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Music playing. Hello, welcome everyone to another installment of our Practitioner perspectives series where, as you know, we identify a topic of continuing education and invite a panelist, a group of panelists both from appeals and practitioners to join us and talk through the issues.

Here we did a couple of these last year which were very well attended. I see over 400 people online here so far today, which I think is great. And of course more will watch these as recorded. And so thanks for joining us. I want to get started by introducing our practitioner panelists here. And 1st up we have a professor, Christine Spidell. Professor Spidell is the director of the federal tax clinic at Villanova University School of Law. She's a frequent speaker and writer on issues affecting low income taxpayers.

And Professor Speidel is a contributor to the procedurally taxing blog and also is active in the American Bar Association.

Christine, we are delighted to have you today. Thank you for joining us.

We also have today Melissa Wiley. Melissa is a member in Kaplan and Drysdale's Washington, DC office. Her practice focuses on advising clients on U.S. tax matters, including civil and criminal tax controversy matters and penalties at the federal and state level. Melissa is a member of the various committees, including the AICPA, IRS Advocacy and relations, and national tax committees. And we're thrilled to have you with us today as well, Melissa.

So thank you for joining. I'm gonna turn to our deputy chief of appeals, Liz Askey, who can introduce our appeals panelists.

Liz.

Thanks, Andy, and welcome everyone. We are excited to have with us today 2 veterans of of our appeals organization. The 1st is, Norma Diaz. Norma is a team manager and our collection appeals function in Miami, FL. She's been with the service for 25 years and then Jessica Talbot in her final week with the service, we are not letting her go out quietly is joining us. She's the senior operations advisor currently, to the director of examination appeals and just has a wealth of experience drawn today, and we are gonna take advantage of that before she sails off into the sunset. She's been with the service for over 38 years, 25 of those with appeals. And in addition to her current role, she has served as an appeals officer and appeals team manager and a technical advisor to the director. She'll again, she'll be retiring this week. We are going to miss her and I know she's going to miss us too. So without further ado.

I'll turn it back over I guess to Amy, right?

Ohh Amy, I need introduce you, I'm sorry.

Amy Guliano is our senior advisor here in in appeals headquarters and none of this would be happening without her.

So sorry for for not giving you your proper introduction, Amy.

So Amy, I will now turn it over to you. Thank you.

Not at all. Thank you, Andy and Liz for those wonderful introductions. I think as everyone can see, we have a really fantastic panel set up for you today. Thank you to our appeals employees for listening in. And let's go ahead and open up today's discussion with the question for all of our panelists.

What are your thoughts on the role of the independent Office of Appeals when looking at penalty appeals?

You know, appeals plays a unique role with an IRS tax administration generally. Um, does it play a unique role with an IRS penalty administration as well?

Um, Christine, I think I might tee it off to you first if you could weigh in and thank you for being here.

Yes. And I want to say thank you so much to to Andy and Amy and everyone for including practitioners in this presentation. It's really an honor to be invited.

And I think it, it really goes to your question, Amy, of the the role of appeals and how important it really is in tax administration. I think we all know that the the purpose of penalties is generally to encourage voluntary compliance and to get taxpayers to do the right thing next time or to learn what they've done wrong. And I think toward that goal appeals is really crucial. I've had clients who've come to me after they've already settled in a matter with appeals. They come to me maybe for collection help, and have expressed just how grateful they are that an appeals officer was willing to take the time to explain to them what happened and to be reasonable and to talk through the issues and they may still owe tax, but they feel a lot better about it after they've had reasoned consideration and somebody to actually to to connect with. And so I think appeals is really crucial in that.

Thank you, Christine. Melissa, what are your thoughts? Yeah, I'll echo everything that Christine has to say that's that's going to sort of be a theme throughout my career to be honest. But I I completely agree. I mean, I.

I want to put all of you in the place of my clients, who in many cases have tried to sort things out themselves and think they don't need a lawyer, they don't need a tax professional to help them find themselves telling the same story over and over again on the phone in letters, getting nonsensical responses. We're getting no response at all until finally somebody from appeals reaches out to them, and in many cases you all are the first person who has sit and listened to them.

And that is so incredibly important and so incredibly vital. And I could go on about how you know your authority to settle versus just seeing things black and white. The way the rest of the service is required to is incredibly important and it absolutely is. But for so many of my clients, the fact that you all are a person who sits and listens to them and their story, I I can't overstate the importance of that so many times clients.

Their frustration is not, you know, as Christine said, that they have to pay the tax, they have to pay a penalty, is that they feel like they haven't been listened to and they haven't been paid attention to. And that is the tremendous service that you all provide, not just to my clients and taxpayers out there, but you also ensure that people, when they leave that contact with the agency, feel better about it. They feel that there is somebody who can listen and that they're not forced to go to court. So those.

So that to me honestly, is, is the big role that you play that really cannot, cannot be overestimated.

Jessica, I think I'm gonna turn it to our appeals panelists now.

Jessica, you, you remind me often that the majority of appeals relating to penalties for failure to file, failure to pay, and failure to deposit are by pro se taxpayers, does this change or should this change how appeals approaches the case?

It really shouldn't. And I think, you know, I've got a soft spot for penalties because most people when they come into appeals, that's where we start them. That gives them that opportunity to, you know, learn how to settle cases and and really, you know, analyze the case and move forward with that.

