EA tax assistance?

[Possi]

My established client got married and last year their refund was withheld. Seems new husband hasn't filed a return since 2001.

For 2002, his income was self employment and the IRS wants over 17k.The other returns are from wages, so they are not as bad as the initial year, 2002.

Having the W2's for 2004 and 2005, I prepared those 2 returns, Federal and State.

While I can and will prepare the tax returns for them to file with the IRS and the State, I have told them that they might want to be represented by an EA or a tax lawyer. I told them I believe a representative might be able to save them from some of this liability, that the money spent on the rep would be well spent...

If you agree that they could benefit from a representative, how do I find a good one for them? Do I lead them to an EA or a tax lawyer?

Thanks!
~possi

[Zee]

You've indicated you won't have any problem preparing the returns yourself. Since he didn't file any tax returns, the IRS is most likely assessing the taxes, interest, and penalties based on 1099's that were provided to your client. Often, client's in situations like this, end up in a refund situation after the standard/itemized deduction, exemptions, and deductions. Make sure any deductions are fully documented. If not, you aren't going to find the IRS very willing to negotiate. The starting point is preparing the returns from good documentation. Then, you can determine where to go from there. How was the amount of tax determined? If it was based on a letter from the IRS it should tell you. I wouldn't be concerned about representation until you've finished the returns, sent them in and started the process. If they disagree with your returns, you can appeal. That's when representation might help assuming you have good arguments. If the IRS is right, have your client pay the bill. If he can't pay, have him setup an installment agreement.

[taxmandan]

Get the transcripts

You can prepare the returns, but only after you get the income transcripts from the IRS. Have client sign a Form 8821 authorizing you to get tax information from the IRS and then call the PHL. Tell whoever answers that you have an 8821, they will give you a fax number to send it to them directly. After they have it in hand they can fax you the transcripts. Takes about 15 minutes plus the on-hold time. Don't try to complete the returns with just the info the client brings you. He will have forgotten something, like interest on bank account, a retirement that was cashed in, or mortgage interest.

There really isn't any need for a rep at this time, maybe not be needed at all. The IRS will accept the returns and then adjust balance due, etc. and then you can see where the client is at and what options are available. May only need an installment agreement to pay of any balance.

[Zee]

You can prepare the returns, but only after you get the income transcripts from the IRS. Have client sign a Form 8821 authorizing you to get tax information from the IRS and then call the PHL. Tell whoever answers that you have an 8821, they will give you a fax number to send it to them directly. After they have it in hand they can fax you the transcripts. Takes about 15 minutes plus the on-hold time. Don't try to complete the returns with just the info the client brings you. He will have forgotten something, like interest on bank account, a retirement that was cashed in, or mortgage interest.

There really isn't any need for a rep at this time, maybe not be needed at all. The IRS will accept the returns and then adjust balance due, etc. and then you can see where the client is at and what options are available. May only need an installment agreement to pay of any balance.

That's a good idea, but wouldn't the IRS letter generally list the income items? It has on those I've seen. I worked on one like this a few years ago. The guy was a self-employed trucker. We ended up with very large refunds for every year instead of a huge liability. I found the IRS very helpful. They were very welcome to get the guy back into the system. The payback? I never saw him again, probably saved him $50000. Go figure.

[erchess]

Representation by preparer

My eyes are bleary so forgive me if someone already made this point, but the person who prepared a return (in this case you Possi) can represent the client in front of the audit and appeals divisions of the IRS. My feeling would be that if you can explain in simple sentences why the returns you prepared are one hundred percent in line with the law and the documented facts you can win at audit. If it turns out that this does not work, then either you see the logic of what the IRS is proposing and tell your client to pay up or you say "Please write it up as not agreed and we'll go to appeals." In that event you may want to advise your client to bring in an EA or a Tax Attorney or even a CPA as long as the individual has argued appeals successfully and thinks you and your client are in the right.

