90 day letter and Tax Court

[Margaret CPA in OH]

Client received a 90 day letter notice dated Oct. 4 and let me know in mid-November after trying to resolve himself.  I got Taxpayer Advocate involved but they won't respond until Jan. 18 with final determination in March.

Meanwhile, what exactly, is 90 days?  Business days or calendar days?  What about holidays when no mail was possible? I've found the form for simplified procedure as the amount is $1600.  Is it too late to mail this?  Ideas?

The holidays and lack of quick response from IRS have wreaked havoc on this situation. I have placed at least 12 calls to the listed number and received not a single return call from the examiner, only letters.

[Lynn EA USTCP in Louisiana]

On a NOD, the 90-days is exactly that - 90 calendar days - which start the date after the date on the letter.  The NOD letter should state the due date for filing a Tax Court petition, but be cautioned to calculate it yourself as if the actual 90th day falls after the stated date on the notice then your actual 90th day rules.  According to my calculations the 90th day will be 1/10/2017 - the due date for the taxpayer to mail a petition to Tax Court.  But please, calculate the 90 days yourself - don't take my word for it !!!

IMO, the taxpayer should go ahead and file the Tax Court petition ASAP, along with the $60 filing fee, and ask that the case be sent to the Appeals office at your nearest IRS office.  If the $ is under $50,000 it could be filed as a 'small tax case' which has more relaxed rules than regular cases. 

Only an attorney or a Tax Court qualified non-attorney may prepare and file the petition on behalf of the taxpayer.  There are many Tax Court qualified non-attorneys around the country who would be more than willing to assist with preparation and filing the petition for what I understand is a modest fee.  Names that come to mind are Sherrill Trovato, EA in California, Kevin Huston, EA in North Carolina, Tom Gorczynski, EA in Maryland, David Fogel, EA, Frank Degen, EA in New York, Richard Reedman, EA in North Carolina. 

Hope this helps,

Lynn

[jklcpa]

If the notice was dated 10/4/16, wouldn't the 90th day be 1/2/17 and you are already beyond the deadline?  

[DANRVAN]

1 hour ago, Margaret CPA in OH said:

Meanwhile, what exactly, is 90 days?  .

90 days is 90 days including weekends and Holidays, but I believe the 90 days cannot end on a weekend or Holiday.  The final date is usually on the notice.

The notice was dated Oct. 4? By my math 90 days would = 27 days in Oct;  30 days in Nov;  31 days in Dec and 2 days in Jan.  January 2nd was a Holiday so January 3rd was the  due date.

[Margaret CPA in OH]

Thanks, Lynn and Judy.  The due date stated is January 2 but that was a legal holiday. Today is Jan. 4th but I think the client wants to go ahead with it.  The Taxpayer Advocate recommended to do that, too.  She just happened to call this morning.  If it gets rejected, so be it.  It's been a mess since the beginning and with the holidays and my dive trip in November, along with the horrible lack of response from IRS to repeated calls, well, so be it.

The big thing after this, if it is denied then IRS needs to decide whether to believe their own prescribed document (Form 8332) or the court document which Reg. Sec. 1.152-4(e)(1)(ii)(5) says they may not do.  I really don't need this....

[DANRVAN]

I don't think the IRS will budge on the deadline since it is statutory.  I would not rely on the advice of the Taxpayer Advocate in regards to filing the petition after the due date. I am not saying its not worth a try but I don't believe it will go through. 

Lynn mentioned that only an attorney or a Tax Court qualified non-attorney may prepare and file the petition on behalf of the taxpayer. However, the petition does not need to be signed by anyone but the taxpayer (enter that door at your own risk) and you can represent your client before the appeals officer.

You mentioned a form 8332 involved, any other details you can share with us?

 

[Abby Normal]

Just because the 90 days for tax court has expired, doesn't mean you can't file an amended return or ask the IRS to make changes.

[Margaret CPA in OH]

DANRVAN, please see my entry on Dec. 2, Dependent Exemption Denied (sorry I don't know how to put in the link). 