What were the penalties?

You're most likely to see somebody who is not represented.

And they have never talked to a live person during this whole process and appeals is that first chance for them to say, can I just talk to you about this for a minute and just, you know, explain what goes on and what's transpired?

So with the penalties, you know, we always, I think that focus is this is just as important as any tax administration that appeals does.

We have to be able to let that taxpayer say, you know what, you want to just take a minute and tell me what's been going on with your case and then we can get into, you know, whether there's reasonable cause, whether there's a hazard here, whatever, whatever the circumstance might be. But I think it's that important, that important first step that we say, tell us your story.

And and Norma, last but certainly not least on this topic, you know any thoughts you have about the unique role that appeals plays here?

I agree with Jessica. It's really about the taxpayer experience, letting the taxpayer know that we want to listen to their story to want to. With that, we're listening to their concerns and sometimes we come to a resolution in favor of the taxpayer, sometimes we don't. But the taxpayer is satisfied that we took the time to listen to their concerns.

Now, Jessica, what if a taxpayer's appeal focuses only on reasonable cause? Is that all appeals looks at in that case?

No, no. The actual verbiage a taxpayer may use should not limit the scope of of that appeals hearing because taxpayers don't know what verbiage to use. They don't know how to. I mean, a lot of them don't even know how they got to appeals. They're just saying I need somebody else to look at this.

So when we get them, you know, one of the things that we teach our AO's is that, you know, familiarize yourself with the case. What happened from the time this started until it got to us?

And then take a look at reasonable cause. Why did the service deny it?

And then we will apply any kind of administrative waivers that are available. You know the most common one is Rev Proc. 84-35 which is for those partnerships with less than 10 members, but more recently we've got notice 2223 for COVID and late filing and anything that was missed by the service we're definitely applying. So those administrative waivers are always you know part of that analysis process.

First time abate.

Uh, one of the things and and.

When we get every once in a while we'll get a TIGTA audit and it'll provide recommendations and suggestions.

So first time abate, a lot of people think, well, it's already been applied because it's automatically applied by the service. But we learned through one of those TIGTA audits that sometimes.

A taxpayer had reasonable cost for an earlier penalty.

And so they don't get the first time abate when they're actually was an error and they you know they messed up and so they come to appeals. So we will look back and say why was first time abate applied earlier and if there was reasonable cause for it, we note that in our in our notes and then we go ahead and give them that first time abate for the penalty that's currently before appeals. That's just part of that taxpayer experience.

And then the last thing is those litigating hazards.

You know what? What's out there? What do we see? Um.

It's not all. We don't always see a lot of favorable, uh, decisions for taxpayers.

But one of the things that we really try to apply are what are, what mitigating factors can we apply to that because no two taxpayers have the same facts and circumstances. And so I think we really have to look and say.

You know, this is what happened to you. Yes, we might have a Boyle situation, but this is what you were doing all along and we can say this taxpayer, you know, really did exercise some ordinary business care and prudence here and we can make a settlement based on that.

So I like to think of those penalties as as a whole package.

We're not just going to look at reasonable cause, we want to look at everything and provide relief where we can.

Melissa, I think I saw you nodding along a little bit there. Is there anything you would like to add? Yeah. I mean, Jessica, I I hope you never leave the service, even though you're supposed to be this week, because that's that's right on.

For those of you who have not worked anywhere else at the service other than appeals like you work in a very high functioning group of individuals and things get missed all the time at the service center level, I know this will not surprise you. Mail gets lost all the time. People end up coming to you because of errors. Everyone is human.

It's not just on their side, but on the side of the service. They end up coming to you because especially during COVID, and I'm sure many of you have seen this, in some of the cases that have been hitting your desk, taxpayers tried their best to comply and tried their best to communicate with the IRS. And because of the pandemic and everyone all over the place and the mail piling up and the mail system not working, things just did not go the the way they were supposed to. And, you know, other than your role as the person who's listening to the taxpayer.

You're also their last stop before they have to go to court, and your singular role there to prevent taxpayers from having to go to court, to prevent judicial resources from being used. Court is terrifying.

I don't know how many of you out there have ever gotten random letters from the IRS about something on your own return. It happened to me about eight years ago because my husband and I, who are not then married, had split our mortgage interest deduction on our house and it didn't tie up. And I got this letter and I have to. I am a tax lawyer. I've been doing this for 20 years. And my heart started racing when I got that letter.

Like what? What did I do wrong? Oh my goodness. So, you know, you reaching out and.

Really listening and considering all the ways in which a taxpayer may qualify it is just the most amazing ability and and you are the only people who are able to do that particularly in the context of settlement. And I know we're going to talk a little bit more about reasonable cause but.

Your reasonable cause is a hard thing to put on paper.

Reasonable cause is something you want to talk about.

You make you reasonable calls one way and the taxpayer story that they're trying to tell maybe that within their their abilities and what they are able to do themselves, they really did try the absolute hardest and and couldn't comply.

So, you know, reaching out to the taxpayer as as Jessica Jessica suggests, and listening to their story and thinking creatively, particularly when they're pro se about what else they they may qualify for is just such a gift that you can give not only these taxpayers but but tax administration.

