Here they come - The Ugly Letters

[Snaggletooth]

Ah yes, the offseason. Time for the money to stop rolling in and the ugly letters from IRS get mailed to our customers.

What is your experience? Mine:

1. A significant number of them are due to IRS mistakes. Seems like maybe half of them in prior years, but this year and last year they have improved.
2. Yet another number are because the client has given us wrong answers, or failed to report something, either deliberately or through ignorance.
3. There have been a few that were my fault - I doubt this would be more than 2-3% of them.

A growing trend are the messages I receive "Ron, I received this from the IRS. What do I do?" And attached is a picture of an IRS letter taken with a cell phone.
The letter is dark, blurry, crooked, and totally unreadable. Am I the only preparer getting these useless messages take with a cellphone?

[kathyc2]

I haven't received any notices this year, and don't remember receiving any last year.

If you are receiving several, you may want to look at your procedures especially if it's from missing information. I always review current year forms to prior year as an aid to see if info is missing. Also, if client has Code W on W-2, have them verify no 1099SA. If I wouldn't do this, there would be a lot of notices from missing income items. Generally what they miss giving me that I need to double check on is investment forms, 1099R's and 1099SA's.

If you are receiving several notices from missing income items, are you also missing deduction items from info client forgets?

[Snaggletooth]

Good points. Especially about the 1099-SAs and Code Ws. The existence of a 1099-SA causes the IRS to automatically assume the distributions are income, when in reality, it's virtually NEVER the case. In fact, most of the time there is a card which are programmed such as they cannot be used for anything else except medical providers and drugs.

I'm happy for you that you have been spared the ugly letters, and perhaps it is a testimony to your expertise. I, too, compare all information documents to those received in the prior year to make sure all income has been turned in, but somehow things slip through the cracks.

[kathyc2]

With more accounts having only e-docs it's easier for clients to forget if they don't receive something in the mail.

This year I had a gal that I've been doing returns for a few years bring a 1099DIV with a few hundred resulting in $65 tax. I commented that this is new since she never brought it before and she said she's had the account for at least 15 years. Never received a notice, so I'm guessing it the matching results in additional tax below a certain threshold they just let it slide?

[FEDUKE404]

With more accounts having only e-docs it's easier for clients to forget if they don't receive something in the mail.

This year I had a gal that I've been doing returns for a few years bring a 1099DIV with a few hundred resulting in $65 tax. I commented that this is new since she never brought it before and she said she's had the account for at least 15 years. Never received a notice, so I'm guessing it the matching results in additional tax below a certain threshold they just let it slide?

Notable comment on the "availability" of tax documents.
A prime example: If you have a Treasury Direct account (such as income from Treasury bills and/or notes), you will NEVER receive a Form 1099-INT (or any other communications) via snail mail. You will receive an email that tells you the Form 1099-INT (and perhaps Form 1099-B) is "ready," but you still have to locate / save / print the tax document(s).
The flip side of this discussion is clients who REFUSE to do anything online, such as get tax documents (including updates) from brokerage firms et al. If their filing system is. . .lacking. . .income can easily go unreported.
Agree wholeheartedly that one of the best things to do is to have a copy of the prior year tax return handy when trying to determine if you have all relevant income documents (and deductions!).
As for your client with the unreported Form 1099-DIV income, one would think the IRS would quickly jump on that. Maybe they do have a "threshold"? Or maybe COVID stuff reallocated their resources. Just curious: Did you amend the prior year returns to report her income??

[Snaggletooth]

"We have wonderful news for you. Your tax information is now ONLINE!

This means we as preparers will only sometimes get the information returns. In my experience, the worst offender is the 1098-T. To make it even worse, the clients who know this stuff is there don't even print it out.

"Did you get a 1098-T for Mortimer?"

"Oh, yes, we've got it somewhere."

"Did you print it out?"

"Oh no, we don't even have a printer. It's on my phone, let me find it...[click....click...click...} Oh, it's on here somewhere in all my messages. I think I got it a couple months ago [click...click.......]

As more and more people are putting up with logon difficulties, elusive passwords, navigation designed for the host and not the user, etc. etc.etc. people are bailing out of the electronic age. I myself have done this for a couple vendors with whom I have confronted ridiculous navigation difficulties, and have insisted they bill me on snail mail. They don't like it, but I will hold their money.

[kathyc2]

Just curious: Did you amend the prior year returns to report her income??

I did not as the amount would be small and the 3rd party would have reported income to IRS, so it's not "hidden" income.

[Lion]

Have an elderly, single client with cancer, no computer, no printer. She's behind (2021 & 2022 on extension) and wants to catch up now so her son doesn't have to do it after she dies in a very, very few months. Her investments were at First Republic, and she gave them permission to share with me. FR uploaded her 1099s to their portal for 2021, and I downloaded to her file on my computer. FR uploaded her 1099s to their portal for 2022, but I did NOT download. I don't know why, missed the email, her son was attempting to take over at one point, I don't remember. Of course the portal password has expired. And, it's First Republic. I have one paper 1099 in the tax folders she gave me. Anybody work with JPMorgan Chase re former First Republic clients?