Abby, I'm not sure how an amended return would be helpful or even possible given the circumstances.  I am only hoping the advocate will agree with the client following Reg. Sec. 1.152-4(e)(1)(ii)(5) which states a court document does not dictate dependency exemption, only Form 8332 or equivalent qualifies.  My client has this signed by custodial parent for even years although court document states odd years. I still cannot imagine or even believe that IRS doesn't accept their own document.  Guess they can but am hoping the TA takes the taxpayer's side.

We shall see what happens...

[DANRVAN]

15 minutes ago, Abby Normal said:

Just because the 90 days for tax court has expired, doesn't mean you can't file an amended return or ask the IRS to make changes.

Agree.  You can still submit information to the IRS and they will consider it.  But you do not have the option to appeal.

[Margaret CPA in OH]

We have already submitted documentation to IRS and it has been denied based on the court document not Form 8332.  The problem is, as mentioned, IRS regs say 8332 is necessary, not court document.  Also, IRS accepted 8332 for even years for 2006, 2008, 2010, and 2012.  If they now deny for 2014, do we amend 2013 and 2015 and send court document not 8332?  And if they then accept this exemption for the odd years, do they recoup funds from mother?  Doubt it!

[DANRVAN]

Not sure what the issue is.  So ex wife is custodial parent and signed 8332 for year 2014 which was timely filed by your client?

 

 

 

[Margaret CPA in OH]

Parents never married.  Original court order gave client (non-custodial parent) right to claim child born in 2003 as dependent in odd numbered years.  In 2004, mother didn't claim child as it wouldn't help her or for some reason and allowed client to claim her.  Client claimed in 2005, odd year.  In 2006, mother offered to let client claim in even years so completed 8332 writing each even numbered year to relinquish right to claim.  Client claimed in 2006, 2008, 2010, 2012 and 2014.  Client was audited for 2014.

Originally client and wife since 2004 were denied exemptions for their sons born in 2007 and 2010.  Examiner requested support docs (school records, ssn cards, etc.) for all children.  Sons were allowed, daughter was not despite signed 8332 for 2014.  Return was timely filed (had to mail as e-file was refused, probably because mother claimed child which led to audit) and included Form 8332 which was sent again. Mother and client have been less than friendly for the last few years so she may have decided to 'stick it to him.'

[DANRVAN]

So sounds like mother filed, claimed daughter and triggered audit. Client has 8332 which would give him exemption, unless 8332 was revoked.  In that case mother would have to attached a revoked 8332 to her return. 

The revocation would have to be made before 12/31/13. She is also required to keep proof of delivery to noncustodial parent or proof that reasonable attempt was made to deliver. 

Without knowing what communications you have had, I would write a letter to the IRS addressing the above issues and stress that your client has met all the requirements for claiming his daughter per Reg. Sec. 1.152-4(b)(3)(I), in absence of a timely revoked 8332 by the custodial parent per Reg. Sec. 1.152-4(e)(3)(i)-(iii).  Hopefully the TA will pick up on this as well, or maybe it needs to be brought to her attention.

You mentioned in your other thread form 12203 has been filed. I don't know if it will be considered since the notice of statutory deficiency was already sent out at that point.

Hope this all work out, but ultimately client is responsible for taking it on himself and waiting until he got over his head.

 

[Margaret CPA in OH]

Thanks, DANRVAN, noncustodial parent did not receive notice of revocation at any time. I have written to IRS and to Taxpayer Advocate about client meeting IRS reg requirement.  First notice to examiner did not cite this reg, just provided 8332.  Examiner still disallowed exemption hence 12203.  With no response from 12203, contacted Taxpayer Advocate.

You are correct that the client is responsible, penny wise, etc.  He understands that now and yet may lose this 2014 exemption. We are still left with whether to amend 2013 and 2015 if IRS stands on court document instead of their own required Form 8332 (or the like) per their own regulations.  And we don't know how to file 2016 as 8332 relinquishes mother's claim but IRS didn't accept it for 2104. 

