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Episode 19: Navigating Taxes With the IRS
Welcome back to “Tackling Tax,” where we’ll bring you the latest on tax policy and strategies—in an easy-to-understand format. Whether you’re looking to learn more about tax bills, global tax implications, or planning insights for your business, you’re in the right place.
Listen every other week for more from our guests, which include everyone from university scholars to industry professionals to the firm’s experienced leaders.
On this episode, we’ll explore what’s going on at the IRS, what taxpayers may be facing when it comes to exams, and more. We welcome Kristin Gutting, Caitlyn Meehan, and Karen Fleming with the Tax Controversy Group at Forvis Mazars.
If you have any questions or need any assistance, please reach out to a professional at Forvis Mazars.
Transcript
IRIS LAWS
In the thick of tax season, on this episode, we dive into all things at the IRS. Will your call get through to ask questions? What topics are getting pulled for exam most? We welcome Kristin Gutting, Caitlyn Meehan, and Karen Fleming with Forvis Mazars’ Controversy Group to discuss these questions and more. From your one stop for tax updates and analysis, I’m Iris.
DEVIN TENNEY
And I’m Devin.
IRIS LAWS
It’s Tuesday, February 10th, and this is “Tackling Tax.”
DEVIN TENNEY
Before we get started with our much anticipated guests, we start our show with the four stories that we think might be most impactful to you. So, let’s jump right into our Fast Four stories of the week.
IRIS LAWS
Tax season is officially underway, with the IRS expecting around 164 million individual tax returns to head their way. The big concern, though, as we’ve talked about before in the show, is how efficient the process will be this year given workforce cuts from the One Big Beautiful Bill Act. There was actually a memo just issued to the IRS Commissioner from the Treasury Inspector General for Tax Administration, or TIGTA, questioning the IRS readiness for the season.
Naturally, taxpayers are worried about telephone service, timing of return processing, and refund. But we’ll talk about all of this in much more detail coming up with our guests.
DEVIN TENNEY
Kevin Warsh has been nominated by President Trump to serve as the Fed chair, replacing Jerome Powell, who’s going to be stepping down in May. Now, Warsh had served as a member of the board from 2006 to 2011, so he’s not new to the organization. But even so, you know, he will need to face confirmation in the Senate before officially starting in the role.
IRIS LAWS
Proposed regulations for the Section 45Z Clean Fuel Production Credit have been issued. Coming in at a whopping 170 pages, we are still digesting all that’s in there, as you can imagine, but high level it defines eligible transportation fuels, establishes rules for calculating emissions rates and credits amounts, and then details requirements for producer registration, record-keeping, and substantiation. The public hearing for the regs will be held on May 28th, so stay tuned for that.
DEVIN TENNEY
Yet another round of tariff proposals has come from President Trump, both officially and unofficially. For South Korea, Trump is stating that the country is falling short by not approving of the deal they struck with the U.S. last year. So, he’ll be increasing the tariffs on autos, lumber, pharmaceuticals, and all other reciprocal tariffs from 15 to 25%. Via executive order,
he’s also declared a national emergency in response to what he views as a, quote, “unusual and extraordinary threat,” unquote, posed by Cuba. As a result, tariffs will be imposed on countries providing oil to the country. The target on Canada also continues, threatening a 50% tariff on all aircraft sold into the U.S. if action is not taken by the Canadian government to certify certain Gulfstream jets.
Lastly, a deal was actually struck with India. Here, India agreed to stop purchasing Russian oil and eliminate tariffs on the U.S. and in turn, the U.S. will reduce reciprocal tariffs from 25% to 18%.
IRIS LAWS
And with that, we’ll move to our “Planning Insights.”
On today’s segment of “Planning Insights,” we’re talking to our fearless tax controversy team, looking at what’s going on at the IRS, what you might be facing when it comes to exams, and more. We are so excited to welcome Kristin Gutting, Caitlyn Meehan and Karen Fleming.
