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    Getting Penalty waived

    My client in his mid 70's with health problem forgot to include a 1099-B on his Schedule D 2007 tax return and is being charged about $5K of penalty. What is the chances of me getting his penalty waived and if good, how do I approach the IRS?

    #2
    Chances Good

    I would say that the chances of getting the penalty abated are good but of course he owes the additional tax plus interest and does have to pay those sums.

    I am assuming that they just wrote to the client and gave him the option of writing back to agree totally, to disagree totally, or to agree in part and disagree in part. You will want to prepare his response and you will want to disagree with the penalty and with what I presume is the fact that they gave him no basis in the sales.

    Good luck. I expect that you can handle this particularly if you use this board for the questions that will probably come up as you work..

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      #3
      Originally posted by AZ-Tax View Post
      My client in his mid 70's with health problem forgot to include a 1099-B on his Schedule D 2007 tax return and is being charged about $5K of penalty. What is the chances of me getting his penalty waived and if good, how do I approach the IRS?
      Given the size of the penalty, I assume it's an accuracy related penalty imposed under §6662. If so, these penalties can be abated using the the "reasonable cause and good faith" exception found in the regulations at §1.6664-4. Write a letter stating your case and request abatement quoting the regulation.

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        #4
        Had one of these a couple of months ago. Sent a copy of the brokerage statement along with a letter agreeing with the interest and dividend calculations and disagreeing with the stock sale because the basis was not included. Stated that the 1099-B was omitted in error, which it was.

        New proposed change letter came back from IRS without the 20% accuracy related penalty, and only included interest on the new amount owed, and the tax due, which was much less. Good luck.
        Last edited by GRich0656; 05-29-2009, 03:48 PM.

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          #5
          My experience

          I have had three encounters with the accuracy related penalty. The first time IRs would not listen to me until I was able to move an exemption from the ex spouses' return to the audited spouses' return to get the tax bill under $5,000 and poof the ARP went away. The next time I tried an appeal based on resonable cause and they kind of laughed at me and said no way. The third one there was no way to appeal as my client left income off of the return due to carelessness. To me it seems like the IRS is pretty tough on giving slack on this penalty. Tell us how it turns out.

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            #6
            If its a first offense and the tax is under 5k, no penalty. With 1099-B issues you can almost always get a tax reduction over what is first proposed on the CP2000 because of the lack of basis. if the client is a repeat offender, penalty no matter what.

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