By Stacie Clifford Kitts                                                                      

If you are interested in developing a lucrative practice with a steady stream of income, you might consider specializing in the resolution of erroneous IRS notices.

Sadly, over the last few years, many tax practitioners, my firm included, have witnessed a marked increase in the number of erroneous IRS notices received by their clients.

These notices are usually automatically generated, are lacking in the information necessary to determine the exact issue or issues, and often include a mysterious amount due for taxes, penalties and interest.

For the savvy entrepreneur, this erroneous IRS notice phenomenon might just provide for an interesting business opportunity. That is – if you can stomach the mind-numbing and often infuriating interaction you will have with the Internal Revenue Service.

It’s no secret that the IRS is experiencing some extreme customer service related problems. One need not search long or far to find a truly eyebrow-raising example.

Case in point, this is one of my personal favorites: After waiting as much as three hours for an IRS agent to pick up a call and ending with an extremely rude agent refusing to help because she didn’t understand the difference between a partnership and a single member LLC (a concept this lady should have understood), my shocked staff asked, “Are they always that mean?”

“Sadly”, I explained. “They didn’t used to be.”

Written correspondence sent to the Service doesn’t seem to fair much better. In many cases, it is clear that correspondence has fallen into one of three categories 1) not actually read, 2) read but content ignored 3) issues are beyond the understanding or research ability of the agent.

As a result, you sometimes get the feeling that you are dealing with a high school student who was trained to click the picture of the “value meal” while taking your order at the drive through window. And it’s no wonder. The IRS’s own Internal Revenue Manual “Incoming and Outgoing Correspondence/ Letters” (IRM 21.3.3.1), is a litany of – if this – then that scenarios. I found the instructions for “working” the correspondence policy particularly entertaining. (As a side note – Dear IRS, clearly it’s impossible to properly respond to all correspondence by using this “checklist” approach when often times it requires a facts and circumstance analysis. I’m just sayin.)

Our law makers have, over the course of the last 100 years or so, created a tax code that is nearly impossible to get right all the time, and for taxpayers and practitioners, whether trained or untrained, you must expect that will be the case. Sometimes, taxpayers won’t get it right.

However, It is ludicrous for taxpayers who did get it right, despite all the obstacles and complications in our tax code, to waste time and resources dealing with the Services inability to recognize a correct application of their own rules or the correct application of settled law. Frankly, if you are not going to properly enforce the rules, there is no point in having them at all – and for that matter there is certainly no point in keeping the Internal Revenue Service around.

Regrettably, something that is becoming more and more common for practitioners, is the need to explain to clients, “sorry about those notices, but we did do it right, they just have their heads up their ….”