Appeals Process

[peggysioux5]

I have a new client that had an issue with 2013 tax return that former CPA was handling. 2013 federal tax return was filed as MFS in a community property state with form 8958 submitted. Previous tax preparer input 50% of spouse’s income on line 21. IRS recalculated federal tax liability in 2015. Tax preparer submitted correspondence to IRS in 2016 along with 8958 and IRS adjusted tax liability but one issue still was not resolved – IRS deemed line 21 income as self employment income. Taxpayer asked me to look into in 2019 and I submitted new info to IRS for which IRS has adjusted taxpayers account. However, IRS is disallowing refund due to time limits.

The taxpayer contacted previous tax preparer many times regarding issue and tax preparer would advise client that “it just takes time with IRS” but according to IRS nothing was submitted to IRS after 2016. With the above information, would other tax preparers consider lack of handling by previous tax preparer grounds for appeal? 

[ILLMAS]

Does your client have any copies of correspondence between the former preparer and the IRS?

[peggysioux5]

No; taxpayer is requesting that I attempt to obtain correspondence from former preparer.  However, in speaking with IRS, no correspondence is noted in taxpayer's account from June 2016 until April 2019 when I got involved.  I think what transpired is previous tax preparer started the process in 2015/2016 and IRS made some (but not all) changes and tax preparer did not follow up after 2016.  Taxpayer made many calls to previous tax preparer  asking for information on the issue but nothing in writing so I would think that might be an issue in the appeal as well. 

[ILLMAS]

I would not take on the duty of being superwoman/man and let them obtain all the necessary information unless you have a retainer and you can deduct your fees as you go along.  

[Max W]

The only way I think this could be resolved is through the tax court.   Sections 1311, -1314 of the tax code allows for mitigation of closed returns under certain circumstances.  However, it is pretty murky and the courts rarely grant refunds.      

If there are good records of  emails, phone calls and notes to back it up, the previous accountant could be sued, but without this documentation it is his word against the new guy's.  The IRS records showing no contact after 2016, would have to be obtained through FOIA and the IRS could tag their feet to the point where a subpeona would have to be issued.   

Here are two cases related to mitigation of closed returns.

https://www.parkertaxpublishing.com/public/mitigation-rules-closed-tax-year.html

https://federaltaxprocedure.blogspot.com/2014/04/the-mitigation-provisions-of-code.html

 

[peggysioux5]

Max, thank you for the references; very helpful.  After reading the references, I am hoping you can answer an additional question for me - Section 1314(e) states "this part shall not apply to any tax imposed by subtitle C (Section 3101 and following relating to employment tax)."  The tax that was erroneously charged was self-employment of almost $5000.  Is there another tax code that pertains to employment taxes?