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PDtax, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 4153
Experience:  35 years tax experience, including four years at a Big 4 firm.
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Customer Question

My 1040 tax returns were audited, resulting in a deficiency.

I filed a timely rebutted to the Revenue Agent's Report (RAR), and requested that my case go to appeals in NY. I live in NJ, but worked in NY.

In court, the agent produced my letter requesting an appeal, to both my attorney and myself, and proclaimed that I could not appeal in NY because I live in NJ.

I never received a response regarding my request for an appeal. Instead, I received a collection notice and a possible levy, if I did not pay the deficiency.

I then contacted the Taxpayer Advocate (TPA), and sent a copy of my request to appeal the RAR, along with all supporting documentation to refute the agent's findings. I also included amended returns for 2004 and 2005, and documentation for additional expenses that I was entitled to and did not claim. These additional expenses were given to the agent at the final appointment and were disallowed in the RAR without merit for 2004.

However, the exact identical expenses that were not claimed in 2003 that I received a "no change" for 2003, were allowed when I filed an amended 2003 return. The agent disallowed the identical expenses in 2004 that I filed as a protective claim, and never addressed the same expenses when I filed a protective claim for 2005, approximately one year after filing a protective claim for 2004.

The TPA later informed me in a letter, that my amended returns are disallowed and all issues were addressed during the examination, which is a bold faced lie!

I did plead guilty to a misdemeanor for filing a false tax return in 2004. I duplicated the exact same losses that I was entitled to claim in 2003 for my capital investment in two corporations with my step uncle.

The reason for duplicating the loss was to get my corporate returns audited for which my step uncle who was the president, underreported gross receipts and or did not file corporate returns. I was a silent partner and my step uncle claimed that we lost money building houses.

Were my civil rights violated based on a taxpayers rights to appeal? Can the IRS issue a collection notice demanding payment of a deficiency until after all of my appeal rights have been exhausted, and were vever afforded to me?

It is my understanding that the IRS cannot even send a collection notice until after a taxpayer has exercised his rights to an appeal.

The issue of my civil rights is perhaps my most viable option against my former employer, the IRS in a lawsuit, if my rights were violated.

It is probably not cost effective to hire a tax attorney for an audit reconsideration even if I should prevail, and I should for the most part.

Truthfully yours,

J.F. Lesser

P.S. If possible, can you answer if my attorney that represented me failed to protect my interests, when he to;d me in court, prior to the agent producing my letter requestimg an appeal of the RAR, that if I do not agree to the RAR, I am going to jail, and by agreeing to plead guilty to a misdemeanor, I would avoid jail. This, despite filing an earlier request to appeal the RAR. The case apparently was never transferred to appeals in NJ, nor was I ever notified of an appeal date.
Submitted: 4 years ago.
Category: Tax
Expert:  PDtax replied 4 years ago.

PDtax :

hi from just answer.

PDtax :

IRS only takes these extraordinary actions when they think the taxpayer is a tax cheat, which you admit to. They appear to have responded to your history by making your case difficult to process. Can you blame them?

PDtax :

I'm not taking their side, but you have no right to expect any favors from IRS. They seem to have used any technical issue they can to ram their position on you. Now, what can you do about it?

PDtax :

IRS can file a collection notice before you exhaust your appeal rights. They do it in SFR (substitute for return) cases, and after regular audits. It's a necessary step in the due process.

PDtax :

You have the right to go to Tax Court, and I suspect it's the only way you will be heard. Once IRS sees you are serious, and probably with another attorney to further show how serious, they will have to devote legal time to your case, and might be persuaded to save court time and settle.

PDtax :

Your claims about civil rights or about the quality of your legal representation are legal questions beyond what I can address for you.

PDtax :

I hope this response gives you cause about why your problem exists, and what you might have to do to fix it. If this answers your questions, please click Accept, and thanks from Just Answer.

JACUSTOMER-qer7jpz8- :

It makes no sense that the IRS can arbitrarily decide what I owe without providing evidence to me, or allowing me to provide clear evidence that the examiner is wrong.

JACUSTOMER-qer7jpz8- :

It is absurd that the IRS can arbitrarily decide what I owe and disallow properly allowed deductions. Sp, the IRS is also being a tax cheat!

JACUSTOMER-qer7jpz8- :

When I received the RAR, it clearly stated that I had a right to disagree with the RAR and submit my reasons for disagreeing by a certain date, which I did. I also exercised whatever rights were available in the pubs to appeal the collection process. I have been ignored and not given any concrete explanations for disallowing my claims per amended returns, nor was the documentation submitted given proper consideration. How can going to Tax Court be cost effective, even if I win? That is why I strongly believe that the only area that is worthy of pursuing is if my civil rights were violated. Remember, the examiner said to my attorney and myself, that I could not appeal in NY because I live in NJ, when I disagreed with the RAR and requested that my case go to appeals in NY.

PDtax :

Let me tell you a story about an attorney i represented. He had a history of not paying in his payroll taxes, including one set of years I was able to successfully settle via Offer in Compromise. Well, he kept it up, and I suggested he change corporate form to cut his tax bill. He did it, but did not do it cleanly, doing things like using the old checking account until the new checks arrived, depositing receivables from the old corporation in the new one, etc. IRS was annoyed, and assessed an alter ego assessment, claiming that all the transfers meant he was playing games, and that they could collect all the taxes from him, the old corp or the new one.

PDtax :

When i tried to clean this up and make a deal, IRS wouldn't make it easy at all. They made me file a freedom of information act request to get the very documents they used to support their claim.

PDtax :

The lesson is that once IRS is annoyed or worse, they have no burden to asist, only to follow the law. You already disclosed they consider you a tax cheat, yet you do not appreciate that they will not assist you. Or your representative.

PDtax :

I would use the FOIA to get the IRS case, and get ready for Tax Court. If IRS is likely to lose, they may settle in advance of trial. However, they can make you go that far, and pay the tax attorney or CPA to represent you.

PDtax :

Thank you from Just Answer, and I hope I was able to answer your question. If so, please click Accept, and thank you.

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