someone said, I'm going to charge you $500 to get back 600. I'd say, well, just forget it. But I made that decision as the client. We don't need to do is make our own decision for the client and assume I'm not going to tell you because you're not going to want to do it, because I can promise you, if they find out after the fact, as you said, July the [00:35:30] 11th, they're going to tell you they would have paid whatever you wanted to get that $600 back. And you have no argument at that point. So I think the summary of what I would say, first of all, I would refer you to the taxpayer advocate. Um, we did a podcast. I can't remember how far back with two people from the Frost Law firm and the Frost Law firm is really big in doing this. They have some good information out. They put a blog out yesterday from a friend of ours, Terry Lemons, if you guys may know from the IRS, is working [00:36:00] for Frost. Put out a great article yesterday on this. Familiarize yourself enough to at least go to the clients and explain to them what is happening, what the court ruling was, the shortness of time that we have to make a decision. Um, and either tell them your firm is not offering that service, but we feel it's obligated to tell you about it or we're doing it. And here's our fee structure. Would you like us to do it? I think as long as you do those things, the [00:36:30] client will make their own decision. They'll decide what they want to do. And is it economic? Are they willing to take the gamble if they're waiting on rulings or whatever the case may be? Yeah, I think where we really make a mistake is if we don't take this seriously and make an effort to identify the clients and remember, it covers a lot of different taxes.

Annie Schwab: So yeah, it's going to be hard to determine.

Roger Harris: It's not easy to do. That's why the fees can't be so low because it's a lot of work unless they got a notice and you can respond directly to a notice digging [00:37:00] up what penalty was it and was it charged for this and all these sorts of things. There's some work to be done. And again, you may say, I'm not going to do this Mr. or Mrs. Client, but I think you need to know. And if you want to pursue it, go somewhere else to pursue it. I'm not going to do it. I don't know. I'm not saying that's a good business practice, but that's your right. But you must inform your clients about this case. And, um.

Annie Schwab: And remember, you can't charge a contingency fee. No. So, you know, if you're thinking [00:37:30] in your head, oh, well, I could, I could do this. And then if they get the money or if it's not appealed or da da da da, you know, I'll take a portion of it. You know, that's that's not allowed. You need you need to collect payments up front, um, for reasonable charge based on your knowledge, the value of your service, etc.. And then what happens in the processing. Now I don't know. Have we heard Roger or the 8843 getting process or people getting their money?

Roger Harris: Well, [00:38:00] one of the problems is we don't know because there's first of all, you file on paper, which is going to slow it down forever. Forever. There's no tracking of it. You know, one of the suggestions that people make is make sure you send it in certified mail or somehow.

Annie Schwab: Oh yeah.

Roger Harris: For sure. Acknowledge that they receive it. So no, you know, I mean, I mean, we've heard anecdotally that, you know, the in cases where there's people discussing it, we're in an audit or in a settlement, you know, that when they put it up in that situation, the IRS has acquiesced to the Quang case. But as far [00:38:30] as just processing. 843 I don't know that anybody has gotten payment yet because first of all, even if they sent the stupid thing in the day the Quang case was announced, I'm not sure it would have been processed on paper yet. So yeah, there's again, I appreciate the fact there's a lot of uncertainty in this, but the only thing, you know, we can sit here and debate any and I could debate all day whether to file a claim or a protective claim.

Annie Schwab: I think if you if you have if you have the numbers [00:39:00] and you feel confident that the form 843 is filled out properly with the proper support? A calculation, I say send it in if you think that the money is worth it and you just haven't gathered the data or you know the client's getting more information to you, then I don't see any harm in a protective claim.

Roger Harris: But you're still going to do a lot of work to even do the protective claim because you've got to determine. So, so, but we can debate that what we can debate and what the one mistake you that will not happen unless [00:39:30] the IRS does something nobody expects is you can't miss the July 10th deadline, right? It won't matter if you're still arguing about a claim or a protective claim on July the 11th, then you might as well stop arguing because it's over. So you could go in either direction that you feel comfortable with, with claims or protective claims, but you got to do it by July 10th, and you got to start by coming up with some sort of communication to your clients to make them aware of this, because I can see instances where Potentially [00:40:00] somebody that could have gotten a lot of money didn't get it because you didn't tell them, because this is not being talked about in the I mean, you're not going to know about this unless you're in our field. And I think if we do our job, we will also remember what I said. The taxpayer advocate's point was, is that unless you have a really professional tax preparer, you're not going to know about it. Well, I'd rather be in the group that have a profession. I'd be be in the group of professionals [00:40:30] than Nonprofessionals.

