IRS Letter

[oceanlovin'ea]

New client (who happens to be a friend) has letter from IRS...letter number 3219 (if that means anything to someone). It states taht this letter is your NOTICE OF DEFICIENCY, as required by law. The enclosed statement shows how we figured the deficiency.
If you want to contest this determination in court before making any payment, you have until the Last Date to Petition Tax Court to file a petition with the U S Tax Court for a redetermination of the amount of your tax. The last date to petition the tax court is May 9, 2011.

So what is my next step? I have not had to deal with the letter before.The amount that is in question is a ROTH IRA distribution. It was all their contribution and it was used to pay medical bills. So it is not taxable.

How do I petition the Tax Court?

Thanks for your help.

Linda, EA

[MilTaxEA]

Sounds like there were a few other letters that your client ignored before this point. You won't be able to represent them in Tax Court (unless you are part of the rare group that has passed the entrence exam). If the money was used to pay medical bills in excess of 7.5% of their AGI, then it is probably worth taking it to court if the amounts are substantial. They will have to hire a lawyer or represent themselves.

http://www.irs.gov/businesses/small/article/0,,id=171838,00.html

[Uncle Sam]

IRS Letter

I would contact Practitioner Priority Service and request a redetermination of the case.
PPS might ask you to submit a Form 911 to prevent the case actually having to go to tax court.
Regarding the IRA distribution used for medical purposes - isn't there a maximum exclusion of $ 10,000? I don't believe it's 100% of IRA funds.

[MilTaxEA]

I didn't realize you could ask for a redetermination after you receive a 90-day letter. Then again, I dont do much rep work...I'll have to take some more CPE on that during the off-season.

[oceanlovin'ea]

It was $3000 distribution. It made more of his social security disability taxable.

They had actually put about $4500 in the account but it was a mutual fund and prices dropped and $3000 was all they got out of it. He said there is about $25 left in the account.

I will call PPS and see what they can do to help.

Thanks.

Linda, EA

[Y2KEA]

I had one of those last year. It involved a ROTH also. My client waited intil the final detrmination notice to contact me. I contacted IRS. They said fax all paperwork to the audit reconsideration unit. I provided the 8606 forms showing no taxable distribution as she still had basis. This was accepted & the case was closed. The client even got a refund because of withholding.
Now for my rant: I sent her a bill for my work. She refused to pay becsuse it was "my fault". "I gave you the forms" she said. Not only did she not give me any forms, she never told me she made ANY ROTH contributions. I fired her this year.

[JohnH]

No good deed goes unpunished.
Guess you'll be signing up for that "Mind Reading" CE class they're offering this summer won't you?

[New York Enrolled Agent]

If you want to contest this determination in court before making any payment, you have until the Last Date to Petition Tax Court to file a petition with the U S Tax Court for a redetermination of the amount of your tax. The last date to petition the tax court is May 9, 2011.

How do I petition the Tax Court?

Your friend apparently ignored a CP2000. Time is of the essence. I don't believe PPS can interrvene. However, what you can do is call the number on the 90-day letter and see if you can reach someone there. Explain the situation (file a POA through e-services before you call). If the case is as simple as you state, you might be able to fax the 90-day unit with the information and that unit can send you a closing letter telling you to disregard the 90-day letter.

Since time is short, you might be forced to file a petition. The Tax Court has made the process very simple for small cases. There is even a series of 8 videos explaing the procedures on the their website www.ustaxcourt.gov and a "fill-in" petition. If your client submits the petition and the $60 filing fee, the case will be very likely referred to Appeals and you, as an enrolled agent with valid power of attorney, will be able to represent the client in Appeals. See Rev Proc 87-24

You cannot use audit reconsideration now. Tax must be assessed before audit consideration is available. See IRM §4.13. Tax can only be assessed after the 90 day period has expired.

