As a former IRS agent and now a tax attorney, I’ve seen how even small oversights can quickly turn into major tax issues. Many taxpayers are unaware that simple actions—like regularly checking IRS transcripts and reviewing bank statements—can save them from costly mistakes and, in some cases, even help them recover money from the IRS.
Today, I want to explain why these two actions are vital for every taxpayer, especially business owners. Let me start by sharing a real-life story (with names changed) that illustrates the importance of checking IRS transcripts and monitoring your financial records.
A Real-Life Tax Story: John’s Struggles with Payroll Tax Penalties
Not long ago, a CPA named Albert reached out to me. He had a client, John, who owned a manufacturing business. John had been hit with hundreds of thousands of dollars in payroll tax penalties, all due to mistakes made by his former CPA. But here’s the kicker: these penalties weren’t for just one year or two—they spanned over five years!
Now, under normal circumstances, the IRS holds the taxpayer (in this case, John) responsible for penalties, even if a CPA makes the mistake. However, John’s situation was different. His former CPA had been battling a terminal illness, and as a result, the CPA had failed to file John’s payroll tax returns on time and made late tax payments. What’s worse, the CPA never told John about the issue and continued assuring him everything was fine during their regular meetings.
After the CPA passed away, John hired Albert to take over. When Albert started going through the records, he was shocked by what he found. The paperwork was in disarray, and the company had been hit with significant penalties.
The Power of IRS Transcript Checks
This is where regular IRS transcript checks became crucial. Albert pulled John’s IRS transcripts to uncover the full extent of the penalties. Given the disorganized state of the records, this was the only way to get a clear picture of the situation. Through this process, Albert discovered the severity of the issue and was able to file missing returns, pay the taxes owed, and request penalty abatement.
Unfortunately, the IRS initially rejected those requests. But Albert didn’t give up. That’s when he reached out to me for help.
Fighting for Penalty Abatement
I filed formal claims for abatement and a refund of the penalties. While these were also initially denied, we didn’t back down. We filed formal appeals, and eventually, we were able to schedule a meeting with an IRS Appeals Officer. Here’s an important pro tip—sometimes, it’s beneficial for the client to attend the meeting with the IRS.
There are many tax professionals out there who advise clients never to meet with the IRS, but in this case, I thought it was important for John to be there. I brought John and Albert along, and together, we explained the full situation—how John had been misled by his former CPA. The IRS Appeals Officer was convinced and recommended full penalty abatement for two of the claims we appealed.
While the case is still ongoing, things are looking promising for John to receive a substantial refund. This story is a perfect example of how regularly checking IRS transcripts and keeping an eye on your financial records can lead to penalty relief or even refunds.
Why Reviewing Bank Statements is Crucial
In addition to checking IRS transcripts, reviewing your bank statements regularly is another crucial step that can help you spot discrepancies or errors in your financial transactions. Many taxpayers miss mistakes in their bank statements, which can lead to overpaid taxes or missed deductions.
For John, this would have been an excellent way to notice extra money being taken out of his account by his former CPA for penalties and interest on late-filed taxes. Regularly reviewing bank statements helps ensure that your business is not overpaying for taxes or dealing with financial errors that could result in unnecessary penalties.
How Regularly Reviewing IRS Transcripts and Bank Statements Protects You
Whether you’re dealing with payroll taxes, penalties, or just want to make sure everything is in order, checking your IRS transcripts and reviewing your bank statements regularly can prevent future issues. These simple actions allow you to stay on top of your financial health and avoid major tax headaches down the line.
If things do go wrong, don’t hesitate to reach out to a tax professional who can help you navigate the complex IRS system. An experienced tax attorney or CPA can guide you through the process of requesting penalty abatements or refunds, as well as help you resolve any tax issues.
Final Thoughts: Take Action Today
Don’t wait until you’re hit with huge penalties or discover major mistakes. Start checking your IRS transcripts and reviewing your bank statements today. These small actions can make a world of difference when it comes to keeping your taxes in order and protecting your business from unnecessary financial strain.
If you’re facing an issue with the IRS or have questions about your taxes, feel free to reach out to me. As a former IRS agent and current tax attorney/CPA, I can help you navigate the IRS system and fight for the relief you deserve.