Also thank you for that Amy I'm gonna chime in here if I can because I I was sort of thinking some of the same things that Melissa ended up saying there and she points out you know we're a high functioning group here and appeals being high functioning group comes with great responsibility. I think that's exactly right. Some of the things that Jessica mentioned we've got to make sure you know that rev proc 8435 or notice 2 and 2223 were applied or first time abatement was that missed that the compliance of. I'm watching the text chat here and one of our appeals officers is noted that she has seen quite a few situations where first time abatement has been missed at the IRS compliance level. So it is on us to keep an eye out for not just reasonable cause for any other penalty relief provision that the taxpayer is eligible for and has not been given. I think the point about appeals being the first time some taxpayers have talked with us is critical and certainly justifies US spending the time to listen to the taxpayers concern in some cases explain you know the the law to those taxpayers. So appreciate the comments everyone's making here. Back to you, Amy.

Thank you, Andy.

I think, uh, before we dig into reasonable cause even further, let's, um, let's turn to the topic of supervisory approval.

Under section 6751-B. And I think here I'll start with my our appeals panelist. What penalties must supervisory approval be obtained and how is the issue raised in appeals?

Well, you know the the 6662 accuracy related penalty, we see a lot of those and.

You know, some of them come through the docketed process or the audit recon process, but we do get some through the penalty appeals process.

And you know, right now we've got basically two ways of doing these. There's the ones from the field examination where you know you'll see that managerial approval and then you've got those campus compliance cases.

In which it's an automatic assessment and it takes something from the taxpayer or maybe they're representative to kind of once they can contest that, then then supervisory approval goes, you know, becomes an issue.

So a lot of these cases when we get them, that's the first thing we're doing is, is, is tracing back what happened. Did the, was the taxpayer contesting this originally when it was proposed, was it not? And based on that, you know, we may recommend concession of the penalty right up front.

Um.

The courts have really you know, that's that's something that we've got our you know, our eyes on is because we see, we see a lot more court decisions coming out where that's being more and more refined on what that supervisory you know, approval needs to look like.

Um, just this morning Amy sent me over some proposed regulations where they want to put some, a little more timelines, a little more specific timelines in on how that works. And we're monitoring those closely and we're going to apply the, you know, apply them appropriately once that's finalized. But you know that this is one of the great things about appeals is, you know.

Something that you think is is is decided.

Never really is you get one court that makes a decision and that has us saying OK maybe we need to take a closer look at this and monitor closely. So in a nutshell you know that's how we look at those supervisory you know approval necessary is it, it's really tracing it back to the source and and deciding whether it was applied appropriately or not so.

Norma.

Yes, umm, for uh collection due process, I'm hearing some. The collection appeals officers are are required to verify the supervisor approval, and as part of the verification process, the collection appeals officer has to determine if the penalty was automatically calculated through electronic means and excluded from IRC 6751 or if an exception applies in after extenuating research.

All the options after researching all the options in the collection appeals officer can recommend abatement. So yes, and we also.

Pay attention, like Jessica was saying, to all the changes that are coming so um.

In a nutshell, um, we have to determine the source, then determine if it applies, and then we move on to recommend abatement.

Christine, do you have thoughts here about how to how to raise this issue with appeals?

Um, well, I'm glad Norma mentioned CDP and the verification requirement because I think we do see it there and it's, it's appropriately part of that CDP verification that all procedures were followed.

We're also seeing in deficiency cases.

That chief counsel is pretty attuned to the issue and so is appeals. And if they can't find supervisor approval in in the record in the file then then they are recommending abatement, which I think is is appropriate the proposed regulations.

Make your jobs much harder I think for for the moment because we don't know what the law will be if those are finalized, what they will say that they know they're proposing to to require approval at A at a slightly later stage than the court has for the deficiency penalties. But on the plus side you would have a little bit more clarity when those are finalized. So we're we're closely watching those as well and I think even though it's been a messy process of figuring out what this.

Statute means and when it applies and how it applies, it's.

It's gotten, I think that the service has responded in a positive way and that in most of our cases we are seeing that there was supervisory approval now which wasn't the case at the beginning. And and so it's when you're counseling your client about the penalties and again sort of going back to the purpose of the whole program, right, being able to assure them that yes, somebody looked at this and here's what it means and here's why I think it does encourage more.

Taxpayer faith in the system to have that supervisory approval requirement and to see that the service is is following it in most cases now.

That's a really great sentiment and very nice to hear you.

Um, let's start really digging into reasonable cause.

So consideration of a penalty appeal requires, you know, thorough review of the taxpayers case file and understanding their particular facts and circumstances. Reasonable cause exists when a taxpayer is exercised ordinary business care and prudence in determining his or her tax obligations but was nevertheless unable to comply. And usually that's due to circumstances beyond the taxpayers control. So I would ask all of our panelists here, you know, what is the best way to approach such a fact intensive analysis?

How do you tell the story?

So I'm going to raise my hand for this one. I have been looking in the comments and there's been some really great suggestions from from folks who are following along and and these are the kinds of things that I try to do with my clients to make it easy for the appeals officer to understand the story.

You know, one suggestion was a really good timeline is, is crucial not just around you know the filing but what happened leading up to the filing or the payment, what happened leading up to the payment, what happened immediately after.

