Hi, thanks for using Just Answer. If you have questions about the answer I give, please feel free to ask for clarification.
After reading your question, I understand that you have not filed a tax return
for the tax years 2007 or 2008. If that is correct, then the advise given to you by the tax attorney and the Enrolled Agent is solid advice.
My suggestion would be to gather all of your tax information for both years, including the cost basis for the gross proceeds listed on the 1099-B you received. Once, you have your information, make a call to the IRS using the number listed on the notice you received. Explain to them your situation of being ill, and ask for thirty days to file the returns that are missing. (In my experience, they will generally give you thirty days, if you ask.)
If you are missing tax documents for either or both years, you may request from the IRS a transcript of what has been reported by others as income
to you. This can be requested by phone or online at this website: http://www.irs.gov/individuals/article/0,,id=232168,00.html
The process can take up to two weeks, so it is advisable that you do this quickly.
Once you have all of the information, file your returns. If you do not have the cost basis for the investment income reported on the 1099-B, you will need to contact your broker or investment company and have them send you this information. This information will be entered on the schedule D
of your tax return.
The transcript you receive will look kind of like a jumbled mess. Sometimes they are hard to decipher, but any tax preparer
should have ample experience with these forms
and will be able to help you out.
Be aware that when you call the IRS the hold time can be lengthy. Call when you have plenty of time and use a speaker phone so that you aren't tied to the phone during the hold process.
Unfortunately, if you were entitled to a refund for either of the two years in question, you will not receive it. The IRS rules
only allow for refunds for a three year period. After that point any refund you would have received becomes the property
of the Treasury.
In a recent case, I had a client in a similar situation,except he had filed his tax returns
, he just failed to enter the cost basis. He used an online tax program that did not explain properly how to complete the schedule D. Like you, the IRS sent him a letter stating he owed in excess of $400,000. To rectify his situation, the only requirement form the IRS was to complete and submit the schedule D. We did not have to amend his already filed return, he was required to submit information from his investment company along with a letter explaining the omission of cost basis on the original return.
I hope this helps with your situation.