E-filed failed to deliver form 982 to IRS

[AZ-Tax]

My client gets a CP2000 letter for 2011 TY stating he never reported his 1099-C cancellation of debt which lead to his AGI to increase thus taxing more of his SS. When I called the IRS they told me they never recieved the form 982 (claiming insolvency) therefore I had to fax them not only the form 982 but the 982 worksheet. I can see filing a paper return and loosing one or more forms but e-filing the return. Has anyone ever expeienced this? Curious, has anyone ever had the IRS question their client's claim of insolvency by proving it with supporting documents, etc.?

[ATSMAN]

If you e-filed and Form 982 was not transmitted to IRS, you will need to check with your software provider is that was indeed e-filed.

I had a situation with an installment loan agreement with my prior vendor that was not transmitted as part of the e-file.

[DaveinTexas]

The issue is not the 982

The issue here is, from what I have been told in numerous seminars, is the IRS is completely disregarding (ignoring) the form 982 and telling the taxpayer to "prove it".

Sounds ridiculous but I can't really blame the IRS, it's so simple to check that little box on the form 982. The IRS really needs a efileable worksheet to attach to this form to reduce some of these nonsense CP2000s. But that would be just too practical I suppose.

What I recommend, before filling out the 982, is to sit down with the taxpayer and either have them fill out or assist them in filling out an insolvency worksheet (like the one from TaxTools. Then, fill out the 982, efile the return and keep the insolvency worksheet in the file so you will have it to respond to the inevitable CP2000 in 20 months.

ATS, I had the same issue with the IA form. In my case, the 9465 was the only form that went efile, the return did not and we had to write a penalty abatement letter for a late return (it was abated, thankfully). I've been directing my clients to the OPA on the IRS website (Online Payment Agreement). I put it in their hands to handle, unless they need assistance.

[David1980]

The issue here is, from what I have been told in numerous seminars, is the IRS is completely disregarding (ignoring) the form 982 and telling the taxpayer to "prove it".

Sounds ridiculous but I can't really blame the IRS, it's so simple to check that little box on the form 982. The IRS really needs a efileable worksheet to attach to this form to reduce some of these nonsense CP2000s. But that would be just too practical I suppose.

Very easy. I wouldn't be surprised if there were a lot of unscrupulous preparers that just attach Form 982, checking insolvency, for every 1099C they see regardless of the facts. So I don't mind too much if I see CP2000s asking for the insolvency calculation.

[Jiggers]

Very easy. I wouldn't be surprised if there were a lot of unscrupulous preparers that just attach Form 982, checking insolvency, for every 1099C they see regardless of the facts. So I don't mind too much if I see CP2000s asking for the insolvency calculation.

Yes, if the problem was the software or the IRS.

But in all cases, the client immediately understands the CP2000 to read that there is an error on the return and then they turn to us as having made a mistake.

100% of the time that is their opinion.

And then you have to show the client that it is not your error and that the IRS made the mistake or your client didn't give you a 1099/W-2.

[AZ-Tax]

Insolvency Spreadsheet

Very easy. I wouldn't be surprised if there were a lot of unscrupulous preparers that just attach Form 982, checking insolvency, for every 1099C they see regardless of the facts. So I don't mind too much if I see CP2000s asking for the insolvency calculation.

I use an Insolvency Worksheet via Excel Spreadsheet with formula's built into it. I instruct the client how to complete it. After client completes it I have client sign and date it. Then I scan it. I have prepared quite a few of these 982's for several different client over the last 3 years and this is the first client that recieved a CP2000 on it. I am considering in future years to just attach the Insolvency Spreadsheet my client signs to the tax return to hopfully avoid any future CP2000 on the form 982.

[Bjorn]

982

Nearly every 982 I filed was ignored by the IRS. In the past, I did not load data on a line on form 982 that said I was going to reduce basis. For the folks with credit card and simple debts I've used line 10a. Also, my software has a worksheet which I've started to fill out and send with the return. Often the CP 2000 notice comes saying they owe the tax.

I write the IRS, include the 982 and worksheet showing insolvency. and every notice where they were really insolvent I've got the IRS to back off.

Rumor, if line 21 nets out to zero I've heard the IRS ignore that. Some of my clients won a small bingo prize. :-) This is pure rumor.

It may be a good idea to warn the client they will likely get a form saying the 1099-c in taxable in 18 months and to bring it in for a reply. You look like a hero if you predict the IRS will write them on this issue.

Mahalo,

Bjorn

[DaveinTexas]

I wouldn't bother

I use an Insolvency Worksheet via Excel Spreadsheet with formula's built into it. I instruct the client how to complete it. After client completes it I have client sign and date it. Then I scan it. I have prepared quite a few of these 982's for several different client over the last 3 years and this is the first client that recieved a CP2000 on it. I am considering in future years to just attach the Insolvency Spreadsheet my client signs to the tax return to hopfully avoid any future CP2000 on the form 982.

adding the Insolvency Worksheet to the return; it will just be ignored. It's a real shame we have to wait for the IRS to ignore their own forms (which they require you to attach to the return) only to respond to a CP2000 notice that we can't charge the client for (maybe we should, but I don't usually).

[DaveinTexas]

Hey Bjorn!!

Nearly every 982 I filed was ignored by the IRS. In the past, I did not load data on a line on form 982 that said I was going to reduce basis. For the folks with credit card and simple debts I've used line 10a. Also, my software has a worksheet which I've started to fill out and send with the return. Often the CP 2000 notice comes saying they owe the tax.

I write the IRS, include the 982 and worksheet showing insolvency. and every notice where they were really insolvent I've got the IRS to back off.

Rumor, if line 21 nets out to zero I've heard the IRS ignore that. Some of my clients won a small bingo prize. :-) This is pure rumor.

It may be a good idea to warn the client they will likely get a form saying the 1099-c in taxable in 18 months and to bring it in for a reply. You look like a hero if you predict the IRS will write them on this issue.

Mahalo,

Bjorn

I may be going crazy but I haven't seen you on the board in a while. You must be busy.....wait...why am I not busy??

Great point about leaving the reduced tax attributes blank, admittedly, I used to do this too. I too now use the line 10a, boy I hope the client never sells that breakfast table because it has a zero basis (more humor!!)

[appelman]

982 doesn't feed into anything else.

adding the Insolvency Worksheet to the return; it will just be ignored. It's a real shame we have to wait for the IRS to ignore their own forms (which they require you to attach to the return) only to respond to a CP2000 notice that we can't charge the client for (maybe we should, but I don't usually).

I always make two entries on Line 21 of the 1040. One shows the debt cancellation amount; the other backs it out and says "See Form 982" Of course, it is also true that the IRS computers don't look at the detail for Line 21! I got a CP2000 once that tried to collect SE tax on COD! So. what can a poor girl do?