Notice of Deficiency

[MargaretMort]

A former client, haven't done his taxes since 2000 because they owed no money, called because he had received a notice of deficiency and the IRS said he owes over $4000. I picked up the paperwork yesterday and have gone over the info the IRS provided. He doesn't owe any money and I can't quite understand how this error was made but that is beside the point. I have printed out a POA for him to sign so I can talk to the IRS. However, the POA says that as an unenrolled Return Preparer I have to have prepared the tax return under examination. There was no tax return prepared. I am wondering if the IRS will even talk to me.

I think this came about because of the stimulus payments, apparently someone filled out something though I have no idea what. This gentleman is absolutely no good with paperwork or figures. His late wife handled all that and, after she passed away 3 yrs ago he started "cleaning out"! I have several questions I need to ask him before I get in touch with the IRS but there is no point in my asking if I can't do anything to help.

I appreciate your thoughts and advice. In my 23 yrs. doing taxes this is the first time I can remember this happening. MM

[jainen]

>>I can't do anything to help<<

You are an experienced tax professional, but are simply not eligible to practice before the IRS in a situation like this. The best you can do is help him find someone qualified, perhaps with a fee-sharing arrangement. Go ahead and ask your questions, then call around.

If he still has most of his ninety days left, you might first try to contact the IRS with your client on an extension phone. The chance of success is better than zero but still not very good. Your client has already ignored many IRS contacts.

The normal procedure at this point is to file a petition with Tax Court, which will be referred back to IRS Appeals for settlement. They aren't going to spend much time with someone who is "absolutely no good with paperwork or figures" and doesn't even have someone who can speak on his behalf.

[JohnH]

I agree with jainen, but with a slight twist. If you contact the IRS with the client on the phone, they will almost always discuss any issue with you in depth.

My preferred method of contacting IRS is to verify with the client a time when they will be available & then call the IRS & put the phone on speaker while I do something else. When IRS comes on the line I explain that I need to put them on hold while I conference the client in. I then call the client, conference them into the call, and off we go. It's easy, quick, and no paperwork involved. Oftentimes the problem is solved, but at the least it gives us an immediate opportunity to gain additional time to work on the problem. I've never had but one agent to object to my using this approach - I wouldn't have wanted to deal with an agent with that type of attitude anyhow, so I just told them to forget it and I called right back & got another one with some common sense.

[Tax Prep by Deb]

I agree with John.

I've had many such experiences, and although the POA doesn't get you in the door with IRS the phone call always does and most agents I have dealt with have put a note on the case regarding future correspondences so that we don't have to go through the same process. I have found in just about every case that the agency (federal or state) likes working with a professional instead of the individual. I have had great success in dealing with this type of situation.

Hope everything works out well for all parties concerned!

Deb!

[jainen]

>>I agree with John<<

So do I; it was my advice to do first. I rate it unlikely in this particular case, however, because the Notice of Deficiency means a final determination has already been made. It is possible to get that set aside, but the IRS prefers to follow the normal path to Appeals. They are in a stronger position if they do nothing until the court orders the review.

But understand that doing nothing is not the same as saying nothing. Oh, they'll talk to you all right--ask you to fax stuff and file a return and everything. But meanwhile your 90 days may run out and that's almost impossible to fix.

If IRS won't pull the 90-day letter after your first contact, file the court petition and wait for Appeals to call. I recommend you refer this to an Enrolled Agent, but you will probably win anyway (assuming you can support your client's story).

[BulldogTom]

You don't say how old the client is. I am assuming he is of advanced age?

If so, you may want to explore this option instead. Prepare a return with a zero balance due. Send it in, then fax in the POA. That will get you legal on the POA. Then call the IRS first as mentioned above with the client on the line. Document the call. Then make the next call to the Taxpayer Advocate. Tell them your client is very old and does not take very good care of his financial dealings anymore. Emphasize that the client does not have a filing requirement and that you have sent in a zero balance due return. Let them know it will be a devastating expense if the client has to file the tax court petition. Send them a copy of the Zero Balance return and see if they will take care of it.

Be ready to file the petition if they won't help you.

How many days are left on the ninety day letter?

Tom

Lodi, CA

[MargaretMort]

My thanks for all the help. Yes, the gentleman is 76 and has had no taxable income for years.

My decision was to return the paperwork and suggest a CPA firm for him to call. I warned him that it will cost him but nowhere near the $4000+ the IRS is claiming. Normally I would have been more involved but my husband is ill and I didn't feel I had the time to do justice to his problem.

Thanks again. MM