Episode 12 - An Attorneys Insight on ERC and the IRS with Moskowitz LLP’s Steve Moskowitz
January 27, 2023 •Concierge CPA Marketing
Welcome to today’s episode of Concierge CPA with Jackie Meyer. We sat down with Steve Moskowitz, and took an inside look at an attorney's view of big vs. small business.
Let’s get to it!
Meet Steve Moskowitz
We pick up Steve’s journey as he worked for an international tax firm years ago. As he gained an inside perspective of corporate business, Steve recognized that the small business owners weren’t getting their fair share of representation.
This was enough for Steve to step out on his own and provide for the underserved, a truly noble career move. His firm started in San Francisco and they now have 40 team members, where he practices as a tax attorney.
Steve is highly skilled and well-educated. He realized that in some cases the Fortune 500 companies would navigate tax law and pay less in taxes than the mom-and-pop shops found on your local market street.
After having both bachelor’s and master’s degrees in accounting, and practicing as a CPA, Steve wanted to go back and learn more about the tax law that the Fortune 500 companies benefited from. It was his goal to take this knowledge to small business owners and make a difference in their lives.
The ABCs or ERC
Steve’s firm specializes in everything tax related but he is very excited about a government program called Employee Retention Credit (ERC). ERC is a government program under the CARES Act that encourages businesses to keep employees on their payroll.
He explains there are two ways to qualify:
- The Easy Way
- The Complex Way
The easy way, according to Steve, is if the business’s gross revenue dropped by a certain amount. In the example he gives, if by comparing gross revenues from 2019, 2020, and 2021, if the 2021 number is down by 20% or more (excluding PPP), then the business may qualify.
The complex way, as its name suggests, is not as black and white.
Technically, business revenues could increase, and still provide financial problems for the organization. In the example he gives, a client sold a product for $7/unit prior to COVID. After COVID, the price increased to $22/unit. Technically, the client’s gross revenue went up, but they were forced to pass the cost onto the consumers, which created many issues.
The question, or test, for the complex way is, ‘did the business have a full or partial closure?’
Steve gives us two examples. If an essential business was only allowed to use 25% of its capacity, then this means it operated at a 75% closure. The second example pertains to supply chain issues and loops us right back to the client who went from $7 to $22 a unit.
The Living Law
Jackie asks Steve if he and his firm do any IRS Representation. Steve enlightens us on some of the realities of the law. While starting out, Steve was a professor at night and he would tell his students that the law isn’t found in an old book that’s been on the shelf for years; it's people’s lives. The law laughs, cries, breathes, and bleeds according to Steve.
Even more so, there are many cases where people are in the fight of their lives because losing the case means losing everything they’ve worked their whole lives for.
Steve’s job, like many other tax attorneys and lawyers, is highly important. He encourages us to understand the system. Most cases will end up settling, but in the cases of going to trial, it’s important to understand the process that leads to the courtroom.
He breaks down the process for us:
- Step 1: Audit
- The business would meet with the auditor at the lowest level. This is fairly rigid. Either something works or it doesn’t. This usually leads to - ‘here’s what you owe, pay it.’
- Step 2: Appeal
- He considers this to potentially be a mistake that accountants make. The accountant may think the auditor is wrong and therefore file an appeal. The problem lies within the appeals officer who knows that they are the last stop. They may give a slightly better deal to finish things out.
- Step 2b: Tax Court Petition
- Steve takes the legal approach to the same problem. Instead of filing an appeal, he suggests filing a tax court petition which is a $60 fee. What this does is, in short, say the taxpayer doesn’t owe any money.
- Step 3: The IRS Attorney
- After the claim is made that the taxpayer doesn’t owe any money, the IRS attorney claims that they owe all of it.
- Step 4: The Appeals Court Pt. 2
- Steve explains the accountant may wonder, ‘why take a cyclical route, just to end right back where I started?’ Here we begin to understand the meat of the process.
- There are two reasons Steve gives, procedurally, it shifts the burden of proof from the taxpayer to the government for any new issues raised by the government. The second reason deals with the statistics.
- The bottom line is once the BOP shifts, Steve implies that the government isn’t necessarily interested in raising new issues. Since there are 19 judges for the entire country that are appointed by the president, then this problem just became a little less severe.
- Statistically, the appeals court will give much better settlements on docketed cases. So by shifting the burden of proof, the lawyer creates a docketed case and in turn, potentially earns the taxpayer a better deal.
Read more on docketed cases here.
The IRS Lense
Jackie asks for Steve’s thoughts on the IRS’ more recent focal points.
Steve says that with the addition of 87,000 IRS agents, it is expected that every dollar given to the IRS is to return multiple dollars back to the government.
In short, Steve puts it this way; people tend to get upset when taxes are raised, but there isn’t much of an argument when the tax laws are enforced. With the newly created IRS jobs, this seems to be the goal.
We’ve covered some dense subjects in today’s podcast, and we encourage you to give it a listen for even more detail!
We’ll leave a few ways to get in touch with Steve below:
Phone: 888- TAX - DEAL (888-829-3325)
Until next time!