Annie Schwab: And that means set apart. So set yourself apart. Set yourself up for, you know, happy clients, new clients based on this.

Roger Harris: And they'll decide whether they want to do it or not. You know, if they want to pay your fee and do it, let's do it. But, um, just tell them, just tell them. So we're going to keep pounding Quang probably for every podcast we do between.

Annie Schwab: Now.

Roger Harris: Until July the 10th. So yeah, we'll apologize in advance, but it's just something I think we've got an obligation to at least [00:41:00] address and hopefully, you know, get some clients either some money back or some penalties abated. Remember, it can abate penalties as well as get refunds. So if there's penalties that you're disputing because of this, you're asking for an abatement, not a refund. But again, we're not going to get too technical. But we had to mention IRC. So I mean we.

Annie Schwab: Well I mean.

Roger Harris: There's there's new stuff on that too.

Annie Schwab: There is. And it's another opportunity for your client. So if um, basically what's happened is [00:41:30] the IRS has introduced like this option for taxpayers who need more time to review a previously disallowed IRC claim. So I think the IRS is probably trying to avoid, you know, lengthy, expensive litigation associated with this. But what they're typically you get two years. So you receive the the 105 C or the 106 C letter. That's the ones, you know, resolve dealing with IRC. And you and you have two [00:42:00] years to sort of respond, agree, disagree, challenge, whatever. Um, so now the IRS is saying, hey, we realize time's flying by. Um, so if you, for, if you or someone who has six months or left remaining in that two year time frame, we'll give you some extra time. You have to ask for it. You have to file a form 907. Um, send it to the agency. You can do a, you can upload it through an online tool or [00:42:30] you can send it snail mail. Um, but it's basically requesting from the IRS. Hey, you have this provision where I can get new time. I would like more time. Um, and so, you know, if you have clients with the ERC that maybe got disallowed or they're still trying to figure out if the changes were were correct or can you support them or blah, blah, blah, blah, blah. Don't you know, you could potentially get a client could get additional potentially [00:43:00] additional time to deal with DRC. So, I mean, I'm still hearing claims being processed and and some people still waiting on their money. And I don't I don't know what pile and what room at the IRS all of these are sitting at, but it's somebody's got a big stack of paper.

Roger Harris: Yeah. And I think everybody at the IRS and Andy and I and everybody, our listeners will be ready when we don't have to talk about DRC anymore, but it'll go away. And another thing, and something we heard last week [00:43:30] at the fly in, or we heard and something was announced. If any of your clients, uh, invested in conservation easements, um, first of all, they're not doing real well in court. Um, the, the, as the, uh, as Ken Keyes mentioned, it's not just a lot of people said, well, I'll just try it. What the hell? If I, if I lose, I'll have to pay the tax back. Yeah, well, the penalties that are being assessed on conservation easements are [00:44:00] 40% in courts are upholding that. So think about it. You know, if you saved $100,000 in taxes, you're going to owe the 100,000 plus interest and 40%. So it's but what the IRS has said, and I haven't seen it, I've heard it announced. I haven't seen it yet, but they're talking about coming up with some sort of because there's a lot of those out there. So they're.

Annie Schwab: Well, I mean, it was promoted. It was it was huge, you know, and and it was working right. [00:44:30] I mean, people got their money and then it was sort of like, wait a minute. It's almost like an IRC mill for, for, you know, easements. Um, but it was highly promoted and well accepted by the, by the.

Roger Harris: I mean.

Annie Schwab: A lot of people did it. Yes.

