Tax Preparer Forgot to e-file my 1040 - what now?

[RT_Shore]

A VERY close friend of the family (might as well be family) is a 75 year old, self-employed tax preparer, whom we have prepare our 1040s. Just as in years prior, he prepared our 2006 1040 and we signed authorization to e-file, filled out the payment voucher and sent it to IRS with our payment on time, etc... thinking we were done. Nope! a few months later we get a letter from IRS stating:

"...we've recieved $xxxx.xx but no 1040 return. Your penalty for not filing and interest is stated below...."

It also gives a special number to call if you "disagree" with the penalty and have "probable cause" to get the penalty/interest waived.

Our good friend 'forgot' to e-file our return! He is an older gentleman and may be getting a bit rusty in the memory dept.

Now, it is not a huge sum in penalty/interest but it is big enough to put a nice dent in us financially. If we report to IRS what happened, and our penalty/interest is waived, will our close friend/tax preparer hear from the IRS or be penalized financially or otherwise somehow?

We have enough paperwork to show we did everything right so I am confident the penalty/interest will be waived. However, I am concerned for the welfare of our friend as he is in NO position whatsoever to pay our penalty/interest if that is how it works.

If the penalty/interest is waived, will our friend hear from the IRS in any manner?

[JoshinNC]

Short answer

A VERY close friend of the family (might as well be family) is a 75 year old, self-employed tax preparer, whom we have prepare our 1040s. Just as in years prior, he prepared our 2006 1040 and we signed authorization to e-file, filled out the payment voucher and sent it to IRS with our payment on time, etc... thinking we were done. Nope! a few months later we get a letter from IRS stating:

"...we've recieved $xxxx.xx but no 1040 return. Your penalty for not filing and interest is stated below...."

It also gives a special number to call if you "disagree" with the penalty and have "probable cause" to get the penalty/interest waived.

Our good friend 'forgot' to e-file our return! He is an older gentleman and may be getting a bit rusty in the memory dept.

Now, it is not a huge sum in penalty/interest but it is big enough to put a nice dent in us financially. If we report to IRS what happened, and our penalty/interest is waived, will our close friend/tax preparer hear from the IRS or be penalized financially or otherwise somehow?

We have enough paperwork to show we did everything right so I am confident the penalty/interest will be waived. However, I am concerned for the welfare of our friend as he is in NO position whatsoever to pay our penalty/interest if that is how it works.

If the penalty/interest is waived, will our friend hear from the IRS in any manner?

is no. xxxxxx (had to put something in to get to the minimum word requirement)

[taxea]

The return can still be e-filed until 10/15. Or you can take it to your local IRS office and ask to speak with someone about the issue. You will get a much quicker answer this way.
Other option is to send the original signed return including the 8879, showing the date you and the preparer signed it, with a statement of explanation and a request to waive all penalties and interest. A signed statement on your preparer's letterhead with his explanation as to what happened would be even better than just one from you. If you choose this option be sure to fax it with a copy of the IRS notice to the fax number on the notice.
taxea

[DTS]

Rt

Contact the IRS number on the notice and tell them the circumstances with your friend. They will grant a small amount of time to file the return, if needed. He should be able to e-file the return for you ASAP and get any penalty abated for you.

He should pay the interest on your behalf. If he cannot, you pay it, as it's probably a small amount. Settle up with him later on.

Good luck!

[taxmandan]

The return can still be e-filed until 10/15. Or you can take it to your local IRS office and ask to speak with someone about the issue. You will get a much quicker answer this way.
Other option is to send the original signed return including the 8879, showing the date you and the preparer signed it, with a statement of explanation and a request to waive all penalties and interest. A signed statement on your preparer's letterhead with his explanation as to what happened would be even better than just one from you. If you choose this option be sure to fax it with a copy of the IRS notice to the fax number on the notice.
taxea

OP said this was their 2006 return, which cannot be efiled. Will need to mail it in with a copy of the letter from theIRS. Attach a letter as suggested and request abatement of the penalty.

[DTS]

OP said this was their 2006 return, which cannot be efiled. Will need to mail it in with a copy of the letter from theIRS. Attach a letter as suggested and request abatement of the penalty.

I did not catch the return was for '06. Yes, return cannot be e-filed, but can still mail in. Sorry about missing that important detail!

[Jiggers]

Penalty & Interest???

A VERY close friend of the family (might as well be family) is a 75 year old, self-employed tax preparer, whom we have prepare our 1040s. Just as in years prior, he prepared our 2006 1040 and we signed authorization to e-file, filled out the payment voucher and sent it to IRS with our payment on time, etc... thinking we were done. Nope! a few months later we get a letter from IRS stating:

"...we've recieved $xxxx.xx but no 1040 return. Your penalty for not filing and interest is stated below...."

It also gives a special number to call if you "disagree" with the penalty and have "probable cause" to get the penalty/interest waived.

How can the IRS calculate the penalty and interest if they have no tax return? All they have is your payment. Something is missing here.

[JohnH]

Besides, if the payment was made on time there will be no penalty or interest for late filing of the return. Possibly an estimated tax penalty, but that would have been due even if the return had been filed on time.

If the facts are as stated, there won't be a penalty or interest issue at all unless the return is later audited and additional tax is found to be due.