When did you find out there was an issue? What did you do when you found out that was an issue? Who did you consult? How much time did you let go through? You know, those are the kinds of things that when I'm working with a client, I make sure that I'm understanding and laying out for the appeals officer, because I do want that story to be clear for you. The other piece of it is documentation, right? I tell my clients all the time, whatever you have to show that you actually did these things, give them to me so that I can put them in the appeals protest.

And hand them to the appeals officer so they know that these things are true. They don't have to think about whether it makes sense. They have a document that that shows it.

And when there's not something you know, I'll even go so far.

As with clients, you some of you may have seen some of this during COVID, where they said.

Look, I, I was not going into FedEx or going into a post office at the height of the pandemic. So I took that thing and I put it in the mailbox. I said, OK, great. Do you have anything, did you, you know, stop at the post office to buy stamps before, like show me anything that might try to back that up and and those are the things that I try to do.

You know, the other piece of that is I also really try to give an appeals officer and idea of who my client is and what they know because there's a very big difference between and. I'm going to take a real life example here, a police officer in in Philadelphia who inherits some money from his mother in Poland. When she wins the Polish lottery. That person is going to know and understand something very, very different from one of my firms, estate planning clients who has had you know.

Binders full of documents and estate planning put together and uses 3 accountants across the world to understand what they're filing obligations are. Those are different people with different perspectives. And you know, to my mind, one of the things I find incredibly helpful. If you've ever heard me speak before or ever met with me, you know that I love the Internal Revenue manual, which is the weirdest thing to say at a cocktail hour, but I do, and particularly the the penalty handbook.

I find incredibly useful. I have it printed out and highlighted and tabbed because it goes through the kinds of things that should be looked at for each individual taxpayer. What is their level of education? Did they consult somebody you know?

What did they hear when they consulted? How quickly did they rectify any issues? I mean, it just does such a nice job of laying out the factors, many of the factors that should be considered, and when I make presentations to other practitioners about how to do these cases.

That's where I'm sending them, right? Go to the Internal Revenue manual. Make sure you're addressing those topics. Give the the IRS appeals officer a timeline. Give them documents.

Sometimes even when we don't have documents, I'll go out and get affidavits from people who know that something happened, who saw that something happened, any incremental evidence that can help you understand the situation. That's that's what I view my role as in as a practitioner.

Thank you, Melissa. Christine, I'd love to hear your reaction.

Well, I'll just second everything that Melissa said.

Yeah, absolutely. I I think what she said about who the taxpayer is and what they know is really crucial and it really is about listening to their story. I think the point about the timeline is extremely helpful.

A lot of my clients have difficulty understanding the time frame in which they have to prove the circumstances that cause them to not file on time.

Um, so people will come in and will provide you evidence of I was hospitalized in June. It's like, well, your taxes were doing April, so let's talk about what led up to that. But it's incredibly common. Like just people don't automatically not only understand what what language to use or what qualifies, but but the time frames are often difficult for them.

Umm.

And so yes, I think with with my clients it's I do a lot of.

Listening to their story and then brainstorming. Like Melissa said, what could we possibly get to corroborate this? Who else knew about this situation?

It's it's very fact intensive and.

Again, it's it's just such an important role that appeals plays when a taxpayer is not represented because if they don't have somebody on their side helping them.

To build the story, they may come and talk to you in a way that's not linear, or in a way where they're talking about something that is maybe technically irrelevant because the time frame is not exactly what it needs to be. So I I think you have a tremendously hard job.

Helping somebody, you know, listening to them, but then sort of fitting what they say in into the manual. But it it really just goes back to the facts and circumstances and listening and putting everything that they tell you in an order that really makes more sense and then probing right to see if they do have any of those circumstances.

Jessica, I'm sure you're just dying to get in here.

Well, in, in timelines are the biggest help, but sometimes there are starting points. So one of the things I like is I I do like conferences even if they're just 15 minutes because you can glean so much information that was unsaid or you know or just walking somebody through something and I I'll just share this real quickly is that.

Years ago I had someone who had all these, you know, these failure to deposits, but they only seem to be at certain times. And so I called and says what's going on? And she says, well, you know, based on the Union contract, when all these truckers come in, no matter if it's, you know, 11:00 o'clock at night, we have to cut them a check.

So there's no way we can make our deposit the next day because I'm still paying out checks as of midnight.

So, you know, we got talking about this and you know for all intents and purposes the banking day ended at 5:00 o'clock.

So we did a quick recalculation and made a settlement based on if the deposit day was the next day.

And that's what we in, that's what we went forward with and I said you know, it's just it, it is something that.

They're doing everything in good faith.

And they're hampered by one thing or another and this, you know, the the settlement and this I never would have known about it had we hadn't had that, you know, 10 minute phone call where she could tell me, Oh yeah, I got you know, I've got truckers coming in at 11:30 and they want that check.

But I there's no way I'm going to get those you know those, uh trust fund monies in deposited, you know on Monday. Just no way it's going to happen. So I like conferencing. I like to be able to you know I I stressed to a House pick up the phone if something just doesn't seem right and have them walk you through what happened because sometimes you will get a whole new perspective.

Normal. What are your thoughts here?

Yeah, in in city P and collection due process hearing, we got a lot of process, um taxpayers and requesting penalty relief and many of the taxpayers have dealt already with the revenue officer, a collector and they're nervous about the whole process.

And, um, the conferences are meaningful, but sometimes they, they they're not very organized. They don't know how to present the case. So what I usually tell the taxpayer is.