The TA promises to get back to us by mid-March but we still may not know IRS decision. I'm going diving April 6-15.  Guess an extension is already in the cards!

[DANRVAN]

Why would you amend 2013 and 2015? Not following you on that part.

In regards to 2016, I would file and claim it since client is entitled to it. The sooner the better to get the process started and get the issue before an appeals officer if needed.

Maybe you will end up with a better agent to work with and won't have to go that far.

Maybe ex-girl friend will not even claim for 2016.

Maybe client learned his lesson and will allow you to handle it in a timely matter.

Maybe you will get a favorable determination for 2016 before IRS closes the case for 2014.

Good luck, Dan

[Margaret CPA in OH]

As I mentioned, if IRS claims client is required to follow the court order (claim child in odd years) instead of IRS Form 8332, it seems reasonable to amend 2013 (still open) and 2015 when client did NOT claim child per IRS Form 8332. 

The problem with claiming the child for 2016 is that IRS has refused to acknowledge their own signed Form 8332 whereby custodial parent relinquished claiming the child.  Recall that this 2014 audit denied client's claim for exemption. As client has rental properties and K-1 coming from another entity, it will not be possible to file quickly.

Due to uneasy relations between client and ex, it may not be possible to discern her plans.  It seems to me a definitive resolution from IRS must be made before filing 2016.  And IF IRS decides to go with court document (odd years), I think it entirely appropriate to amend 2013 and 2015 and attach IRS determination to ignore it's own required document.

We shall see what happens in March with advocate.  Oh, I tried to get to an appeals officer but was denied.  I tried to get to the examiner but was denied direct contact or return call.  I tried to contact examiner's supervisor but was denied direct contact or return call.  I finally sent in 12203 as last ditch effort but client then decided to try tax court although probably a day late.  I don't know his decision as to mailing the tax court form or signing the waiver and making a payment.  Guess I will find out eventually!

Thanks to all who chimed in here.  This is the first time I've ever had a client with issues like this even after 25 years+ of practice.  Never to late to learn!

[DANRVAN]

The problem was the agent did not applying the tax laws properly and the taxpayer did not use the proper channels to resolve it.  I have dealt in situations where two divorced taxpayers try to claim the dependent. I have been told and come to believe that the agent often will take the side of the mother. I have also found it is a waste of time to make phone calls in these matters.  Your client took it in his own hands so you did not have the opportunity to make written responses in a timely manner.

The fact that the client blotched 2014 by not going through the proper channels will have no bearing on a favorable determination for 2016. I believe form 12203 needed to be filed before the notice of deficiency was sent out on October 4th, but you should get a written notice saying whether it was accepted or not.  The time to file form 12203 is before the notice of deficiency (90 day letter) is sent out.

If the tax court petition had been filed on time, the case would have gone before an appeals officer in an attempt to resolve it before going to court.  I recently resolved a client's case at that level where his ex had also claimed the dependents.

There is no basis for amending 2013 and 2015 as I understand they are not covered by the 8332. The fact that  an agent did not properly apply tax law for 2014 does not mean the IRS will follow that position in future years.

It looks like your client might be out $4,900 for 2014, (lost refund of $3,300 and balance due of $1,600). I don't know how the taxpayer advocate can help if client did not act in a timely manner.

If it's worth that amount for 2016, your client should go ahead and take the exemption and go through the proper channels to get a proper determination for that year. You do not need a "final determination' for 2014 to file for 2016. Just take a fresh shot at it.

Please keep us posted on this, but it sounds to me like the client missed his opportunity for an appeal by filing 12203 late and then missed the tax court petition deadline. It will be interesting to hear what the TA has to say, but I don't think she can help if statutory deadlines were missed.

[Margaret CPA in OH]

Thanks again for weighing in on this.  I will certainly take your recommendation under advisement.  We shall see what the final determination is for 2014 and whether the TA has any input and/or advice at all.