Researching a Tax Notice

This SOP outlines the steps tax team members take for researching a tax notice received on behalf of a franchise client, from intake through resolution and franchise communication. It applies to notices from federal, state, and local agencies, including the IRS, related to income tax withholding, FICA, FUTA, unemployment insurance, and other payroll-related taxes.

Step-by-Step Procedure

1. Confirm access and authorization

Confirm these before you start researching. Most of the steps below depend on having them.

• Verify identity: confirm the tax account number, FEIN, and client name on the notice match what is on file in iSolved.
• Power of Attorney: confirm the POA form is filled out, signed, and uploaded in iSolved for this client. If it's missing, request it before proceeding. Most agencies won't release information without one on file.
• Account access: confirm you have access to the client's online account with the issuing agency. If you have access, use it to verify that the payment and filing dates line up with iSolved's payment history.

If the POA or account access is missing, don't let it hold up your research. Reach out to the franchise right away and continue working the notice.

2. Identify the notice type and what it is asking for

• Read the notice in full: identify whether it is informational, a balance due, a rate change, a discrepancy notice, a delinquency notice, or a penalty assessment.
• Identify the issuing agency and program: confirm which agency sent it, the IRS, a state department of revenue, a state unemployment agency, or a local jurisdiction, and which tax type it relates to (federal withholding, FICA, FUTA, state UI, state withholding, local tax, etc.).
• Confirm the period(s) affected: note the specific quarter(s) or tax year(s) referenced.
• Confirm the deadline: note any response or payment due date.

3. Research the account in iSolved

Work through the areas below as they apply to the notice. Each one answers a different question about what was filed, what was paid, and whether it matches what the agency is showing.

Client Management > Client Maintenance > Legal Service History

• Review the legal service history start date. Was this a period before or after the client was running payroll in iSolved?

Reporting > Report Archive

• Was this for a period before or after the client was running payroll in iSolved?
• What is the payroll type: Regular Payroll, Special Payroll, or Data Conversion?
• Is there a green checkbox for last of quarter/last of year (if applicable)?
• Was there a voided payroll in that timeframe? What were the circumstances of the void, and how long between when the original payroll ran and the void was processed?

Reporting > Return Archive

• Are the proper reports in the return archive? Compare the summary reports against the tax notice. Do the numbers tie out? If not, can they help determine the amount due?
• Are there any amendments in iSolved? Sort by Output Item so amendments surface to the top.
• What is the difference between the original and amended reports? Can you explain the amendment and tie out the difference?

Client Management > Client Utilities > Tax > Regenerate Tax Files

• Select the year and quarter.
• What is the status of the filing, pending or sent?
• What is the output type of the filing, e-file or paper?
• Reference the batch number for notes and the confirmation number from the time of filing.

Tax Filing Management > Tax Quarter End > E-File History

• Filter for dates or process batch number.
• Review the notes and confirmation number. Confirmation pages are also printed to our Tax Team SharePoint under the year and quarter.

Client Management > Taxes > Tax Maintenance

• This screen is maintained by the franchisee, not our team. Review it against the notice to check the unemployment rate and payment frequency on file. A mismatch here is a common cause of rate discrepancy or misapplied payment notices.

Client Management > Taxes > Company Tax Liabilities

• Filter by QTD or YTD for the tax period you're researching.
• Check the last three columns. If Process Date, Payment Method, and Process Batch are populated, PV Corporate paid it.
• Check the Status column:
  • Paid: PV Corporate paid it, and the cash is with the taxing authority.
  • Prepaid: iSolved shows the amount as already paid, so it appears on reports, but no money was actually sent.
  • Pending: the money is in the Corporate impound account and will be paid before the due date.
  • Held: the money is in the Corporate impound account, but won't be paid until the status is changed back to Pending.
• Try to locate any missing tax funds that might match the amount on the notice. Export to Excel from the top-right button if it helps with sorting and searching.

Helpful reports (Production Utilities > Service Bureau Reports)

• Tax Return Checklist: shows all tax forms generated with a status of Sent or Pending.
• Tax Acknowledgement Import: shows accepted/rejected status from transmitted files, or lets you import an acknowledgement back into iSolved.
• Tax Payment Analysis: shows all tax payments made, including the process batch number and confirmation date.

4. Determine the root cause and required response

Once the research above is done, pin down which of these it was:

• Timing: payment or filing was made but had not yet posted on the agency's side when the notice was generated.
• Rate discrepancy: the rate used in filing does not match the agency's rate on record.
• Misapplied payment: payment was received by the agency but applied to the wrong period or account.
• Agency error: the agency's records are wrong despite correct filing and payment on our end.
• Client-side error: information provided by the client (wages, rates, account numbers) was inaccurate.

Then use that to decide what the notice actually needs:

• No action needed: if research confirms the notice was issued in error or has already resolved (for example, a payment that has since posted).
• Correction or amendment: if a filing needs to be corrected or amended.
• Payment or ACH trace: if a payment needs to be issued, or a prior payment needs to be traced and reallocated.
• Formal response or abatement request: if the notice requires a written response to the agency, such as a penalty abatement request.
• If it's unclear or you're stuck: bring it to the weekly Ticket Talk meeting to work through it with the team.

5. Determine responsibility for penalty and interest (P&I)

If the notice includes P&I, determine who is responsible for it before deciding how to handle it.

• Tax team at fault: if the P&I resulted from an error on our side and the amount is over $50, handle it as follows:
  • Submit an abatement request to the agency.
  • If abatement request is denied
    • Attempt to pay the P&I from the OPS account first and log it on the bank rec spreadsheet labeled "P&I"
    • If it cannot be paid from OPS: add the liability into iSolved under the Tax Adjustment screen, log it on the bank rec spreadsheet labeled "P&I," and move the funds from OPS to the tax account.
• Franchise or client at fault: if the P&I resulted from an error or delay on the franchise or client's side, they are responsible for paying it directly, either through the client's portal with the agency (state, local, or IRS) or by check mailed back with the notice.

We do not collect P&I on the franchise or client's behalf, for bank reconciliation purposes.

6. Respond, document, and close out

• Draft and send the response: outline what the notice says, why it happened, what we did, and (if it applies) who's responsible for P&I. Attach supporting documentation, then send it the way the agency requires.
• Update the HubSpot ticket: log the root cause and action taken internally, and use the same outline above, written in plain language so the franchise can repeat it to their client.
• Follow up and close: set a reminder if the agency is expected to respond, and close the item once resolution is confirmed or the deadline passes with no further action needed.