I want you to put it in writing for me and write it like you're writing to a friend. You're telling a story and put the dates in and attach any documentation that you think it's relevant to your request. And then you send it to me and I'll review it and after I conduct my review, we'll speak again.

And um, and it works wonders because they have the opportunity to present.

For the to present their case without writing the letter, and then after they talk to us and they write the letter, we have a second conversation and we get so much more information from them.

But umm it is.

Communication is crucial between the uh appeals officer and the taxpayer, especially when it's a pro set taxpayer that it's already has some anxiety about about the process.

Absolutely. Communication is crucial and I like the idea of telling the story to our friend. You know, we would tell details that would sort of give the color of the story when you're talking to our friend. Now Norma IRS compliance and customer service representatives in the wage and Investment division use the reasonable Cause assistant or RCA almost exclusively. How does appeals approach differ?

I hear this from taxpayers a lot. Um, some computer program it's making the decision or there's an I I cannot speak of an investment or um customer service use of the RCA tool. But in collection revenue officers are required to use RCA when the taxpayer requests relief for certain penalties due to reasonable cost and it's under Internal Revenue manual. In appeals, they use of a computer application such as the.

RCA goes against our mission to provide a meaningful opportunity for taxpayers to present their case appeals. Employees don't have access to this tool, either exam or appeals collection. We have no use for for such a system, it's irrelevant.

I'm just gonna. I'm gonna jump in here, Amy, just because I can't hold myself back. And I think that I think that point is so critical that Norman made. I was listening with great interest over the last 15 minutes as we talked about, you know, things are often not black and white or, you know, there may be facts you haven't thought of. It's the Union paying out checks at 11:30 or the police officer who, you know, it was uninformed about the law to think that you'd be able to come to appeals and everything would be black and white and a reasonable cause assister can give the answer in all cases is not realistic. This is why people come to appeals is for us to listen to them and to listen to the unique facts of their situation. I'm so pleased to hear everyone mentioning that here and watching the the comments in the chats as people who appeals officers who recognize that and say I like to think it's called an appeals hearing because listening is the first thing we do right. So I appreciate that there are appeals officers do that and think about.

What are the facts that are unique to this taxpayer and how does that, uh, weigh in on the reasonable cause determination?

Thanks, Amy, back to you.

Sure. I thank you for chiming in, Andy. It's such an important point. That's that's why it was a question phrased the way it was, just to make the point, you know, this is this has no place in appeals.

You want to be sure that it's not perceived as having a place in appeals. So moving on the the Supreme Court decision in Boyle states that the failure to make a timely filing of a tax return is not excused by the taxpayers reliance on an agent and such reliance is not reasonable cause for late filing. Jessica, I'm going to tee this one up to you first, what legal or factual hazards exist when considering the scope of oil?

Well, up until recently I would say boil was pretty much the standard and and appeals did give great weight to it. Now that's not to say that you know anybody that tried to come in with a late filing penalty or something who had relied on a third party gotta know it definitely wasn't. But there was some weight given there. You know, that's that's the whole thing about you know those litigating hazards, if this taxpayer goes forward will they be successful.

But again, this goes back to that telling the taxpayer telling their story, what were their individual facts and circumstances.

And was that really, you know if you rely on it, if you rely on on a third party for a filing due date?

We want to understand what was behind that reliance.

You know, I've seen, I've seen people that, you know, they'll come in with five years of tax returns and in their letter of protest they will say, you know, my accountants told me for all these years that I had no filing requirement, but then I got this SFR notice because my Social Security taxable. Those are the kinds of individual facts and circumstances that while accounts management or customer service may not take into account. They they do carry great weight here in appeals as they should because in those circumstances.

That reliance was absolutely, you know.

The taxpayer that Reliance was was acceptable and we have to give weight to that and we have to propose a settlement in those cases.

So, um, I'm interested in what Christine and and Melissa have seen out there, because I know I that's just one example, but I'm sure there's dozens of others.

I think you hit the nail right on the head, Jessica, which is when I have a client come to me and say somebody told me that I didn't have to file this, my answer is always who was that person and what did they know? And those were the things that I'm trying to get across to the appeals officer. I mean, I've had clients come to me saying I relied, I relied, and they tell me what their reliance was. And I'm like, I'm not putting that forward. That's not, you know, saying that you told your neighbor that you had some money and your neighbor.

But I don't worry about, like, that's not what we talk about when we look at the neonatology criteria, right. And. And So what I'm trying to do when I address that issue, and I always very proactively try to distinguish my cases that I believe in from Boyle, which is this isn't someone who gave the account the information and said here's the e-filing authorization, just file it by the deadline for me. You know, this is someone who went to an accountant, said, hey, I got this money from my mom.

In Poland and the accounts that don't worry about it, that's a gift. It's not taxable. You have no filing obligation. Well that is good reliance and what I do is try to make sure that I again can back those things up. Look if I can get something from the return preparer, that's wonderful. They often and and I think this is something that I would note as a practitioner point to you all is that when I go to a return prepare that has screwed something up.

I usually can't get them to put that in writing. So, so I, you know, I try to get something for my client to do e-mail your return preparer. Do you have something to show that you gave them the right information by the right amount of time? But you know, where I would try to bring kind of my practitioner perspective to to your lens is sometimes, especially when we're dealing with a practitioner who didn't do their best work, it's hard for me to get anything out of them to prove that.

