Linda E. Stiff
Internal Revenue Service
1111 Constitution Avenue, NW
Washington, DC 20224
Dear Acting Commissioner Stiff,
As president of the National Association of Enrolled Agents (NAEA), I write on behalf of approximately 40,000 enrolled agents (EAs) nationwide. The purpose of this letter is to share our concern with recent enforcement actions IRS has taken.
More specifically, we have seen a disturbing trend in the administration of the campus correspondence examination program. Many of these correspondence audits are single-issue focused or limited to a taxpayer’s Schedule A. Regardless of the particular focus of the correspondence audit in question, the Service is issuing subsequent follow-up notices too rapidly.
Broadly, the issue is as follows: a taxpayer receives an initial correspondence audit, which contains a request for documentation. The taxpayer is often asked to justify a particular Schedule A deduction (e.g., non-reimbursed employee business expenses). The taxpayer’s enrolled agent then submits documentation within the 30 days allowed. It seems simple enough thus far, but, alas, the taxpayer’s problem is only beginning. The taxpayer then receives, in rapid succession: a proposed adjustment (i.e., a 30-day letter), which disallows the expenses questioned in the initial correspondence; a waiver and consent; a request for installment payment; and then, within 45–60 days of the proposed adjustment, a notice of deficiency (i.e., a 90–day letter).
The enrolled agents representing these taxpayers are exasperated for a number of reasons, but the primary one is that the follow-up notices are being sent without respect to information provided in response to the initial correspondence audit itself. In some cases IRS has lost or claims to have never received the response, while in at least one case IRS campus staff has informed an enrolled agent that the 90-day letter may indeed be issued before IRS is able to process the taxpayer’s documentation submission. This EA was advised to file a Tax Court petition!
Other enrolled agents have attempted, without success, to have the audits moved to the field. Some are filing Forms 911 (Request for Taxpayer Advocate Service Assistance), claiming that the taxpayer is being harmed by the arbitrary fashion in which the tax law is being administered. No matter how we proceed, our clients’ bills continue to rise due to premature—and in many cases, completely unnecessary—notice escalation. And perhaps even more frustrating to EAs is that we find ourselves with multiple clients in the same position (e.g., a group of flight attendants or police officers who use the same EA) and we are unable to “stop the madness.”
Enrolled agents are not alone in their concern. Taxpayers themselves are unnecessarily troubled by the stream of ever more serious sounding IRS notices (and let’s not forget that even the most benign IRS correspondence often produces a state of high anxiety in a taxpayer). Further, taxpayers are often tempted to sign the proposed adjustment, either not understanding that IRS has not considered their initial response or in a misguided effort to stem further enforcement activity.
Taxpayers who timely respond deserve consideration of whatever support they offer in defense of deductions or credits claimed on their tax returns. Otherwise, taxpayers are left to believe that their audits have been concluded before they even open the initial notices. Likewise, an enrolled agent should not be forced to the extraordinary action of filing a Tax Court petition simply to protect a client’s right to reply to a correspondence audit.
Given the pattern our members have seen, we request that you investigate the timing of notices related to correspondence audits and make appropriate adjustments. Should you or a member of your staff wish to discuss particular cases, please contact our Senior Director, Government Relations, Robert Kerr. Thank you in advance for your consideration of this matter.
Diana Thompson, EA
CC: National Taxpayer Advocate—Nina Olson