Roger Harris: Yeah. I mean, it's like, well, I'm going to invest $10,000, then I'm going to get $100,000 right off on a $10,000. I mean, that's right. It came with really great looking background information. Lawyer signing off. Cpa signing off and [00:45:00] all those sorts of things. And and in some cases, it was just done improperly. There wasn't the perpetual transfer of ownership. And in some cases it was just made up. You know, that this piece of dirt today that I paid $10,000 for, miraculously a year from now would be worth 10 million if I put a golf course on it. You know, and so I'm going to deduct the difference as a deduction. I mean, it was it it's like anything the concept was legal. It's taking advantage of it and going too [00:45:30] far. But the IRS has said because there there's so many cases they're just overwhelmed with with cases they're going to offer some sort of safe harbor settlement. I haven't seen what it is yet. Kind of like, remember when they did this with IRC? If you pay it back or do this sort of stuff, you know, so we're anticipating there be something coming out. Again, I've heard the announcement they're doing it. I don't know if you've seen it. I haven't seen it.

Annie Schwab: I haven't seen it, but I'm guessing it's going to be something like, you know, turn yourself in, pay back, whatever, [00:46:00] and we won't charge, you know.

Roger Harris: Charge.

Annie Schwab: You.

Roger Harris: 10% instead of 40% or something.

Annie Schwab: You have a time frame of doing it. And here's the special place you go or the special form.

Roger Harris: You file or whatever.

Annie Schwab: To do it.

Roger Harris: If you have clients that invested in conservation easements and they're nervous as they should be, um, keep an eye out for whatever this is. Again, I don't know what it is, but it might be the, the best you're going to do because, uh, Ken Keyes made it very clear when we go to court, we're winning. [00:46:30] Mhm. Uh, and these penalties are being upheld as well. So it's not just here.

Annie Schwab: Is there a certain time frame meaning like how far back how like the transaction occurred?

Roger Harris: Well, I think they're probably trying to institute fraud to eliminate a lot of that, you know, and so, I mean, some of them are just outrageous. I mean, they're just, they're ridiculously, you know, out of whack. And again, it's just I don't know what's the saying, you know, pigs get, I don't know, whatever it is.

Annie Schwab: Good to be true.

Roger Harris: It [00:47:00] is and it is. And but again, the concept that no one created this, this is different than one of the Indian tribal credits that nobody which.

Annie Schwab: Never existed.

Roger Harris: Never existed. This was a legitimate activity. Yeah. But people just went crazy with it and again, came up with these appraisals of what this would do for, you know, if I just did this and I don't have to do it. I just got to show you what would happen if I did do it. And because I'm not doing it, you owe me money. You know, it's. [00:47:30] Yeah, I mean, it's a little crazy. I understood why that happened because but but keep an eye out for that. They have said there's going to be some sort of safe harbor. And if you have clients, it's got to be better than paying everything back plus 40%.

Annie Schwab: Yeah. And well, obviously we'll continue to follow it, follow it. And, you know, bring you the latest on on another podcast.

Roger Harris: So there may be hope.

Annie Schwab: Yeah. Or at least, I mean, it kind of sounds like you're going to have to come out of pocket regardless, but at least you [00:48:00] might not have the large penalty. So yeah. Um, well.

Roger Harris: It's kind of like going from the death penalty to life in prison. It ain't great, but it's still better.

Annie Schwab: That's one way to look at it.

Roger Harris: Yeah.

Annie Schwab: Um. What else? What else? Um, so we just have a few minutes here. Um, I do there's sort of call to action items, um, that I just want to remind you of. I know it's May. I know we're telling you about a July deadline. I know you've got returns on extension. Um, there's still lots to do, but I do [00:48:30] encourage you to, to remember these few things that, um, give you a touchpoint with your clients, um, and may help you, um, down the road. So for example, encouraging those who either got really large refunds or had large balance due to look at their withholdings, um, maybe update their W-4 with their employer to sort of even keel that out. Um, notices. Another thing is notices are going out. Um, not [00:49:00] just the ones for the, the direct deposit information, but just our regular notices. And I don't know how many different types. There's a huge list on the IRS website, kind of, you can click on it and it'll tell you what does this notice mean? What are you supposed to do? Kind of layman's terms. Um, to deal with that. Uh, you know, obviously encourage your clients not to just toss those, um, if they come in the mail, but again, online accounts would help with the ease of access ability to not only view the notices [00:49:30] and, but most of the time you can respond or even upload documents or support or whatever.