[ED SMITH]

The suggestion about getting transcripts is very good, but ask for the right transcripts. I always request Wage and Income - these will have the W-2's 1099's etc, and the Account Transcripts - which will have the amounts that were assessed plus any payment that the client made, if any.

If he had business expenses in 2002, a return will probably show a lower tax liability.
You will also have to use from 4852 - for any missing W-2's, 1099R's. Any year that has been assessed by the IRS has been SFR'd (substitute for return). These returns get mailed to a special address. The IRS can tell you.

There is also the question of state tax returns. The Wage transcript does Not have any state info so you can estimate the state withholding tax and attach a copy of the 4852 to the return. Only a few states actually have that info - relying on the W-2's. Some states, such as CA will give you the info over the phone with out a POA.

[Possi]

There is also the question of state tax returns. The Wage transcript does Not have any state info so you can estimate the state withholding tax and attach a copy of the 4852 to the return. Only a few states actually have that info - relying on the W-2's. Some states, such as CA will give you the info over the phone with out a POA.

Unfortunately, Virginia does not have individual withholding information at all. No W2, no withholding. Seems illegal to me, but I've been around the mountain with them on this issue before.

I believe all the income from 02 was 1099 income, and he has zero documented expenses.

I didn't know if an EA could help in getting his liability reduced.

I'll get the transcripts and prepare the returns. And thank you for all the information and confidence building responses.

~possi

[laur4555]

EA tax assistance?

Possi,
Funny you mentioned the issue with getting Virginia WH info. I came across the same problem with Georgia. My main question to them was...then what do you do with the annual W-2 reporting that is sent in? I just could not believe it.

Laurie

[Lion]

You can do it

An EA can't do anything you can't do, if you prepare the returns, as far as representing them before the IRS in these initial stages. The important thing is to get actual returns filed with the best information you can find, all the deductions you can find. An EA can't get amounts reduced if the amounts are owed. Just get the returns in and then see where they stand. And, yes, it can be hard to get state w/h information from many states; you'll have to go with the best you can find from check stubs, bank statements, talking to someone at state, etc. But, you don't need to send them to another professional, especially if pricier, at this stage.

[Possi]

should be illegal...

... that they are not required to keep that specific information.

If the taxpayer can't get a copy of the actual W2, they get zero credit for VA withholding!

So what does the state do with all that free money they are keeping?

[erchess]

Shhhhhh

You didn't hear this here but what they do with the money is send half of it to me and half to a former Governor of the state. Shhhhhhhhhhhhhhhhh. Big Secret!!!!!!!!!!!!!!

[New York Enrolled Agent]

My eyes are bleary so forgive me if someone already made this point, but the person who prepared a return (in this case you Possi) can represent the client in front of the audit and appeals divisions of the IRS.

That is not true. Only practitioners who are under the provisions of C230 may represent a client in Appeals. A non-C230 practitioner has limited rights under C230, §10.7(c)(viii) to represent a client during an examination of a return prepared by that practitioner. §10.7(c)(viii) expressly states that the non-C230 practitioner may not represent any client before appeals or collection personnel.

[erchess]

Thx for the correction NYEA

That is not true. Only practitioners who are under the provisions of C230 may represent a client in Appeals. A non-C230 practitioner has limited rights under C230, §10.7(c)(viii) to represent a client during an examination of a return prepared by that practitioner. §10.7(c)(viii) expressly states that the non-C230 practitioner may not represent any client before appeals or collection personnel.

Thank you for pointing this out.

[taxmandan]

Possi,
Funny you mentioned the issue with getting Virginia WH info. I came across the same problem with Georgia. My main question to them was...then what do you do with the annual W-2 reporting that is sent in? I just could not believe it.

Laurie

Out here on the left coast, Oregon doesn't capture that information either, they only get the total withholding from a company, not allocated to the individual employee. However, we do have a form to calculate and estimate the state withholding, it's usually a little lower than what was probably actually withheld, but it's better than nothing.