Is the IRS getting meaner

[DaveO]

And more careless or is it just my imagination? Client filed his 2006 return late which is his fault. He had sold a rental house and a small business. He owed over $80k in tax which he paid with the return. He gets a mailing from the IRS which he assumes would be the penalty and interest. Instead it's Form 4549, Examination changes assessing him another $15k for AMT penalty and interest including $2k in accuracy related penalty.

We force the 6251 to print and he isn't even close to the AMT. Since the property had been purchased prior to 1999 the AMT depreciation was quite a bit less than regular so the AMT gain was a lot less. Took all of 5 minutes to figure out.

Seeing how the purchase dates and property type is clearly shown on the 4797 this seems very careless on the part of the IRS.

[MLINDER42]

IRS meaner

Probably computer generated.Just means more work for us to do no charge.

[Jiggers]

No charge stuff

Probably computer generated.Just means more work for us to do no charge.

I know we all do stuff "No Charge" for answering questions, responding to IRS notice, etc.

I do keep track of all that time during the year, by client.

I think this year I am going to add up all those hours, multiply by my hourly billing rate, and then divide by the number of tax returns that I plan on doing and add that to my base fee.

That way I can recover some of that lost time and money!

Example: 10 hours X $100/hour = $1,000 (Lost billing) ÷ 250 estimated returns = $4 per return added to my base fee.

[Edsel]

Typical Examination Adjustment

When there is an unknown element in the calculation, the IRS always maximizes the amount in their favor. Example: Failure to report a Sch D stock transaction goes through the IRS paper exam with a basis of zero, and the proposed adjustment is based on this. Taxpayer actual reporting of the sale would have a basis of some sort, maybe even enough to take a loss.

I think this is what happened with the IRS AMT calculation. They don't know when the building was bought, so they assumed to their own maximization.

Mean? I can think of a bunch of things worse about the IRS. Not a lot of sympathy on my part for taxpayers who don't report transactions. Sure, it could be an oversight and I am committed to minimizing taxes for clients no matter what. But if this were on a long list of things to change about the IRS, it wouldn't be close to the top.

[DaveO]

Should'nt they exercise reasonable care?

We are held to a pretty high standard in our work. The IRS did know when the building was bought it was right there on the 4797. Nothing was left off this return it was just filed late.

I'm used to seeing this stuff on a CP2000. Getting the Examination Report implies to me that a human actually looked at it.

Oh well, I'm just venting anyway. I know the IRS will never be held accountable for the grief and expense they cause taxpayers with incorrect notices.

I had a client a couple of years ago who had a 1099 misc issued to him for $4,500 the IRS processed their copy as $450,000. They issued him a CP2000 seeking nearly $250,000 in tax, penalty and interest. The guy just mowed lawns for a living and was near sucidial when he called me. Lucky for him he had kept copies of his 1099's and we solved it pretty quick. The service should of at least picked up his laundry bill that week.

[jimmcg]

No Charge

Probably computer generated.Just means more work for us to do no charge.

Have never done no charge work in my life. What does it feel like?

[Uncle Sam]

IRS Getting Meaner

I'm in the process right now of attempting to close a correspondence audit, now going on for 6 months. Married, joint return.
IRS sends client a notice in January 08 for an audit of 2006 for Medical and Contributions.
Client sits on it until he comes in for 2007 tax prep. 30 days had passed. I asked for 30 day extension to submit data. Within the 30 days, I go through client documents, send it to IRS.
Husband dies 4/19.
Around May 5, IRS sends Examination Report accepting everything we provided. Since client didn't have 100% documentation - IRS accepted what we provided - so there was a small increase in tax.
In reading the report, IRS properly picked up additional tax per audit. HOWEVER - it did NOT follow through adjusted calculations after the tax increase. We had an AMT Credit that virtually wipes out the tax increase.
I've responded to two IRS notices of disallowing the credit.
Had to File a 911 with Taxpayer Advocate.
TAO sends a notice to me - with contact info 2 days after I submit it.
IRS now has TWO previously written communications documenting the increase in AMT Credit practically wiping out the tax increase.
The contact person is not there when her notice said she'll be. Left voice messages -went unanswered. The TAO sends out a SECOND notice completely disregarding my messages to her and the content of my original IRS responses.
Finally - I get a call from the woman last week. - She was in office when I had called both times - but was busy at time of first call and got behind in her work - so in order not to ignore people - she sent out the SECOND notice. Anyway, after reading my communications, claims she would send an advice note to Examinations reducing the increase by the amount I requested for the AMT credit.

