Corrupt? Incompentent? Or both?

[Abby Normal]

Widow in my extended family, received IRS matching notice on a 1040 for a K1 supposedly showing 9,020 of dividends. The original 1065 (family LLC) was paper prepared and filed, with cents (?! ) on the amounts. The K1 showed 90.20 of dividends, but was apparently keypunched as 9,020 to the member's 1040 account. No other members have received matching notices.

CPA advised widow to file an amended 1065, even though the original 1065 was correct. And the bill to date is about $500 for just talking about this. Who knows how much the unnecessary 1065 would cost. And at this point, it's getting close to being more expensive to pay this CPA, than to pay the IRS.

I advised to send a copy of the K1 showing the 90.20 in response to the IRS notice, explaining that it was entered wrong by the IRS.

All of this could have been avoided by efiling that 1065.

[Lee B]

Years ago I had a client who was an appliance repairman. He received a 1099 Misc from Whirlpool for warranty work in the amount of $5,000.

He received a computerized matching notice from the IRS saying the amount should be $50,000.

To my surprise,I just sent in a simple letter explaining the correct amount was $5,000 which the IRS accepted.

[DANRVAN]

13 hours ago, Abby Normal said:

And the bill to date is about $500 for just talking about this.

"Corrupt? Incompentent? Or both?"  Maybe both, be curious to see how he justifies $500 on his invoice, if  he prepared the K-1 he should take responsibility for it.

 

13 hours ago, Abby Normal said:

I advised to send a copy of the K1 showing the 90.20 in response to the IRS notice, explaining that it was entered wrong by the IRS.

All of this could have been avoided by efiling that 1065.

I agree with all of that.  Also a call to TPP hotline might even solve it.

[Randall]

Years ago, my own client sent me a 1099 for $900 with the cents showing.  They used QB with a very small font.  I received a letter from IRS showing it was $90,000.  I almost fainted.  I sent a letter with a copy of the 1099 enlarged so the decimal showed up better.  IRS accepted my explanation.  Whew!

[Jim Oh Bkkr]

1 hour ago, Randall said:

I almost fainted.

These notices always seem (seemed) to land in the TP's mailbox on Friday - so they have to sweat it all weekend. 

My story is no different, six frantic messages on my home phone from client Friday evening.  Then he was beating on the "locked" door of the office @ 6:00am Saturday morning.  State Farm 1099 for 1K, IRS said 100K, the tax bill for this small garage was almost 3 times the highest Gross Income he had ever reported. (BTW, this TP died from a heart attack in his late 40's.  I know this didn't cause it, but I still remember the stress it caused.)

30 years later, this still p*sses me off to think about it.  And this organization now has a $700,000 (that we know about) stockpile of ammunition? ? ?

[gfizer]

I had a similar situation a few years ago with a client who received a notice saying she had received 16300 in royalties that weren't reported on her tax return.  The 1099MISC showed $163.00.  I simply wrote a letter and attached a copy of the 1099MISC and the IRS corrected it.

[Abby Normal]

Update: All of the members of the LLC refuse to sign the amended 1065, but this is putting a strain on relationships with the widow (who married into the family, later in life). Fortunately, most of the estate is settled, except for a stein collection, that supposedly contains some valuable items, but no one really knows the best way to sell or split them.

[Sara EA]

If no one wants them, at least they can be put to good use!  I had an estate that contained a bunch of "old liquor bottles" that ended up selling for over $22k.