To you. So just asking for a little bit of grace and understanding on that point.

I would echo that, umm and we we did have this situation arise in in a case that that just settled a couple days ago and you know going to the preparer and.

Trying to get copies of their.

Their records showing when they tried to e-file and what the what the reject code was right for all the returns.

So we were able to show that the taxpayer had attempted to file, that the e-file had attempted to to be filed on time and and the.

Umm.

That the taxpayers sun had later come in and attempted to e-file it. It turned out that the e-file had not worked because the sun had already filed and claimed himself and not as a dependent.

And um, so you could kind of see in the records what was going on there?

Of course it's, you know, it's still the taxpayers obligation to file by the deadline, but I think sometimes the records do show there was a story there and he was trying to get his son to amend so that he could then file correctly, right, claiming the dependent.

Um, so I think that was just helpful context for for our discussions. But the the advent of e-filing has definitely complicated things. I know we were going to talk a little bit about some of the litigation. It's it's I think less clear now when you have a preparer who who did try to e-file on time there was the the Haynes opinion from the 5th Circuit.

Which basically said, well, if the preparer is the agent of the taxpayer, we have to look at whether the preparers actions were reasonable, whether the preparer exercised ordinary business care and prudence. And in that case the preparer had not gotten a reject notice from the IRS.

And so that case was remanded for for the court to determine whether the preparers actions arose to reasonable cause right and that case was then settled.

So there is some uncertainty there and it's it's it's again like all the other penalty the issues I think it's just so fact and circumstances dependent.

And it it is definitely a challenge to try to get those records and the cooperation of the preparer, but but we do try.

Often our clients are a little more successful than we are, I think. So I think Norma, your your approach of talking to the tax preparer and then sending them off to A to collect what they can is a great one.

Jessica, I know you were looking at the Haynes litigation too. I don't know if you had anything to add about the e-filing issue.

You know, I have and and you know, like I said earlier, you know, you figured Boyle was settled law. Well, we found out that nothing is settled law anymore.

So, you know, it's something that we're going to keep an eye on because we do have, you know, the remand from the 5th Circuit.

Um, Northern District of California, there's a spot as where Spottiswood versus US and that court actually upheld.

You know and I think for a long time in appeals, especially with electronic filing returns, you know, we were looking for that e-mail that, you know either the acceptance or rejection and if you didn't get either one of those, you know, appeals was kind of leaning towards if you didn't get a rejection or you didn't get an acceptance, then you need to consider that the return was not filed.

But in in reading some of the comments and reading some of the people that were weighing into this Haynes decision.

You know one of them.

He made a really interesting point that the fact that a return was rejected from electronic filing.

Doesn't that in and of itself say that the service received?

The return.

And that they need to do something to try to perfect that because they do that with a paper returns. If somebody forgets to sign, they'll send, they'll give them you know a 3045 day. For them to come in & that return before they reject it. And so I thought that comment was absolutely was really interesting because well what do we do? Do we if we just reject it, the service just rejects it. Is that enough?

Shouldn't they, you know specify you've got a 10 day window to get this in or you know something along those lines. So I think.

Especially with respect to electronic returns, I think we're going to have to watch the courts closely over the next few years because I do think we're going to see a shift.

I think that's right. More to come on that issue for sure.

So there's a perception that reasonable cause is very difficult for a taxpayer to show. Is that perception fair?

Why or why not?

Christine, do you have thoughts here?

I think that perception is.

Shared, you know, by my clients and I think it's fair, it is a pretty high bar.

Um.

I mean.

I think it is very difficult for a taxpayer to show, especially if the taxpayer.

Doesn't have good counsel or doesn't have good knowledge of what the standard is and isn't able to present their case effectively. It's especially difficult for those taxpayers.

But but I I certainly have you know, many, many clients who want to, who don't want to pay the penalty, who do have facts that rise to reasonable cause. So it it does require.

It does require that they.

Did the best that not just did the best that they could, but they really did everything that they could to try to comply.

Um.

And it's.

It's it's a tricky question because there is some inconsistency in the case law. So you do sometimes see very sympathetic taxpayers with like you know a 40 year compliance history. That's perfect. And who explains to the court how they kept all their tax documents and how they met with their preparer and.

Um, there, there are some cases out there where the court is very sympathetic to taxpayers especially with good compliance history and so, so you never know for sure if if you might be more successful in litigation, but I think ordinary business care and prudence.

It can be tough and it can be tough for.

For people who rely on preparers without necessarily having.

Having a good reason to do so, right? Or or perhaps you should have checked up to see if they actually followed through.

Um.

Many of my clients just have a lot going on in their lives and so generally that's a very difficult.

Um, it depends on what is going on in their life, right? So, for example, clients who were homeless, we've been able to successfully get abatement there. But many situations with financial stress and interpersonal stress don't quite rise to that level.

But I don't know what what others think. I'd be curious to hear from Melissa.

And Norma and Jess.

Also true for my clients, Christine, in different ways.

And I think that all kind of keeps going back to the same theme that a lot of us have been talking about, about really taking the time to listen and understand the situation of the taxpayer. And if they're doing a bad job of telling you, then to give them the sort of advice that Norma suggests, like tell think about telling a friend and write that all down for me, because I think that is helpful. And look, I tried to do all of these things the right way, and sometimes I don't do them the right way.

