Audit Problems

[erchess]

I am in Buncombe County North Carolina and I have a client who lives in the same area and is involved in a lengthy series of letters from IRS Personnel in Philadelphia PA. I am also faced with the fact that my client is tired of worrying about the matter and I am going to have to talk her out of surrendering and paying what is asked. OK now for the questions. I know that I first have to read the whole letter carefully a couple of times. But here are my questions.

Do I have a right to demand a face to face meeting with a Revenue Agent in Asheville or is that something the guy to whom I am writing can refuse to do??

Can I, and if so should I, skip the above step and ask to go to Appeals?

How do I go about making either request?

[joanmcq]

What stage of the audit are you in? Has an NOD been issued? How did it start, a correspondence audit or a CP2000?

[erchess]

Not sure I understand

stage of audit. It started with a CP 2000 and so far they have written a letter, the taxpayers made a response without professional help, the IRS Responded and I was brought in and amended the return in question, then the IRS wrote back that my amend begain with the orignal numbers on the return when it should have begin with the numbers from changes the service had already made, so I corrected that and now we have a response which I will see on Tuesday morning.

[ChEAr$]

sounds like

stage of audit. It started with a CP 2000 and so far they have written a letter, the taxpayers made a response without professional help, the IRS Responded and I was brought in and amended the return in question, then the IRS wrote back that my amend begain with the orignal numbers on the return when it should have begin with the numbers from changes the service had already made, so I corrected that and now we have a response which I will see on Tuesday morning.

IRS has already made the changes, i.e. assessed the tax, since they mention that any 1040x
has to use their figures as starting point.

Let us know what happens.

[erchess]

Suppose that I want to to a POA but

I don't yet have a CAF number. What do I do?

[S T]

Try this

I think the CAF is automatically assigned when you submit your first 2848.

See form 2848 instructions at http://www.irs.gov/pub/irs-pdf/i2848.pdf see page 2 under sub heading Line 2.

Enter nine digit CAF #, if a CAF number has not been assigned enter "none" and the IRS will issue.

Sandy

[joanmcq]

Did the IRS respond with a CP2000? If so, you don't amend. You just send in the documents supporting your arguments. If you want to make changes that don't have anything to do with the notice, that's when you amend. AFTER the notice has been processed, and the tax assessed. Amending or addressing any issues not on the notice will just muck up the process. One or two responses back and forth is not a lengthy correspondence with the IRS. So if you are still getting CP2000s from the IRS you shouldn't have amended. Where did you send the 1040X? And what was the issue? What info was missing from the return?

[erchess]

Loger Version

Original Return was prepared by a social contact who is on disability and therefore takes payments under the table and therefore does not sign as paid preparer. Apparently the majority of the numerous returns she did contain major errors and a lot of people in the small community are in the examinations process. On the return in question the problem is that spouse's social security was not reported. CP actually I thought under stated the taxable portion of the social security but naturally I am ignoring that. I am taking the position that the CP notice asks for too much money for two reasons. It is indicated on the SS1099 that the spouse had Medicare withheld and that the spouse paid considerable legal fees to collect the social security. (This was the first year she received SSI but the Lump Sum Election did not help because the couple had significantly higher income in the three previous years.) Anyway to make my case I sent in an amended return with corrected Sch A to the writer of the CP Notice. I did discuss with him on the phone the fact that I was going to do do that. As I said earlier in the thread my first Amend began with the original return when it should have begun with the IRS Changes. They pointed that out to me and I sent in another amend. They have responded to that, apparently unfavorably, but I have not yet seen the response.

By the way, I very much hope that the taxpayers do not have to pay the full amount asked for and then amend the corrected return begging for most of the money back. They do not have the funds necessary to do this and would have to set up an installment agreement.

I did not try to deduct the full amount of the legal expenses. I pro rated according to the ratio of taxable and nontaxable social security. It does seem to me that the general rule that legal expenses to obtain taxable income are deductible would apply here.

The spouse just wants to settle and of course we will do whatever they decide to do but I am inclined to ask for a face to face in Asheville and if we lose there, to take it to appeals.

[bertrans]

Since the first notice was a CP-2000, your client's return is being examined by the IRS' Document Matching Branch. Unless the issue involves overreported withholding, your client will eventually receive a Statutory Notice of Deficiency, which will list your client's right to go to Appeals and Tax Court. There is no provision for going to an office audit, face-to-face, in this situation.

[erchess]

Where

Since the first notice was a CP-2000, your client's return is being examined by the IRS' Document Matching Branch. Unless the issue involves overreported withholding, your client will eventually receive a Statutory Notice of Deficiency, which will list your client's right to go to Appeals and Tax Court. There is no provision for going to an office audit, face-to-face, in this situation.

Where would the appeal be held? I assume that it would be face to face.

[bertrans]

Yes, the Appeal itself would be face to face, and would normally occur at an IRS Area Office close to your client's location.

[joanmcq]

The response should have showed the SS correctly reported and added a 'but adding this SS also increases the medical and misc itemized deductions'. since they are related to the notice issue, its possible the changes would go through without amending. Did they sign the first CP? That could be the problem; that they actually agreed to the thing before you got involved. In which case, you do have to amend to make any changes, and start from the amounts they agreed to.

I've never done a face to face appeals; they've always been by correspondence on a CP2000 that goes to NOD. Even the face to face audit I had, I appealed through correspondence.

[ChEAr$]

appeals

Be advised that in cases of CP2000 notices, when a taxpayer doesn't respond in time, and
the 90 day letter is issued, IRS has and is effectively bypassing the appeals procedure, so
don't count on it.

that's not the case here with erchess' client, since he's actively talking with IRS, but still
we need to be aware of IRS thinking on this.

[Davc]

Be advised that in cases of CP2000 notices, when a taxpayer doesn't respond in time, and
the 90 day letter is issued, IRS has and is effectively bypassing the appeals procedure, so
don't count on it.

that's not the case here with erchess' client, since he's actively talking with IRS, but still
we need to be aware of IRS thinking on this.

Unless it's changed, sending in the tax court petition will cause a case that hasn't been through appeals to get kicked back to appeals.

[ChEAr$]

Exactly, Dave.

Unless it's changed, sending in the tax court petition will cause a case that hasn't been through appeals to get kicked back to appeals.

My only point is that appeals is not automatic like it once was.