help with client catching up: 2010- 2013

[Hahn1040]

Client's father died in late 2013.

Client realized in mid-2014 that the parents had not filed their returns since 2009.

Mother is in nursing facility due to dementia.

Client and brothers have been compiling the tax info for the returns:  obtaining duplicate 1099s, researching the cost basis of bonds and other securities sold, searching for church contribution records, etc.

 

I have the returns pretty much finished up and have some questions of logistics:

 

I have always been told to NEVER send more than one tax return in an envelope, but here it seems to make sense to send them all together as a package with a letter of explanation

 

WHERE do I send them:  The parents (mother still does) live in Texas, estimated payments for 2010 were made to TX but my client who has POA for the mother and whose address will be on the returns lives in VA.  Will they have trouble matching up the estimated payments if I send it to Kansas City based on the Virginia address?

 

How do I request abatement of penalties based on First time penalty abatement waiver and/or due to reasonable cause?  I see the form 843, but I don't understand if I use that.  It looks to me that the form is used when penalties have already been assessed.  My understanding is that they will not waive the interest.

 

They owe about $11,000 for 2011 and $600 for 2012.  2010 has a small overpayment (because he had made the estimated payments)  and 2013 has an overpayment because of medical costs of nursing facility.

 

Any help or suggestions will be greatly appreciated.

Thanks!

[Pacun]

I always send multiple returns in one envelope. This one will needs to be in one envelope so your explanation makes sense. I have noticed that government agencies keep even the envelopes and they are not allowed to throw anything that it is received. Yes, sometimes they misplaced them but hey, how many times we have misplaced W-2 and it takes a big effort to find them?

 

Make sure you list the years you are filing on the letter. I thought your question was going to be "Who is going to sign the returns"?

[rfassett]

I am more of a keep things normal sort of professional and would suggest sending the returns in separate envelopes with no explanation.  When the penalty notice is received, then ask for abatement.  I sense that you are attempting to get a waiver based on first time for all the years.  '13 and '10 do not sound like they will have an issue.  '12 sounds like a very minimal issue that I would tell the client to pay because it would be cheaper than what they are going to pay ME to mess with it.  You can try to get it combined with the 2011, but I think you will spend a lot of time for very little return.  The '11 is where the big penalty will be and that is the one that I would want to single out for sure.  I do not think it would matter a lot where they are sent.  People move all the time and their estimates seem to catch up to where they go.  Just be sure that the first ssn on the estimates is the first ssn on the return.

 

Pacun asks a valid question.  Who is going to sign the returns?  Is your client the executor of the father's estate?  I understand he is the POA for Mom, but if you are filing joint returns, I believe you need both signatures - at least for 2010, 2011, and 2012.  Mom, via POA, can sign the '13 as surviving spouse, but I do not think that stretches back to 2010 - 2012.  I could be wrong about that but it might be something you want to look into.   

[Jack from Ohio]

How can you ask for abatement of penalties that have not been assessed?  I agree with rfassett.  Each return in its own envelope.  Mail oldest first then the others waiting 2 weeks between.  Then deal with penalties as they are assessed.

Edited January 29, 2015 by Jack from Ohio

[jklcpa]

If you were thinking of going for the First Time Abatement, that is only applicable when only 3 years are outstanding, and the abatement will be applied to the earliest of the three.  If you were to try for this for 2011, that means that you would have to file 2010 to get that into the system and then file the others and request the FTA.  I don't know if that would be possible or reasonable to expect since the IRS person that will weigh in on this request would see that 2010 was also late and may disallow the request anyway. 

 

Asking for abatement for reasonable cause would be a different matter entirely, and I agree with Ron that 3 of the returns aren't worth bothering with for requesting abatement. 2011 is the one that you need to deal with. I'm wondering if even reasonable cause might be off the table depending on when the son was granted POA because that also makes him a responsible party for handling the financial matters, so the health of the parents becomes less of an explanation for the late filing.

 

As for the mailing address and estimated payments, I would use the son's service center since his address is going to be on the returns, and I would include the schedule of the estimated payments made. Chances are the IRS system will show those payments and this will be a nonissue, but if not and the payments are questioned, that is easily explained about which service center the payments were mailed to, and at that point you would also be providing additional documentation to support those payments anyway.

[Catherine]

You have been given two alternatives for sending in returns and each has its own merits.  

 

If you decide to send all of them in together, I recommend "sandwiching" the returns with two pieces of printed paper - both sides printing facing OUT.  Text should be in the biggest darkest type that will fit the page, and be something like "Forms 1040 for FOUR years enclosed - 2010, 2011, 2012, 2013" - and make sure each individual return is binder-clipped together so pages cannot be mixed.

 

I have done that, and it seems to be the best way for them not merely to process the return on top and ignore all the others.

[kcjenkins]

I agree with Cat, if you do decide to combine them, even tho my choice would be separate mailings.  

[DANRVAN]

I agree with Ron; mail in separate envelopes.  Once I sent two years of amended returns for a new client in one envelope.   I thought I made it as clear as Catherine did with bold print, highlighter, sticky pads, etc. I thought that there was no way they could miss one, but they did. The one they lost was for 2010 with a $20,000+ refund.  They processed the 2011 which had a small balance due.

 

Took awhile to straighten that out.

[FreedomTaxed]

We never combine years when paper-filing. We put each in their own envelopes, and we space out the mailings by 1-2 weeks, as told to the client. This lets the IRS properly enter each filed year into their systems in order.