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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 7349
Experience:  15years with H & R Block. Divisional leader, Instructor
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My 2009 & 2010 tax return was audited for cash and non-cash

Customer Question

My 2009 & 2010 tax return was audited for cash and non-cash contributions. We furnished a statement from our church and the Salvation Army. With our church contribution statement we supported the donations with our bank statements. Because the contributions were cash (as the result of identity theft) we furnished the bank statements to show the cash withdrawals used to make the donations. None of the cash donations reported were more than $250 which did not require us to furnish our canceled checks or credit card statements. There was a weekly breakdown of the contributions and none exceeded $250.
For our non-cash we furnished a Salvation Army receipt of donation, a compiled list of donated items, the value assigned, and a Salvation Army value guide which gave the appraisal value of the donated items.
The auditor did not accept any of our substantiating documents. We appealed it to the auditors supervisor who said he agreed with the original auditors assessment without providing us an explanation. This was in January. We have just received a Notice of Deficiency from the Commissioner on July 20th. It is now our understanding that we could have petitioned for an appeals hearing on our audit. We were not provided any information from the examination office to our rights.
It is not our desire at this point to file a petition with US Tax Court. We want to know is there a process to insure we have exhausted all of our rights prior to appealing this decision by the original examiner and his supervisor.
Submitted: 2 years ago.
Category: Tax
Expert:  Robin D. replied 2 years ago.

Robin D :

Hello and thank you for using Just Answer,
If you have tried to work with the auditor and did not get them to see your side and you tried to have the manager see your deductions and they said no, you will now need to file a formal appeal. “Protest” is the official term for formally appealing an IRS determination. You must protest within 30 days of the date on the appeal notice letter. You have already "informally" appealed to the manager so this is your option. You can fd this on your own or you can have a tax professional represent you or just help you file the paper work.

  • If you owe between $2,500 and $25,000: Either write a protest letter and write at the top “Small Case Request” or use IRS Form 12203. .
  • If you owe more than $25,000: Write a protest letter. The IRS doesn’t have a form for contesting tax debts over this amount.

    Here is a link to the form for small claims
    http://www.irs.gov/pub/irs-pdf/f12203.pdf
  • Customer :

    Here is the problem. It is past the 30 day mark. We immediately replied to the supervisor and the supervisor told us they were agreeing with the examiner. We did not know nor were we furnished any information by the Examination Office telling us what our appeal rights were. In fact, the examiner only audited us for our 2009 return, and once that was denied, they sent us information about our 2011 return. We furnished the same examiner with information for 2011 and we are waiting to hear from him. But on the Notice of Deficiency, the examiner included tax year 2010 which he did not audit us for nor give us a date for an examination hearing for us to substantiate our 2010 deductions. I am sure that will not fly with the tax courts but we want to insure that all of our appeal rights leading up to tax court have been granted to us. Please advise.

    Robin D :

    No, your appeals rights have not been exhausted yet as long as you have not missed the date on the letter. The fact that they did an (what appears to be desk audit) assessment on the 2010 is still open for discussion. If you were not audited for 2010 then the assessment has been mad ebut you are alloowed to show your proof for the 2010 year.
    I have to say that in light of your information I would advise you get professional help in dealing with the IRS.
    Here is Publication 5 which you should have been advised in the notice of all your rights (it is sent with the notice)
    http://www.irs.gov/pub/irs-pdf/p5.pdf
    It is a short 2 pages but will give you your basic info on what steps you have to take.
    When you receive a Formal Notice of Deficiency then you go to Tax Court. If you have been dealing with the IRS on your own, now is the time to get a professional involved (this means a CPA or an Enrolled Agent). You can find help from an Enrolled Agent at many chain tax offices (HR Block, Jackson Hewit...) and will likely pay less than you would with a CPA but if you know a CPA then call them first.
    At this point you can also contact the Tax Payer Advocate. 1-877-777-4778 I do not usually say contact the advocate but in your case it may be needed. Your rights are important and the IRS must abide by those. The advocate would be able to advise faster if your rights have been violated.

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