Preparation and Tact Are Keys to Promptly Resolving Tax Notices

As seen on Bloomberg Tax

Preparation is essential to quickly resolving employment tax notices and avoiding often long and unproductive phone calls, two payroll professionals said June 21, during Payroll.org’s 2023 Virtual Congress.

Employers generally receive tax notices when the IRS or local agencies note a discrepancy in reporting. The most common employment tax notices involve mismatched Forms W-2, incorrect reporting in Form 941, or reporting issues with Social Security deferrals, among others.

Once a tax notice is received, employers should perform their due diligence by gathering as much information as possible regarding the discrepancy. “You must research your issues prior to calling and figuring out what your resolution is. Come completely prepared. Otherwise, you’ll be on hold for four hours,” said Rebecca Harshberger, payroll practice leader with Entertainment Partners.

“Do you have the original source documents to be able to discuss the problem? Be prepared with the documents and a copy of your power of attorney,” she said.

The most important step to dealing with a federal, state, or local employment tax notice is determining your organization’s power of attorney. “Don’t bother calling until you have this,” said Mindy Mayo, managing director for KPMG, “try to make it a one stop shop.”

Authority to resolve a federal or state notice can be established by filing Form 2484, Power of Attorney and Declaration of Representation. This authorization, which can be submitted online and is valid for federal and state notices, allows any named employee to receive and inspect an employer’s confidential tax information. “The IRS will flat out deny speaking with you unless you have a state or federal power of attorney form,” said Mayo.

Any employee or third-party provider can be added to the form, but special attention must be given when filing to avoid “knocking someone off that needs to retain power of attorney,” warned Harshberger. “The IRS only has so many spaces for names.”

For state and local notices, employers should vary the people who are currently registered with state agencies as an active power of attorney. “You’re also going to want to create an account with each agency portal,” said Harshberger. Use a communal password spreadsheet so authorized team members can access the account.”

Once power of attorney and source documents are ready, call the agency and “instantly put a hold on your account,” advised Mayo. “You’re going to want to get that upfront.” Putting a hold on the account will stop any liens or collection activity while a resolution is found. “Don’t be afraid to ask for a long hold,” she said. “I even ask for 90 days.”

After submitting a hold request, employers should be ready to discuss the problem and any possible resolutions. “Tell them exactly what you need to do to correct the issues, and then they can be very helpful,” said Harshberger. Employers should diligently track any calls made to the agency, along with the agent’s phone number and fax number. Don’t be afraid to ask them for their name, said Mayo.

“Keep a record of every contact you make, because this information will be useful for your taxpayer advocate in the event that no resolution is found,” cautioned Harshberger.

Mayo emphasized that the key ingredient to promptly and successful resolving any employment tax notice was the right attitude, stressing that employers should always “be pleasant!”