And so if you know, if I am before you with the case or if another practitioner is before you with the case and you see something and you're like I that's not adding up, tell me what really went on there. Like please do push back because a lot of times, you know, I don't always do my job perfectly too.

I leave things out. I don't think of an angle that you're looking at. I didn't think to ask the client a question about something that's not adding up for you. Tell me to go get the answers for you because I'm certainly going to do everything.

Try to make your job easier.

We do hear the comment from people that reasonable cause is impossible to get. Don't waste your time.

I hear it a lot from clients. I hear it a lot from other practitioners. I think there's a handful of things that go behind that. One is because you're all human. There are some appeals officers that are harder than others, and that is just the nature of the game. The other, I think, and again, I go back to some of the comments I made in the beginning about how critical your role is.

I can almost always, if I have a client who has a story and I'm not telling clients who have lousy stories to go, go and waste your time. Or at least I try not to. But if I have a client who has a story, I'm always telling them at the beginning. Look, this is not a slam dunk. What you know, I see a lot of conversation in the chat and we've talked about some case. This is what the case says. You know, the individual taxpayer story is quite often not squarely addressed in any case law.

And that's particularly for those of you who stay with us for the next hour, the case in the international information return space and.

You know where you can be helpful and this is what I try to explain to my clients is you may be expecting 100% concession.

And that's probably not going to happen. But what you will get in appeals is someone who can sit and consider your story, consider the state of the tax law and see that there is risk to the government and say let's agree to split this on some level and I think that.

Practitioners could do a better job of explaining that to our client.

Right. That like unless you've got a fantastic slam dunk story, which some taxpayers do, I would like more of those. You know, you're probably not going to get a full concession but.

If what you're getting is a 60% concession because your story is pretty good but there's still some chance the government could prevail, you should consider that a positive, you should consider that a win. And I think that you know one as a practitioner, I I try to do that and and educate my clients on that. But the other half of that is especially if you're dealing with prose clients to say.

Look, This is why I've reached this number. I think you've got a lot of valid points. I've heard them. They're good. I understand why you acted the way you did. I see some problems in your case. If a judge were to hear this, I think they might consider those against your case. And So what I'm willing to do here is settle in on this basis. And that's why I think that conveying that sort of decision making will help clients to understand that is still a win because their alternative.

It's going to court, spending more time, energy and money and maybe losing all of it.

Jessica Norma any sort of final thoughts on this point? Yeah, I mean the the one thing with reasonable cause and this is just a pet peeve. It's why I don't like reasonable cause assister.

Because a lot of cases that we do get an appeals, you'll see where a taxpayer absolutely had reasonable cause from one date to another date.

And then things got a little bit more iffy. You know, maybe for a month or two after that reasonable cause. Her sister is an all or nothing proposition.

And that's, that's to its detriment because you know when we get those cases, yeah, for the, you know, you might have filed this nine months late.

For the first six months based on everything that we've talked about or everything that you've shared?

It was reasonable that you were late during that time.

And so, but the following three months maybe not so much. So, you know, you offer, you know a 60% concession.

That's something I wish the service did more. I wish they would not consider it an all or nothing proposition, and I think that's why taxpayers don't like it. I think that's why reps don't like reasonable causes, Sister, because there is nobody's going to fit within that small box.

So I.

That for me. That's why I think reasonable cause has that perception.

And I do hope that when taxpayers come to appeals that they see that now we we want to look at everything and and we're going to, we're going to settle appropriately based on yes, there was a reasonable this time factor here.

Thank you, Jessica. So I this came up briefly a little bit earlier in the panel, but let's let's talk for a few more minutes about the impact of COVID-19 on penalty appeals.

I think Jessica mentioned we are seeing COVID years in appeals and we are applying the COVID penalty relief just as we would any other form of administrative relief that's available. Melissa and Christine, you know in what ways did COVID-19 result in non compliance. You know how are you seeing like what, what were the business disruptions like and how did they impact the regional cost factors in the case since you're seeing?

So Christine, I'll leave kind of the the personal individual tax to you because I think you probably have seen a lot more of that and very compelling ways from a business perspective. And and I think some people have the view that like well businesses had to operate, they should have gone on operating. These aren't individuals dealing with their own taxes. I kind of, I always try to remind people that businesses, although the Supreme Court may say otherwise, are not people, there's actual people, people.

Who are running these businesses and those people, who are the ones who are affected by the pandemic? So I mean during the pandemic.

I was working at Ernst and Young and so in the national tax department, and so you can imagine the number of questions and penalties that I saw flowing up to me. And a lot of them were companies and a lot of them had stories like the controller had very severe depression during the COVID pandemic from isolation.

Couldn't do his or her job. They found out that that person had stacks and stacks of forms just sitting at their desk and only once they were back in person, once they started receiving notices that they realized something was wrong, right?

That's that's an individual person not being able to do their job because of something, and that could be within cover or not. I'm just remembering that particular example you know someone else asked for for a concrete example of.

Just actually an entity that I sit on the board for now, not at the time of non compliance just to be clear.

And they are, uh, sort of a mutual aid function. They they try to go into communities and help communities help each other. Well, in one year during COVID, they went from being a $50,000 organization to a $600,000 organization because of the need and because of the level of donations that they received to do the important work that needed to be done during COVID. Food, vaccines, information about health masks.

