Posted: September 19th, 2022

Question

TaxMemo4 xTaxResearchMemoFormat3

Question #4: IRS Bypass of the Taxpayer Representative

A CPA’s corporate client has IRS tax difficulties that are related to a myriad of payroll tax and income tax liabilities. After trying for more than a year to handle the situation on its own, the corporation finally decided that it needed the CPA firm’s assistance to resolve the matter.

THE FACTS

1. The corporation contacted the CPA firm on March 2, 2020. The CPA accepted the engagement reluctantly because he was in the midst of the busy tax filing season.

2. The CPA represented the client at the first meeting with the IRS, which was held on March 9th. While discussing the situation with the revenue agent, the CPA immediately got the impression that this IRS employee was not concerned with the taxpayer’s needs and even less concerned with his needs as a very busy CPA during the filing season.

a. The revenue agent was rather abrupt during the meeting.

b. He told the CPA that this matter had been assigned to him for resolution and had been in his case inventory for about five months.

c. He gave the CPA an in-depth list of information that he needed from the taxpayer to ‘determine if the taxpayer would be allowed to have an installment agreement. (The corporation had already prepared a Form 433-B financial statement.)

3. When the agent told the CPA that he wanted all of the information submitted to him by March 16th, the CPA was shocked.

a. The agent did not seem to comprehend what the CPA would be doing during the next week to meet the needs of his other clients.

b. He asked for an extension of time until the end of March to gather the information.

c. Grudgingly, the revenue agent gave him the requested extension.

4. After the filing season ended, the CPA contacted the corporation. When he explained that he would need to present the requested information to the revenue agent at the end of March, the taxpayer replied that it would have the controller gather the information.

5. A week later, just a week before the March 30 date for the submission of the materials, the CPA received a call from the taxpayer stating that the controller had a family emergency and was presently unable to put the information together. The taxpayer would need additional time to put the information together.

6. The CPA contacted the revenue agent and explained that he would not have the information available by the expected date because the corporation’s controller was involved with a family emergency. In a very abrupt manner, the agent replied that it appeared that the CPA was stalling the completion of the investigation, and he demanded to know when the CPA could get the information to him so that he could conclude his work.

a. After apologizing for the delays, the CPA asked the revenue agent to give him an additional 15 days to get the information from the taxpayer.

b. The revenue agent told the CPA that he would think about the extension and would get back to him in the next few days.

7. Several days later the CPA was sitting at his desk when he received a phone call from the taxpayer. The IRS revenue agent had come to the taxpayer’s offices, where he complained that the investigation had been unreasonably delayed because the CPA was hindering the examination by his failure to furnish the required information after repeated requests.

8. The CPA was understandably very embarrassed by the agent’s actions. He wondered what right the revenue agent had to bypass his power of attorney.

You are to write a memorandum to answer question#4, no more than 2 pages.

QUESTIONS:

1. What are the requirements before an IRS agent may bypass a taxpayer representative?

2. Did the IRS agent improperly bypass the taxpayer’s representative? What is the support for your conclusion?

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