Tax Resolution is a fascinating way to expand your firm as long as you don’t overpromise expected results. CPAs, attorneys and EAs are in a unique position. Only these credentialed professionals are able to represent taxpayers before the IRS without the client being present. There is a greater need because of the proliferation of correspondence audits and horror stories of dealing with an understaffed IRS. There are many good reasons for clients to never talk with the IRS. Clients can rarely improve the situation. Now technology is making it easier by creating templates for forms, letters and transcripts.
Attorney Kurt Avarell, founder of Canopy Tax said one in 10 Americans have some problem with the IRS. “One of the most dangerous positions for a CPA is when they do something they don’t do very often,” Avarell said, “Some CPAs specialize in tax resolution work. It is unusual for a tax practice to not do resolution work.” To get started you need your client to sign a form 2848 power of attorney or a form 8821 for information only.
The system he created helps walk the accountant walk through how to deal with the IRS with all the forms and letters they need to solve the problem. According to Avarell, the Canopy Tax system logs into eServices and pulls down tax transcripts. “You can see if someone filed their estimates,” Avarell said. “Canopy also parses out codes to provide a 10 page transcript in readable form.”
Avarell came up with the idea in New York doing pro bono work on the side handling tax resolution cases. Avarell got a lot of satisfaction helping average Americans who made a mistake. “They were not going rogue,” Avarell stated, “it’s because the tax code is complex and incomprehensible. Most people who owe money are not tax protestors. There were several who did not have enough money because of a medical emergency. They may have pulled money out of an IRA that had withholding but the tax withheld was not enough.”
After his pro bono experience, Avarell taught himself how to program and built the original Canopy Tax system in his basement. “The IRS is sending more notices,” Avarell said. “Mail audits are up considerably. The IRS has cut back on auditing and the way they do auditing. They have cut back in the collection division.” CPAs will often wait on the phone for hours to talk with the IRS Collections Unit. “At a conference,” Avarell said, “I heard a person who will wait on hold with the IRS and then sell their spot in line.”
Tax Resolution is offered by highly reputable attorneys, CPAs and a few not so reputable. The Offer in Compromise (OIC) program enables taxpayers to resolve debts by entering into an agreement with the IRS for reduced payments. A few high profile cases have involved Tax Resolution businesses which overpromised OIC results. However, the majority of people do not qualify and that fact was not made evident in the advertising for these services.
An Offer in Compromise is not the primary way to get satisfaction. “There is always some relief,” said Avarell. “The best case is you get out for much less than you owe; the more common result is to get someone on a payment plan. The client calls the CPA because they have levied their wages. It is rare for the IRS to take a house or a car. They don’t do that, but the fear is out there. So just to get them on a payment plan is a relief,” continued Avarell. “There is a first-time penalty abatement which sometimes removes all of the penalties. It is rare to see interest removed. It is a much higher standard. It is a smart avenue to try. There are 50-100 penalties; they are expensive. The most common are failure to file on time, failure to pay and the accuracy related penalties like taking too much of a mortgage deduction,” Avarell elaborated.
Faron Adamson, CPA has two tax practice offices in Missouri and likes Canopy’s workflow system and customizability. “It helps workflow scheduling because clients can log in and interface securely,” Adamson said. “It is satisfying to see it solve CPA’s pain points,” Avarell concluded.
Publishing CPA Magazine since 2002, T. Steel Rose began his career with Price Waterhouse leading to the start of Rose & Cash, CPAs. He was a VP for Solomon Software, now owned by Microsoft, and launched CPA Software News in 1991.