What happened was they went from the 990 postcard threshold to the full 990 threshold in one year. They didn't have the ability, they didn't have the people in house to even understand that, and they didn't have the accounting systems track set up to track all of the information that was necessary to fill out, fill out the full 990 we spent. And I was the one like shepherding this. So I'm telling you the truth, I promise. We spent close to a year trying to get all that information together to file an accurate.

And if I don't get that abated at the service center, then I'm going to be before one of you on it. But these are some of the COVID related real life stories that aren't just related to individuals but but affect businesses.

Thank you, Melissa. Christine, we'd love to hear your take on on.

Sort of the impact on individuals that you work with.

I'm sure we.

All individual have our own stories of folks in our lives who's whose families and lives were just disrupted by COVID.

Um, there was more than usual instability, right among the lowest income workers.

Lot of confusion about unemployment, like the whole mess of unemployment systems.

Not basically breaking down.

Not being able to handle the influx of claims, not being able, not being set up to handle pandemic unemployment. That the new program where people who were formerly self-employed could get unemployment, the systems that the states had, just couldn't handle it.

And couple that with all of the fraud. So we saw quite, quite a few people who got 1090 nines for benefits that they never received.

Some people who got.

Who got checks for benefits that they never applied for and then sent the check back and still got it 1099. The next year there was just chaos and some of those systems that were trying to help people.

Umm.

And I think there were, there were also some folks who who lost lower paying wage jobs.

Um, who then maybe had some self-employment or some gig work or some, you know, sales on Etsy and so that that is very.

A difficult time when you have somebody who was formerly a W2 employee and becomes a 1099 independent contractor. That comes with a lot of tax traps for people who are not.

Um, who don't have the experience or the knowledge about estimated payments? And how do you keep track of your finances? So you certainly saw those cases too.

The folks who just didn't didn't understand that as soon as you start.

Creating a product and selling it, even if it's part time while you're watching your children, you have a business in the eyes of the government and you need to keep records as if it were a business.

Um, but certainly, I think it just exacerbated all of the normal confusion and fear that people have about about taxes and paperwork and the government.

That makes sense. Thank you. Now, Andy and Liz, I did not leave as much time as I had hoped for sort of a debrief of the text chat and any attendee questions. Is there anything you'd like to share sort of impressions that the reaction or question we might be able to answer?

In our final 2 minutes.

Liz, you wanna go first?

Because um.

A question about, I think this is interesting, you know, balancing taxpayer service with our judicial approach in appeals and can you can somebody from appeals maybe speak to, you know, sort of what is the level of factual development we can undertake here in appeals in these penalty cases?

I'm going to say that there's not supposed to be asking for documents. That appeals, I guess, is the question.

So, so that delicate line that we balance on.

Is we're not asking, we're not investigating, we are asking for things that corroborate the taxpayers statements.

That's that's that balance. Yes, we're, we're we, we maintain our independence. But if the taxpayer says, you know, I had a financial hardship or I relied on somebody, us asking for that information is not investigatory. It is just asking them to provide a little bit more detail and I think that's the balance that we've used.

That's helpful.

A few comments as as you all were the panel was talking about um, uh, COVID cases. And I know I'd heard some comments from practitioners myself about hey, a lot of CPA offices were in really bad shape during the COVID. They couldn't find employees. You know, their employees were ill or were at home. You know, they had these longtime clients trying to comply and the CPA firm just could not keep up. I think it it puts a finer point on a lot of what you all have been focusing on about you know, you as appeals officers, we can't just say, Oh well, Boyle.

That you know, in boil the taxpayer lost, so therefore taxpayer you lose, right? As was pointed out time and time again over the last hour, you know the taxpayers facts are not likely to be found in the decided case law somewhere. It's on us as appeals officers to use our judgment right to think through and say what is the appropriate answer here. And that's why things like reasonable cause assister are not just the crutch we can rely on, it is on us to know the state of the law.

And to think about it and think about the surrounding circumstances where it's whether it's COVID-19 or otherwise that give rise to whatever the non compliance was here that led IRS to impose the penalty, right. And appreciate the efforts that all of our appeals officers make each day to #1, listen to the taxpayer. And the number two, think about the scenario that's being presented and #3 use your judgment on these issues. I really enjoyed this panel, Amy, and all participants in.

Talking through that aspect of the penalty and relief and and and I would note too when we talked about first time abatement earlier and I saw some comments in the text chat about first time abatement. I do think we and appeals have an obligation to keep an eye out. Should have first time Abate had been applied in compliance and somehow was missed. We rely on practitioners to bring things to our attention. Not too long ago practitioners told us you know the penalty handbook or part 20 and 21 say this but part 8 the appeals IRM is different.

We're inconsistent. It says this and you know that was brought to our attention by practitioners and we were able to clarify part eight of the IRM on that. So I appreciate the role of practitioners, Melissa and Christine, and being with us here on things like this today, but also your willingness to bring issues to our attention where you think we're missing something too. I think all of the feels finds that very helpful. Thank you. Back to you, Amy. Thank you, Andy. I'll just echo Andy's. Thanks.

Um, it has been wonderful having you with us today, Melissa and Christine, Jessica and Norma. You all did a fantastic job. You shared very thoughtful insights, and I know I learned a lot personally from the discussion today.

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