Kristin Gutting is the leader of the Tax Controversy and Procedure practice group. She has been a professor of law, authors pieces for Bloomberg, and lives in one of my favorite cities in the world, Charleston, South Carolina. Caitlyn Meehan is a senior manager with the firm and, like Kristin, is an attorney coming to us from the Palmetto State. Last, but certainly not least, we have Karen Fleming, a director in tax controversy who has experience with high-net-worth individuals, trust and estates, closely held flowthrough entities, family office, gift and succession planning.
So, with that, welcome to “Tackling Tax,” everybody.
Karen, let’s start with you. I think we are all well aware that tax season is in full force despite cuts from OB3 and recent noise from D.C. about passing appropriations packages and whatnot. What would you describe as the IRS’ current operational reality, right? So, we’re talking staffing, we’re talking responsiveness on phone calls and letters, and consistency.
IRIS LAWS
And you know, maybe what does that mean for taxpayers when they’re looking to navigate all their different, you know, matters before the IRS today?
KAREN FLEMING
Yes. So, right now, the best word I could use to describe the IRS is that they’re in a state of flux. While they’re known for many things, historically their agency functioned on stability, process, procedures. Be it efficient or inefficient, it really had that consistency. And right now there’s just an extreme state of flux. There were seven IRS commissioners last year. Seven.
IRIS LAWS
Yeah.
KAREN FLEMING
That inconsistency.
IRIS LAWS
It’s wild.
KAREN FLEMING
I know, wild. So, how can you have that stability when time at the top is really fluctuating at all times? So, unfortunately sort of an expectation of unrest and fluctuation is the best way to approach the IRS. And really approach every conversation and every interaction expecting the unexpected. Kristin, anything else you’d add there?
KRISTIN GUTTING
Yeah. I have to agree, there definitely has been a lot of movement at the IRS, and the current commissioner is actually wearing two hats; he’s also serving as the commissioner and leading at the Treasury. And we’ve seen a similar revolving door with the chief counsel’s role as well. And then on top of that, if you, between the layoffs that we’ve seen and the deferred resignation programs, the IRS workforce has shrunk pretty significantly.
I would say that last time I checked, since January of ’25, so just a little over a year, the staffing is down by more than 27%. Then, if you kind of look a little deeper in that, revenue and agents are down by around 31%, and then revenue officers are down by about 18%.
So, you’re looking at slower exams, possibly examining agents changing in the middle of exams. You’re looking at it being really hard to get a hold of someone in the collections area and deal in that area, just based on the reduced staffing. So, a lot of adaptation needed.
IRIS LAWS
And I think, Kristin, just within our Washington National Tax Office, we’ve seen this firsthand. We have a lot of folks, one which used to be with the IRS. And, you know, sometimes we try to get insider knowledge and we have contacts there. Or, we used to have contacts there. And every time we reach out, it’s like, oh, that person’s not there anymore. I guess we have to figure out who else to go to. So, I think we’ve certainly experienced that firsthand.
KRISTIN GUTTING
Yeah. And then I think, Kaitlyn, you know, maybe you can add something about what you’re seeing. I know that you’ve been dealing a lot with just processing delays in different areas.
CAITLYN MEEHAN
Yeah. So, right now it feels like the IRS is definitely operational, but processing really remains uneven depending on what type of correspondence we’re submitting to the IRS. So, certain items move relatively quickly, while others, particularly those requiring manual review, continue to face substantial delays. So, the IRS posts their processing status for tax forms and it’s regularly updated.
So, right now, as of January 2026, that page is showing that our regular electronically filed original returns are generally processed within about 21 days. But that timeline really doesn’t reflect where, you know, taxpayers are really encountering the most friction because those persistent delays really remain concentrated in our paper-filed returns, amended returns, and other correspondence.
So, right now, you know, amended returns for individuals and businesses, they are being processed as of January 2026. But if those are paper filed, the lag is considerable, as the IRS is like dating those back to September of 2025 and even April of 2025, which is almost, you know, a year into processing. So, even outside of just our general return stream, the delays are really compounding when you’re moving from processing to resolution.