[JohnH]

Dennis:
Not a problem - after all this string is about forgiveness for mistakes anyhow.

[RT_Shore]

First, thank you all for your responses!

I did leave out some pertinent information:

I got an extension for my 2006 1040. We brought over all information to our preparer on 10/9/2007. Preparer prepares 1040 and mails us a copy of the return, in which he signed as "preparer", along with an authorization to e-file form (which we filled out and mailed back to his office). He also included hand written notes instructing us to fill out the above form and send back to him, also to send in our payment with the voucher he included that was pre-addressed to the IRS.

We sent the authorization to e-file back to our preparer as he instructed. We kept the 1040 copy for our records. We sent the voucher with full payment to IRS. So, now we are done with 2006!

About 60 days ago we got the notice from IRS that we had not filed. We notified our preparer and he mailed back a signed, typewritten letter (with his business letterhead) stating to the effect:

"I forgot to file your return!" "my mistake, so sorry!, etc etc..." "it is too late to e-file your 2006 so I included a paper copy of your return, simply sign, date, etc...." "IRS will be sending a notice of penalty/interest due etc...."

Okay, so we immediately signed the paper copy of our 2006 1040 and sent it to the IRS. Then, about 10 days ago, we get this notice of penalty/interest due. It is a lot of money (for him), but it was not our mistake. We have been researching every corner of the net for answers and have found nothing about what the IRS may do to our elderly friend/ tax preparer if we press our case. We have not contacted him yet since receiving the penalty/interest notice, and are trying to handle this whole thing behind the scenes, but with great turmoil that this dilemma has caused us.

As evidence to show probable cause, we can send in his letter to us acknowledging that he "forgot" to e-file for us and a few other notes from him. We did not retain a copy of the authorization to e-file since we did not receive it in duplicate.

Other notes: We sent in the balance of what was due with the payment voucher mentioned above and we knew we were in for some penalty/interest there, due to the fact that it should have been paid by 4/15/2007. The recent IRS notice itemized the amounts being penalized for both being late with estimated tax payments and, just for being late filing the return. The amount itemized just for being late is sizable.

The main issue, is:

Will the IRS contact or our friend/tax preparer if the IRS abates our penalty/interest? Either to bill him for the penalty/interest, or fine him, or?

Our dilemma is: Should we just go ahead a pay it to save face and never raise the issue we our friend again? Or get it abated, as it won't affect our friend?

[ED SMITH]

The main issue, is:

Will the IRS contact or our friend/tax preparer if the IRS abates our penalty/interest? Either to bill him for the penalty/interest, or fine him, or?

This question was already answered. They will not contact him.
The IRS generally will abate a late filing penalty if there is reasonable cause, which you have. They will NOT abate the interest.

Our dilemma is: Should we just go ahead a pay it to save face and never raise the issue we our friend again? Or get it abated, as it won't affect our friend?

This question is for Dear Abbey, not for this forum

[BHoffman]

Go ahead and use the letter to show reasonable cause and request the penalty abatement. I've never heard of the IRS going after the preparer for a matter like this.

They will either accept your explanation and abate the penalty, or they won't and you'll have to pay it. In any event, the preparer isn't likely to be held accountable by the IRS even though his actions caused it. The IRS imposes the penalty on the taxpayer, and they usually stay out of business between the taxpayer and the tax preparer. Most of us would feel obligated to reimburse a client who suffered a penalty because we made a mistake.

The IRS will certainly become interested in a tax preparer who makes a career out of preparing fraudulent returns, but having a "senior moment" and forgetting to efile a tax return does not a felon make.

[JohnH]

----> The recent IRS notice itemized the amounts being penalized for both being late with estimated tax payments and, just for being late filing the return. The amount itemized just for being late is sizable. <-----

I still contend that you were not assessed any penalty for filing the return late, if the facts are as stated. If you had a valid extension in place and if you paid the tax before 10/15, THERE WOULD BE NO LATE FILING PENALTY, even if the return was filed after 10/15.

You state that you were assessed an estimated tax penalty - that would have been due even if you filed & paid on 4/15. You would then have been assessed interest at about 8% APR from 4/15 to the payment date. You would then have been assessed a late payment penalty of 6% APR from 4/15 to the payment date. That's it.

If there was a 5% per month late filing penalty (which maxes out at 25%) on the unpaid balance, then the problem is either that you didn't pay all the tax when due or the extension itself was invalid.

Anyhow, you should write a letter to request abatement of the penalties and not worry about getting your friend in trouble - it won't happen. It would be courteous of you to send him a copy of the letter before you send it to IRS & ask for his comments - he might even have some suggestions on wording. He has already sent you a note acknowledging his error so surely he expects you to request a penalty abatement.

[Jiggers]

You need Professional Assistance

I think you need some Professional Assistance to get this resolved.

I think your original post and the latest post providing additional information leaves me confused.

In other words, pay someone to assist you.

Just by 2¢ worth.

[JohnH]

Jiggers:
You are right - if the penalty is really enough to cause any concern, they need to have a local tax pro look at it. I don't know whether it's intentional or unknowingly, but the poster is leaving out some criticial information.

I have my theories about what's going on here, but no sense posting a bunch of speculation on top of speculation.