What a lot of aggravation for very small sum of money - which the client was willing to pay when she got the first notice - until I told her not to.

So yes - IRS is very sloppy at times when you need them the most.

[Roland Slugg]

No charge?

Some of the responses to the original post say (or at least suggest) that the follow-up work will have to be done at no charge. Another says he will build a "free follow-up" factor into all his bills in future years. I disagree with both of those ideas.

I bill for all follow-up work unless I was partly or entirely responsible for the error or omission that requires it. And I would not dream of padding all my clients' bills to cover possible extra work I may do later for a few.

Although it isn't clear, the next-to-last paragraph in the original post seems to imply that the O.R. did not include a F-6251. If this is so, then I would suggest that its omission may have led to the IRS making the proposed adjustments it did regarding the AMT.

The original post also says, "... assessing him another $15k for AMT penalty and interest," but there is no breakdown of that $15k between (1) additional tax due to AMT, (2) penalties, and (3) interest. Depending on how late the return was filed and the tax paid, however, I can easily see how the penalties (late filing and late payment) plus interest could amount to $15k. The additional tax, if any, attributable to AMT may be ... and I suspect is ... a small portion of the total bill.

Finally, to ask if this incident signals that the IRS is turning "meaner" strikes me as, well ......

[geekgirldany]

I'm in the process right now of attempting to close a correspondence audit, .

Yep I still have one going with that sales tax issue. I keep on getting told wait a month. Looks like I will be heading to the TAO.

[Uncle Sam]

Sales Tax Audit

Perhaps I can help with that. I'm a former sales tax auditor (back in mid 1970s) in New York. Each state of course, has its own rules and audit procedures.

[geekgirldany]

Thanks so much for the offer but this is from the Federal Return. Deduction on Schedule A for sales tax. The customer added the numbers wrong. Sent receipts to back up what he had... twice. They would not accept them... sent a letter stating that the taxpayer disagreed and to reconsider the receipts again. No word. Called and was told to wait a month, this was in September.

[erchess]

Change the System

Right now demanding too much money is an income generating activity for the IRS. Sometimes the wrong amount is paid in full and sometimes they collect less than they asked for but seldom, I would venture, less than is justified by the law and the facts. Certainly they never get more than they ask for.

I think we should give the IRS all the information needed to accurately calculate every person's and every entities' tax due. They should file papers showing what they think is due and then if anyone alone or with a professional can show that they have asked for one penny too much then they pay no tax and are due due say ten thousand times what was asked for. This would lead either to very accurate tax calculations by the government or abolition of the income tax. Of course it would necessitate the abolition of most physical money and tracking through a government system every transaction that has tax consequences for either party and it would require opening up our financial records to the government. Some would see this as Orwellian I suppose. But number me among those who do not believe that the Federal Constitution should be understood to grant any right of privacy.

[DaveO]

Should have been clearer

[QUOTE=.

The original post also says, "... assessing him another $15k for AMT penalty and interest," but there is no breakdown of that $15k between (1) additional tax due to AMT, (2) penalties, and (3) interest. Depending on how late the return was filed and the tax paid, however, I can easily see how the penalties (late filing and late payment) plus interest could amount to $15k. The additional tax, if any, attributable to AMT may be ... and I suspect is ... a small portion of the total bill.

[/QUOTE]

The penalty for late filing was assessed and paid already. The extra AMT was $9000.

[ChEAr$]

Well, I'll tell you.

Have never done no charge work in my life. What does it feel like?

It feels real good sometimes when you think your client deserves a break due to no fault
of his own. Helps also to maintain that client goodwill that will pay off in the future.

I just feel that we shouldn't nit pick on fees all the time.