So, if we have penalty abatements or other correspondence, it’s taking six, nine, 12 months even to get a response from the IRS. And as Kristin mentioned with collections, that’s often taking a considerable amount of time overall for resolution just to get to the initial stage of speaking to someone. And even when we’re trying to escalate matters, if it’s through the Taxpayer Advocate service, they’re also experiencing their own delays.
So, it’s taking at least 45 days for a case to even be received and assigned at this point. So, it’s really a reflection of the IRS being, you know, behind in processing and everything. The outcomes are really varying significantly by function at this point.
DEVIN TENNEY
Is there any indication that the IRS is doing anything to help bring employees back or to expedite, you know, some of these processes get back to, you know, where they’re not necessarily always in flux?
KAREN FLEMING
You know, I’ll speak to that end with a simple no. They seem to believe that the lower staffing levels are appropriate and there are realignments of departments, realignments of groups. But I think we, as users and representatives working with the IRS, see the inefficiencies that are caused by this. And really, they’re looking at it as a way to revamp and move into the future a little differently organized, but maybe not return to the levels of staffing that we’re used to.
DEVIN TENNEY
Well, I do want to shift and talk about some of the specific issues or themes that you’re dealing with. I know you’re all in a very fortunate position where you get to commonly work with IRS agents. So, from like a tax matter standpoint, what are some of the things that you guys are consistently having to address?
KAREN FLEMING
Yeah. Well, I focus as we mentioned, on exam. So, particularly exams of corporations and passthrough entities have really focused on research and development credits. Aircraft. If you have an airplane, it will be audited. If you are pulled for exam, you’re not getting out of it.
IRIS LAWS
I believe you, Karen. We had our aviation team, I believe was two episodes ago, Devin, now, to talk about all the landmines that come with that. So, if you’re interested in aviation, take a look at that episode. It’s a really interesting one.
KAREN FLEMING
Yeah. And some other items. Mergers and acquisitions. Transaction years are really getting pulled for exam. And within the exams themselves, the IRS is taking a close look at fringe benefits, accountable plans, items as simple as meals and entertainment, really looking at documentation and contemporaneous documentation of what the purpose of that business expenditure was.
IRIS LAWS
Don’t get Devin started on fringe benefits and all of that good stuff. That’s his arena. But super interesting. I guess, Kristin, you deal a lot with ERC issues here at the firm, that’s the Employee Retention Credit. Could you speak a little bit about what you’re seeing from an IRS examination perspective with that?
KRISTIN GUTTING
Yeah. Just recently the IRS said there’s still about 41,000 claims that haven’t been resolved yet. And we are definitely seeing that play out in real time. A lot of the claims that were denied during a broad-blanket denial the IRS was issuing in July through December 2024, in which protests were filed. Those are still in limbo even though protests were filed over a year ago on all of those, they have, most of them, not been assigned to any appeals officers.
We’re also seeing, when it comes to exams, we’re not seeing the traditional exam process that we’re used to. We’re not seeing assigned revenue agents. Instead, we’re seeing service center exams where taxpayers receive a standard IDR asking for ERC documentation, usually with a 30-day deadline. The tricky part of this is that there’s no actual agent to talk to.
There’s no one you can walk through the issues with, confirm they’ve received the response, or even ask for an extension. The notice just gives you a general phone number, or you can leave a voicemail and actually hope someone calls you back. So, that’s causing a lot of problems. These service center-type exams. My concern is that this may be a glimpse of how the IRS might handle larger scale, topic-specific exams going forward. And this model of the service center, like a pooled exam concept, is really challenging for taxpayers who are trying to stay, you know, engaged and compliant when working with the IRS.
IRIS LAWS
So, what does that mean? You just, like, give them your best shot. And if they don’t like what you give them, they reach back out? Like, that seems inefficient. Is that what’s happening?
