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Jax Tax
Jax Tax, Tax Attorney
Category: Tax
Satisfied Customers: 1376
Experience:  JD, LL.M in Business and Taxation, IRS Enrolled Agent. Expert in Business and Tax Transactions
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I had a friend prepare my taxes in 2009 and he completely

Customer Question

I had a "friend" prepare my taxes in 2009 and he completely botched it. He used Turbotax but named me as the preparer. Last week the IRS sent me a letter telling me that I owe them $5,860 for that year because he entered some information incorrectly (the amount of tax withheld and my taxable wages by thousands of dollars). I'm not sure what to do now. I don't have the money. Should I go to a tax preparer and have someone review the return to make sure I owe this much money or should I just bite the bullet and set up a payment plan? I already have a payment plan set up for last years taxes which I am up to date on but I don't think that I can afford two payment plans.
Submitted: 3 years ago.
Category: Tax
Expert:  Jax Tax replied 3 years ago.

Jax Tax : Welcome to JA. I am here to assit you. You have a few options.
Customer :

ok

Jax Tax :

If you add the $5800 to the amount you owe, what would the total be?

Jax Tax :

Did you pay your "friend" to do the return?

Customer :

about $10,000 for 2009 and 2010. Yes I paid him $50.

Jax Tax :

First. If you do not like this person, you can turn them into the director of professional responsibility for preparing a return for a fee and not indicating himself as the preparer and not completing the return correctly.

Jax Tax :

You are saying him put more for federal tax withholding than you actually had?

Customer :

Yes. He indicated that the tax withheld was $4,157 when it was only $457 and also that my taxable wages were $39,500 when they were actually $51,399.

Jax Tax :

What was the source of the taxable wages being increased. Did he not have all of your income docs?

Customer :

I could turn him in but I don't have a receipt to prove that I paid him. I do have an email though. What would that do for me if I turned him in.

Customer :

He must have just typed the wrong numbers in for some reason. I only had one W-2 and only one source of income.

Jax Tax :

Do you have the w-2 with you? What does line 1 say? Do you have a copy of the return?

Customer :

I have a copy of the return but not my W-2. I never got the W-2 back from him, which was a mistake on my part

Customer :

But I'm pretty sure that it says $51,399 because what he wrote, $39,500 sounds way too low. I know I made more than that.

Jax Tax :

What lines on page 1 of the return are filled out?

Customer :

1, 6a, 7 and 22

Customer :

36 and 37

Customer :

are you still there?

Jax Tax :

Sorry. Another expert had me locked out.

Jax Tax :

What do lines 38-43 have on them. The exact amount?

Customer :

38 - $38,565

Customer :

40a 14,904

Customer :

41 - 23,661

Customer :

42 - 3,650

Customer :

43 - 20,011

Jax Tax :

Um. Did you pay health insurance or contribute to an IRA/401k in 2009?

Customer :

I did pay health insurance. No IRA

Jax Tax :

How much per month?

Jax Tax :

Do you own your home/pay a mortgage?

Customer :

im not sure the exact amount right now. it comes out of my paycheck. i think about $150 a month.

Customer :

no, i rent

Jax Tax :

What lines on the Sch A are filled out. This would be the source of line 40a $14904

Customer :

5 a - $7000, 8 - $125, 9 - $7125 17 - $700, 18 - $4,100 19 - 4800 21 - $3,500 22 - 250 24 - 3750 26 - 771 27 - 2979 29 - 14904

Jax Tax :

Are you paying a State installment agreement? Did you have $7000 in state taxes withheld from your check?

Jax Tax :

Can you call IRS at XXX XXX XXXX and ask for a income transcript for 2009? Have a fax number ready or get the income and tax withheld information verbally and log back on?

Jax Tax :

Get all income reported to you, the amount, and the tax withheld.

Customer :

I am not paying a state installment agreement for 2009, but i did pay one for 2008 during 2009. I had less than $7000 in state taxes withheld from my check. This is because I am a server and only get paid $4 and hour and first my health insurance comes out of my check, whatever is left over goes to taxes but I always end up owing at the end of the year.

