Cp-259

[Jesse]

I have a new client for 2007, Partnership return required to file form 1065.

They brought me a CP-259 notice today:

Our records show that you have not filed the tax return as shown below: "Form 2758 Fiduciary Income Tax for period ending 12/31/06."

Form 2758 is Application for Extension of Time to File Certain Excise, Income, Information, and Other Returns.

Client runs an excavation company, nothing unusual. Looked over the 2006 tax return and nothing seems unusual (former preparer has since deceased so I can't call and ask her for advice). Can anyone give me any thoughts as to why client is receiving a notice from IRS asking for this form?

[Nashville]

Possible Telephone Thing

Jesse, this form 2769 - could that be referring to the telephone excise tax credit that was in effect for 2006? Businesses were not entitled to the IRS settlement of $20, $40, $60, but had to file something for which not only the excise tax but the interest was calculated.

Just a shot in the dark...

[Jesse]

I didn't want to appear as a total idiot when I called the IRS, but I could find no reason for this form 2758 being needed. I just got off the phone with the IRS and the agent has nothing for form 2758 being requested, however the 2006 form 1065 was never received or processed.

The agent instructed we send a resigned copy of Form 1065, with a copy of the notice received and point out that the request for the Form 2758 is an error in their system.

Thanks for the feedback.

[JohnH]

Once IRS receives the 1065. the client will probably get the FTF penalty notice, and then you'll have to send the "get out of jail free" reference to get that removed. If you let them know that penalty is likely to be assessed, and to give it to you when it arrives, then they won't mind the fee you'll charge them to get it waived.

[DTS]

1065

Jesse,

Is your client forgetting the return was filed by them or the preparer that was ill? Things get lost at the IRS all the time or the preparer just let this one slip by when they were ill. Maybe, verify this with your client. If it was left up to the previous preparer to file, but did not file due to their illness, that may be ample excuse for abatement.

Just a thought.

Dennis

[erchess]

Related Question

How often does the IRS ask for one form when it would be appropriate to ask for another, and in particular how often do they ask for a Form number that does not exist?

Reason I ask is I have an SCorp client who tells me the IRS claims his 2253 was never received so they want proof that the SCorp properly so elected. I realize client could be typing wrong in his email so I have asked him to fax me a copy of the letter. As most people reading this know, F 2553 is filed by corporations wishing to elect S Status. If indeed that is what they are talking about I can prove that I timely prepared it and gave it to the client but I don't think he can prove he mailed it in.

[Jesse]

Jesse,

Is your client forgetting the return was filed by them or the preparer that was ill? Things get lost at the IRS all the time or the preparer just let this one slip by when they were ill. Maybe, verify this with your client. If it was left up to the previous preparer to file, but did not file due to their illness, that may be ample excuse for abatement.

Just a thought.

Dennis

The previous preparer became ill suffering with cancer in 2006/07 passing away in July of 2007. The 2006 return was prepared but not mailed to IRS until March of 2008, there was also a notice of penalty for filing 2005's late. I wrote a letter concerning 2005's and the penalty was abated and, as well as some interest, refunded. I warned him about the late penalties for 2006 and when the penalty bill comes in the mail we will write again.

The request for Form 2758 is what threw me for a loop.

Once IRS receives the 1065. the client will probably get the FTF penalty notice, and then you'll have to send the "get out of jail free" reference to get that removed. If you let them know that penalty is likely to be assessed, and to give it to you when it arrives, then they won't mind the fee you'll charge them to get it waived.

JohnH, I really wish I could be more like you. I frustrate myself, at this time of year when things have simmered down I seem to let my compasionate side take over and do not charge as I should. I think this poor taxpayer, it's not his fault his preparer died and left him with so many loose ends and it's not his fault the IRS messed up, lost his return and is now requesting some off the wall form. It's not my fault either, but I'm just an idiot that should probably be working for someone other than myself.

I read geekgirldany's post and I need to bring on a new tough attitude as well, just haven't got there yet!

[Jesse]

How often does the IRS ask for one form when it would be appropriate to ask for another, and in particular how often do they ask for a Form number that does not exist?

I wonder this as well. I also have a client that mailed in an extension of time to file that the IRS claims they did not receive. The late filing fee is in excess of $1,500. This client is very organized and I do believe the 4868 was mailed but they just put a stamp on the letter so how do you prove this?

[JohnH]

This is why I advise clients to use certified mail with return receipt whenever the amount expected to be due is significant. Some still choose to just drop it in the mail, but at least they've been warned. I also suggest that they mail the payment about a week in advance, since that will give them a "check clearance" date either before the 15th or close enough to further establish that the return or extension must have been timely filed.

On a few occasions, when the amount due was really large and I had reason to question the client's willingness or ability to follow through as instructed, I've mailed an extension showing the balance due but with no payment. I figured that if two extensions show up (one with payment and one without) then IRS is going to give them credit for the extension having been filed either way, and the payment will be credited as of the receipt date. Never had a problem with any of those.

[JohnH]

Jesse:
Don't give me too much credit - there are also occasions when I wish I could be more like me.

[JON]

You just

gave the reason for the request for the extension. They did not get the return until 2008-they are counting the days late and now goes back to April 15.... They are giving you a chance to show how late it is....

[OtisMozzetti]

Use EFTPS

A good, inexpensive, way to totally document that payments were made on time to the IRS is to use EFTPS, Electronic Federal Tax Payment System for checking account debits. Individuals can use it for no charge, and payments can be scheduled up to a year in advance. Payments which have been scheduled can be cancelled, and payments can be entered as little as about two days in advance. Also, in this state, one can submit state tax payments as checking account debits via "WebPay".

[Jesse]

gave the reason for the request for the extension. They did not get the return until 2008-they are counting the days late and now goes back to April 15.... They are giving you a chance to show how late it is....

But an extension, Form 7004, was originally filed so the due date was Oct 15, 2007. Form 2758 had nothing to do with form 1065 as far as I can tell. The 2006 return was mailed to the IRS in March of 2008 but they have no record of receiving it.

I gave the client seperate envelopes for 2006 and 2007 and instructed that even though they are going to the same address they need to be seperate envelopes. Also a third envelope mailed at that time contained the letter asking for a refund of late filing fees for 2005's Form 1065. I don't know if they received 2007 because I do not have power of attorney for 2007.

The income was reported on each members personal returns, therefore under the rule for small partnerships (with 10 or fewer partners) I asked the penalty be abated and late fee paid be refunded. In the letter I wrote for 2005 I stated "Under Rev. Proc. 84-35 we are requesting relief and refund of the late filing penalty assessed and paid for the Tax period ................." Client was refunded the $300+ for the late filing penalty paid and interest on the $300. So out of the three envelopes given to the taxpayer to mail I know the IRS received and processed at least one of them.