KRISTIN GUTTING
Sometimes it can even sound worse. For example, they actually have a tool that you can use to upload your IDR response, your information, to them, and you get a confirmation, just like you would get with the return that they received it. However, about 30, 45 days later, we’ve been seeing where the IRS issues a denial of the exam, saying we’re denying the claim and you can file a protest. And the reasoning is you never filed a response.
IRIS LAWS
Wow.
KRISTIN GUTTING
But we have the proof. And so that’s how these can be challenging, because if I was working with an actual revenue agent and knew their name from the beginning, I could call them, I could talk to them, I could walk them through something, see if they need anything else. So, these are definitely very inefficient.
DEVIN TENNEY
Well, that’s very interesting as well. I’m curious how you think this might apply, if at all, to, you know, future reviews, audits of, like, the no tax on tips and overtime or, you know, some fairly big, substantive changes that a lot of employers weren’t necessarily aware of? A lot of them are employees or individuals taking the credits aren’t necessarily the most sophisticated parties. It will be interesting to see how the IRS addresses, you know, some of the OB3 provisions and the changes as well.
KRISTIN GUTTING
Yeah, that is definitely something I’ve talked to other practitioners about, that we have a little fear, and that this could be a glimpse of how, with fewer resources, you know, fewer revenue agents. They said they’ve lost about 31% of them. Well, this would be a way to audit in the masses still and do more auditing. If you did these service centers and they go into a pool and whoever can pick it up picks it up.
IRIS LAWS
To a certain extent, they’re doing what they can with the resources they can, right? So, I guess let’s shift a little bit, you know, even if those sorts of common themes don’t apply to you, it’s possible, right, to get a notice or to be selected for exam. I think most people have experienced that to some extent.
Karen, given that unfortunate truth, how should companies be thinking about IRS exam readiness before maybe you even get the notice?
KAREN FLEMING
It may seem simple, but following best practices on an ongoing, daily, regular basis. And more specifically, what do I mean by that? Having signed accounting policies that are reviewed on an annual or reoccurring basis in their file. If they have reviewed their capitalization policies, it’s written. When did they review it? Who reviewed it? Who are their sign-offs?
And that goes further than their capitalization policy. It should go into each and every one of their accounting policies, that documentation, one of my favorite words. And that goes further, especially into the lending areas. If they have a lending arrangement signed contemporaneously with the stated interest rate, with a payment schedule that then is being followed and maintained. So, when I say following ongoing best practices, it’s each one of those things, but on a regular and reoccurring basis, because the hardest thing to do is rebuild later or understand what you were thinking.
Or, as we’ve talked about the IRS’ turnover, companies have turnover. Sometimes you’re digging into a situation that you weren’t present at that company for. Wouldn’t that have been better if whoever was present had documented contemporaneously the thoughts, the positions, the loans, behind the scenes? It would probably make everyone’s life a little bit easier there. So, documentation is really, I’ll go back to it, my favorite word. That retention of the documentation, as well as the contemporaneous nature of the documentation, really becomes essential.
IRIS LAWS
And to Kristin’s point, right? I mean, it’s possible, I guess what I’m hearing from you guys is that if you don’t have that contemporaneous documentation, they might still, you know, assess a penalty on you or something like that. Even if like, what happened was in good faith and accurate. If you don’t have that documentation, then, up a creek on this. Is that true?
KAREN FLEMING
Yeah. It really is your burden, the taxpayer’s burden to maintain that documentation and be able to provide it when requested.
DEVIN TENNEY
That’s really good advice. I do want to make sure that Kristin and Caitlyn also get to contribute on that front. Do either of you have like, one piece of advice that you would recommend to businesses that they should really be focusing on today?
CAITLYN MEEHAN
Yeah, so, if I had to pick really one thing that businesses should really be doing right now, it’s operating proactively with the IRS rather than reactively. So, the IRS is really operating in a world where automation, processing delays, and enforcement are really all happening at the exact same time. So, waiting for issues to surface through either a notice or assumption that the IRS will fix something on its own is really creating some unnecessary risk.