Customer :

Ok. I can do that. But I have to go to work now. Is it possible to resume this on Monday?

Jax Tax :

Anytime this weekend. I get notified on my phone.

Jax Tax :

I just want to ensure I have all the info so I can help.

Customer :

Alright. So, when I log in it will notify you to log in as well, right? I want to get you and not someone else. I will get the info tomorrow and try to log back in on Sunday.

Customer :

Thank you so much for your help so far.

Jax Tax : You got it. To answer your question, you will have to include the new debt in the current payment. You can request a penalty abatement form 843, but do not know for what quite yet. Based on what you have given me so far, I am not sure.
Jax Tax :

Good day Sir. Were you able to obtain a copy of your w2?

Customer :

I got the information from the IRS that you suggested I get, the income and tax withheld for 2009.

Jax Tax :

Welcome back.

Jax Tax :

What is the amount shown as withheld/

Customer :

Income withheld was $457 and wages were $51,399. Like I said before, the guy who did my taxes entered the wrong information for these, that's why I owe more money.

Jax Tax :

Ok. So you have two options.

Customer :

Withheld: $457, Wages:$51,399

Customer :

sorry, that was an accident

Customer :

ok what are they?

Customer :

you still there?

Jax Tax :

First, you need to sign the CP 2000 and return it to the IRS so that you can set up a new payment to cover both debts.

Jax Tax :

You should include with the singed CP 2000 a form 9465 to request the payment plan. Make sure the total debt will be paid in 60 months. I would divide the total by 55 to ensure the interest is included.

Jax Tax :

So you options.

Jax Tax :

1. File a form 843 to request the "accuracy related penalty" be abated based on the preparer's mistake. This may be difficult since the preparer did not sign the return.

Jax Tax :

2. File suit against the preparer for all associate penalty and interest. A demand letter may do it if you state you intent to disclose the fact that they did not sign the return as is required by federal law.

Jax Tax :

At the end of the day, you need to change your withholding so this does not happen in the future. Once the total debt exceeds $25K it gets much more serious. You so not want this to happen as one step is the filing of tax liens. This will effect you ability to get loans and your credit score.

Jax Tax :

As far as the 843 request goes, you could take the blame on your self stating clerical errors.

Customer :

Ok. So if I report it as the preparer's mistake or my mistake then I may be able to get some of the penalties taken off?

Customer :

but I will still owe about 5,860 still?

Jax Tax :

Yes, you will owe the money, and yes, you can have the penalties reduced. The best option is to pay the balance in full since the IRS does charge about 5% interest rate compounding daily. A simple interest loan would be much better.

Jax Tax :

The 843 form can be used to request the penalty abatement.

Jax Tax :

The only other option if you do not want to pay the tax is to complete IRS form 433F

Jax Tax :

The IRS will use this form to make a determination as to your financial ability to pay. They can accept a $0 monthly payment if your financial circumstances support it.

Jax Tax :

You first want to change your withholdings since they are used on the 433F as an expense only if they are being withheld, which ultimately helps you not owe in the future and lower the current payment amount.

Customer :

But I only get paid $4 an hour, the money from my paycheck goes directly to health insurance and the rest to taxes. I never receive a paycheck, only tips. So, the withholding is as high as it can be.

Jax Tax :

OK. So the $51K from last year was a different job?

Jax Tax :

The 433F may help you out.

Customer :

no, its the same one, but that's mostly tips that i receive nightly, not from a check

Customer :

I only have 5 days for me to set up something with the IRS. Should I first do the 843 form, or should I request an extension?

Jax Tax :

I see. You are probably better off just sending the 9465. At $50K a year, the payment will probably be less.

Jax Tax :

Send the CP 2000 and 9465 first. Once the payment is set up, then send the 843.

Customer :

ok

Customer :

Is it possible for me to refile my 2009 tax return accurately to insure that I received all the proper deductions and that I actually owe $5860 more?

Jax Tax :

You can, but if the only change is the withholding, then it will not make any difference. The IRS has already corrected that issue. Use form 1040X to amend the return.

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