1040X after IRS sent second letter

[Pacun]

Tax payer never filed taxes and had $27,000 on 1099misc for 2002, 2003, 2004 and 2005. In 2004, 1099misc had $27,000 in both non-employee compensation and fish income. IRS prepared returns for 2003 and 2004 and TP owed more than 40K. Tax payer has been paying $300 for about 2 years.

TP filed 2007 and his W-2 income was about $26,000 (no other income). His son was born on December 25, 2007 and his return showed $3,150 on dependent and child care expenses. He also claimed his girl friend who lived with him the whole 2007 and didn't work since she was pregnant most of the year. He filed as HH and itemized deductions. Both itemized deductions and dependent and child care expenses were invented by the tax preparer whose name and signature are invisible on the return. Tax Preparer even provided a name and EIN for child care center. I wonder, "who in the right mind will claim dependent and child credit for a child who only lived 6 days in 2007).

I prepared his 2008 claiming girl friend, who lived with him all year and TP provided whole support. He also claimed his son and filed as HH with standard deduction and of course NO dependent and child care expenses. All 3 share an apartment and no one else lives there.

After tax season, I requested 1099s and W-2s from the IRS for 2002 trough 2006. Based on this information, we filed all those years. We sent a letter for 2004 when we filed stating that 1099misc had a typo and that he never received any fishing income. IRS seems to have accepted our filing for 2004 and his liability was greatly reduced for that year.

In October, TP received a letter from IRS regarding his 2007 taxes. Since he was receiving a lot of correspondence from the IRS for the other years he filed, he never brought it to me. At the beginning of December he received a second letter from the IRS stating that he failed to answer within the 30 days allowed. TP's next step would be to file a court petition by February. He brought those letters to me last week. I am hoping IRS will accept a 1040X for 2007 filing as HH using the standard deduction and no dependent and child care expenses. I know it is late but I know for sure this person will never have money to open a court case.

Has any one had any luck with a 1040X after tax has been assessed?

I have told him that this is my last attempt to help him since there is no much I can do. Remember he failed to file his taxes when he was making money. Should I try to help him more?

[jainen]

>>this person will never have money to open a court case<<

Don't worry. Tax Court ALWAYS kicks it back to IRS Appeals first, and Appeals will accept the 1040X without any fuss. But the ONLY way to protect your client's rights is to file the Tax Court application within 90 days of the letter. The IRS will not act on anything before then, even if they promise to. (Okay, there IS a subjective procedure available but it isn't worth the effort for a non-filer because you are going to get another chance to submit the 1040X anyway. So just do it the normal, reliable way.)