So, you know, these notices that are being issued aren’t just informational. They can really often trigger automated actions, shorter response windows, and just downstream enforcement. So, every notice really needs to be taken seriously even if it looks wrong or duplicative. So that just generally means acknowledging it, evaluating it on its own merits, and responding deliberately. Again, not assuming it’s going to resolve itself.
DEVIN TENNEY
Certainly, there’s certain windows. I would imagine that if you don’t respond timely, you lose your opportunity to certain things. Is that an example of a scenario?
CAITLYN MEEHAN
Yeah, that’s absolutely correct. So, let’s say we get a notice that gives you appeals rights like Kristin was mentioning earlier. With denial letters, you have a certain amount of time to respond to that. And if you don’t, procedurally you could miss out on the opportunity to rebut that information with the IRS.
DEVIN TENNEY
Kristin, what about you?
KRISTIN GUTTING
Yeah, I have to agree with Caitlyn. I think it’s more important than ever now to be very proactive and not let things sit. It’s really key to navigate, to do this, to navigate matters before the IRS. I think, you know, simple things that you wouldn’t think you’d have to do. It takes five minutes and makes sense to do.
For example, check your transcripts, pull your account transcripts and check them. We have seen on more occasions than I would have expected where taxpayers file their returns online, assume they were processed and their refund was carried to the next year, and then they get a notice that the refund was not carried to the next year because their notice comes to them saying, hey, you’ve underpaid, you have a penalty, and you also owe the tax.
And then we go back and look and determine that for some reason, the IRS didn’t process the return. The previous year’s return. So, that like I said, this happened more than you would think. So, simple things like just staying on top of things, being proactive I really recommend to taxpayers right now. And then follow up. If you send something to them and you don’t hear, call every 30 days, stay on top of it. It’s important.
IRIS LAWS
So, pulling the transcript, I think is a great piece of advice. I’ve done that for clients many times. For our listeners, my understanding is that you have to have one of those ID.me accounts or whatnot on the website, or how do you pull those transcripts just sort of functionally?
KRISTIN GUTTING
Yes, you do. You do have to have an ID.me account. So, you have to have an account with the IRS that allows you to have an e-services mailbox. So, if you are a representative and say you were basically if you were acting under a 2848 power of attorney or some other form similar, you could call the IRS and obtain them that way.
Or you could actually, if everything was on file, you could, without making a call, you could go into the chat transcript delivery system they have and actually just ask for it through that system by entering the information you want and then it’ll show you out on the screen.
IRIS LAWS
Sounds great. Less calls the IRS, it sounds like to be the play. So, guys, this has been enlightening. Thank you so much for taking the time to join us. We hope that you will join again, maybe after tax season, to see how things are going. If you’ve gotten, you know, started to get notices and whatnot. This is always really helpful insight. So, thank you all for joining.
KRISTIN GUTTING
Thank you for having us.
DEVIN TENNEY
Each episode we’ll bring you what we call a “Focused FORsight of the Week,” an article or webinar that might be of interest to you. This week’s Focused FORsight is a shameless plug for two articles that I actually wrote and published last week. It’s called “No Tax on Tips and No Tax on Overtime: What Employers Need to Know for 2025 Reporting.”
We’ve got more guidance in this area, and in working with clients and reviewing the rules. We’ve identified this space as a real opportunity for employers to trip up. So, take a look at the articles to get some important information as you look to report your employees’ pay.
IRIS LAWS
And that’s our show. Thanks for joining. Remember to subscribe and listen in for the next episode of the podcast. Until next time.
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The information set forth in this podcast contains the analysis and conclusions of the panelists based upon his, her, or their research and analysis of industry information and legal authorities. Such analysis and conclusions should not be deemed opinions or conclusions by Forvis Mazars or the panelists as to any individual situation, as situations are fact specific.
The listener should perform their own analysis and form their own conclusions regarding any specific situation. Further, the panelists’ conclusions may be revised without notice, with or without changes in industry information and legal authorities.