Annie Schwab: Um, so that's something good. And then it was just our April podcast. We spent a lot of time talking about post tax season evaluation. You know, spend some time evaluating how your firm did during busy season. You know what clients maybe you need to fire who need what clients need better training. Um, what clients need to pay you more. Um, [00:50:00] you know, your pricing, your staff, you know, do you have the right people in the right spot? Do you have the right technology, your processes, your workflow? And so hopefully everybody did take, take a minute, um, to do that, uh, to sort of evaluate the success pain points bottlenecks, but now is the time to take action. So if you keep letting, if you just keep pushing it down the road, one, it's not going to be, you know, as prominent in your, in your thought process, but you'll end up next tax season with [00:50:30] the same, the same issues. So I highly recommend, you know, during these summer months that, you know, if you, you know, want to really improve your quality of life during tax season or, or grow your practice or streamline your processes. This is the time to to actually take action. So I know it's easier said than done, but I do. We encourage our firms to do it. And let me tell you, the ones who actually take action and do something are [00:51:00] very happy. They did.

Roger Harris: Makes makes a big difference.

Annie Schwab: It is. Um, and then the IRS form dates are out. If you have never attended an IRS forum, um, there are five um, various cities, most like June through August ish. They're the dates are out there. Locations are out there. They've even. I saw yesterday that they put out, um, some course descriptions with the agendas. Uh, I strongly encourage if you, if you can attend and you've never attended before, it's [00:51:30] worth it. Uh, the, I don't remember the registration fee, but it's fairly reasonable and you.

Roger Harris: Get very affordable.

Annie Schwab: Very affordable. And you get, um, you know, various hours of, of CE, uh, and then there'll be, you know, there's a whole vendor area with sponsors and vendors out there to talk to you about technology or, or resources or hiring and all these things. So check that out. I know we'll be there. Um, the [00:52:00] pageant will have a booth at four of them. Rogers speaking at all of them. He's going to be traveling all over this this summer. Um, I told him he just needs to keep a bag packed. No, no need to unpack. Yeah, just.

Roger Harris: Get off the plane and get the next bag and go back.

Annie Schwab: Yeah, exactly.

Roger Harris: We're also going to be.

Annie Schwab: Worth checking.

Roger Harris: Ahead. We're also going to be presenting on typically these things start on Monday, but registration is on Sunday and on Monday. Something new this year that the IRS is doing is they're putting in some practice [00:52:30] management courses. And we're going to be teaching one of them. Uh, those will start every Sunday at 4 p.m.. So if you get there early, there's going to be 3 or 4 sessions around in addition to ours. But we'd love to see you. And we'll be. Yeah, we'll be in all of the exhibit halls except New York. Uh, so come by and say hello.

Annie Schwab: Yeah, well, that's all I have for today. Um, I hope, I hope everybody enjoyed it. Some of it was a little bit of a repeat, but a lot of it, um, I do think is directly [00:53:00] related to a lot of our listeners. So I'm glad we had the opportunity to bring that to you. And, um, yeah, we'll be back. We've got various podcasts set up. We've got some guest speakers, we've got some, you know, some new information to bring. So continue to listen and invite your friends.

Roger Harris: Yeah, we've got some great, you know, we're not going to tell you who our guests are until we're actually doing it because what we've learned, things could happen. Sometimes things get in the way and they come later, but they'll be here. We've got some great guests, some great topics. [00:53:30] And, uh, I hope, I hope you've enjoyed, you know, those of you who've been listening, I think I've been amazed, even we were at any last week finding out how many people actually listened to us.

Annie Schwab: Yeah, I know.

Roger Harris: And we appreciate every listener we have, and we want to have more and come see us at different events. We're going to be around the country. We hope you'll come see us. And most importantly, we hope you'll continue to listen to this podcast and, um, let us know what you think, give us suggestions, whatever.

Annie Schwab: Yeah, we take suggestions for [00:54:00] topics. If there's something that you're struggling with and you think we would be, you know, knowledgeable, that'll bring it to you. If we can, we will.

Roger Harris: Yeah, we take requests. We don't sing, but we take requests.

Annie Schwab: There you.

Roger Harris: Go. All right. Well, Annie, as always, it was great to see you last week. And, uh.

Annie Schwab: Definitely.

Roger Harris: Great to have you back on the podcast today. And thanks to all our listeners and we hope that you enjoyed this and we hope you'll tell your friends about it. And most importantly, we hope you'll join us next time for another federal Tax Update podcast. Bye, everyone.