[oceanlovin'ea]

I talked to a very nice lady at the 800 number on the letter. She told me to fill out the 8606 and fax it to them with the "notice of deficiency - waiver" unsigned. They would make the necessary adjustments and they would get a letter saying they didn't owe anything.

But they too will get a refund because of withholding on the 1099R.

Thanks for your quick answers.

Linda, EA

[S T]

Cp 3219

I knew I had one, but had to go digging to find it. It was a 2006 Tax Return, that the deficiency notice was issued Sept 2008, and was not forwarded to me until about March 2009.

Similar situation - client ignored all of the prior CP 2000 notices, so by the time they forwarded to me with a "HELP" it was really a deficiency notice

I called the IRS # on the notice - they just "chuckled" and advised me to fax in the information - which I did, then they (IRS) corrected the notice and actually issued a refund. Not sure how IRS arrived at the refund - but they closed the notice for that tax year.

So Linda, you should be good to go.

Sandy

[dyne]

That is a Statutory Notice of Deficiency or 90 day letter. At the expiration of the 90 days your client will OWE the tax. My tactic when IRS does something stupid is to contact our CONGRESSMAN. IRS must then reply to the congressmen to justify their action. This should only be used as a LAST RESORT!

[FEDUKE404]

Clarification needed

That is a Statutory Notice of Deficiency or 90 day letter. At the expiration of the 90 days your client will OWE the tax. My tactic when IRS does something stupid is to THREATEN to contact our CONGRESSMAN and DO SO if necessary. IRS must then reply to the congressmen to justify their action. This should only be used as a LAST RESORT!

While I applaud your efforts to help your client, I am a bit curious as to how you define "something stupid" by the IRS.

If a client receives notices, and either chooses to ignore them or fails to bring them to the accountant's attention, the blame is on the client. Not on the IRS.

To bring a congressman in seems like a bit of unnecessary overkill unless there is a legitimate reason to do so. ("Well, you see, I was just slightly speeding 90 mph in a 35 mph school zone and the judge won't give me a break....Can't you help me??")

Again, I'm not picking on you - but there is W-A-Y too much of "it's someone else's fault!!" going on these days. At least IMHO.

FE

[dyne]

Anytime IRS proposes to assess a tax against a taxpayer when it is clear that such proposed asessment is WRONG, I consider it to be something stupid done by IRS. In the poster's case it may have been the fault of the taxpayer. Perhaps I should have said "...when IRS is clearly wrong..." I just helped a taxpayer who was NOT my client and IRS is proposing to assess a $4,000 tax which is CLEARLY wrong and they will not concede the issue. Sometimes the only alternative is to contact one's Congressmen. I have not done that in years except for the case mentioned above regarding the $4,000 assessment. I said that I consider this to be a LAST RESORT!

[FEDUKE404]

Much better!

Anytime IRS proposes to assess a tax against a taxpayer when it is clear that such proposed asessment is WRONG, I consider it to be something stupid done by IRS. In the poster's case it may have been the fault of the taxpayer. Perhaps I should have said "...when IRS is clearly wrong..." I just helped a taxpayer who was NOT my client and IRS is proposing to assess a $4,000 tax which is CLEARLY wrong and they will not concede the issue. Sometimes the only alternative is to contact one's Congressmen. I have not done that in years exept for the case mentioned above regarding the $4,000 assessment. I said that I consider this to be a LAST RESORT!

Thank you for the clarification.

The IRS is quite capable of bone-headed moves, followed by stubbornness that only a Tennessee mule could ever appreciate.

So far as I know, over the years I've had a single client who had to go the "congressional" route to resolve a tax problem. This mild-mannered gentlemen had just about come to blows with how the IRS was not handling ( = ignoring) a situation involving him.

FE

[Uncle Sam]

IRS Letter

Feduke - I agree with you totally. Based on the OP - there's no need to contact a Congressman/woman.

What I suggest we do in the future - any time our clients are clearly right, and IRS is wrong, we'll contact Dyne and he'll take care of it for us with his foolproof solution.