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taxmanrog
taxmanrog, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 407
Experience:  Licensed CPA, MA, MST with 29 year's experience. Teach Accounting and Tax courses at Masters level.
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Customer Question

Attachment: 2013-10-14_014428_irs_notice_deletes.pdf

Attachment: 2013-10-14_014533_deletes_corrected_1099_be_aerospace.pdf

I need a tax attorney or someone who is admitted to practice before the Tax Court to answer this.


 


I have received an "increase in tax notice" from IRS. In 2011, I received payment of $10,000 from a company. They sent me two checks that were not cashed, and eventually they canceled the checks and wired me the money. In Jan 2012, they sent me a 1099 that reported $30,000 (they forgot to subtract the canceled checks). I called them, they said they will send a corrected 1099 to IRS, so I reported $10K in my 2011 tax return. Apparently, IRS did not receive the corrected form, so now, they have found $20,000 underreporting, plus some missing dividends from investments, total of $21,136 correction, leading to a tax increase of $6453 plus $1291 tax understatement penalty.


 


The first letter from IRS was in June, I was out of the country, I missed the first window to send them corrected docs. The next letter was in September, now the only chance I have is to file a petition with the TAx COurt (with Dec 2, 2013 deadline) and I can also send them new docs to consider. But it says: "lf you want us to consider additional information, please email to us in the enclosed envelope immediately. Our consideration will not extend the December 2, 2013 deadline of petition with the U.S TaxCourt ."


 


I have contacted the company that issued the incorrect 1099, they have emailed me a copy of the corrected 1099 which shows the $10,000 amount on it. I have no objection to the investment dividends and interest that are reported, and I have no opposing documents at the moment. I can potentially collect those docs, but it is possible that IRS reported amounts are accurate. I have pdf copy of the IRS letter that I will share with you and the corrected 1099 form.


 


1. What should I do now? Send supporting docs and file a petition just in case?


2. How hard is it to file a petition? How much would a tax attorney charge to file a petition?


3. If they accept my corrected 1099, I would have understated my income by only $1136 (from the investment dividends). would they send a new letter with what I owe them from that part?


4. If it goes to tax court, I won't be able to show up because I will be out of the country for work for most of next year. Can I get a tax attorney to represent me? How much would they charge?

Submitted: 1 year ago.
Category: Tax
Expert:  taxmanrog replied 1 year ago.

Welcome to Just Answers! Thank you for giving me the opportunity to assist you! I will do my best to help!

 

I have dealt with this same situation before. Your best bet is to call the number on the first page of the Notice of Deficiency. Unfortunately, with the Government closed now, you can't get anyone to answer. When they finally do, call them and explain your situation. They will probably tell you to send them a letter explaining the situation again.

 

You could also write a letter explaining the situation, and fax it to the IRS at the number on your Notice of Deficiency. This would also get the ball rolling to resolve your situation.

 

Time is of the essence. The IRS will not extend the date for filing a Tax Court petition. You probably won't have to go to court, the IRS will fix this first, but it may take some time. I am afraid that you may not have enough before December 2, especially with the IRS shut down.

 

I would do either or both of the above steps first. Then, if you have not heard from them by the end of November, I would file a Tax Court Petition. These are pretty boilerplate, and can be easily filled out using Cut and Paste.

 

I have a couple at the office, and could upload one if you think you need it, but I would not be able to do that until I get to the office tomorrow afternoon.

 

Let me know what you think.

 

If I have answered your questions, please rate me highly. I would appreciate it!

 

Thanks, XXXXX XXXXX a great holiday weekend!

 

Roger

Customer: replied 1 year ago.
Relist: Incomplete answer.
Expert:  taxmanrog replied 1 year ago.

I am not sure what you thought was incomplete. The steps are all right there.

 

In answer to your question 1, here is what do you need to do:

 

First, you need to contact the IRS at the number on your Notice - use(NNN) NNN-NNNN You won't be able to contact them until the government starts back up, as the IRS, like the rest of the Federal government, is shut down. When you talk to them, tell them everything you have said here.

 

Next, write down what you have said here. Fax it to the IRS at(NNN) NNN-NNNN This will get someone working on it as soon as the IRS opens for business again.

 

As I said, it will take more than a few days to get this resolved. The IRS moves very slowly. So, if they have not sent you a letter indicating resolution by the end of November, then file a Tax Court petition. This is just a step to buy you more time. With the evidence you have, filing the petition should get someone at the IRS' chief counsel's office to dismiss the case and abate the tax, penalties and interest.

 

I have attached a Tax Court petition from my last client that was similar to your case. You can copy it almost word-for-word, just changing your personal information. I already changed the numbers to match your case.

 

Your second question - how hard is it to file a Tax Court Petition, and how much would a tax attorney charge?

 

The Petition is easy. I have attached a copy of one for you to use as a template. A tax attorney would charge you $1000 - $2500 to do this. You can easily do it yourself!

 

In answer to your Question #3, yes, once the 1099 question is resolved, they will recalculate your balance due based on the investment income and send you a new letter. Your tax should only be a couple hundred dollars, if that.

 

In answer to your Question #4, what if it goes to Tax Court? It won't go to Tax Court. The IRS does not like to lose in Tax Court. It costs them time, money and resources that it does not have. When they have a case that they can't win, as in your situation, they try to settle it. In most cases, it does not even go to court. Someone in Appeals looks at it prior to the Court looking at it. The people in Appeals are not the normal IRS agent. These people have intelligence, understand the tax laws, and have the power to make deals. So, once Appeals gets it, the matter will go away quickly.

 

I hope this has answered your question. I believe this time I did, question by question. I also attached your Petition, which should help!

 

graphic.graphic

 

Thanks again! Have a great weekend!

 

Roger

Customer: replied 1 year ago.

Hi,


Thanks for more details. This is helpful.


 


I am now writing a letter to IRS with this information and using your petition letter as a template.


 


So you are suggesting that I don't raise the issue of the minor corrections at all in the IRS letter- that I don't oppose the other minor deficiencies (amounting to a total of rougly $1000 from dividends and interest). Is that fine?


 


If I dont hear from them, I would send the petition (the same letter pretty much) to Tax Court. What is the deadline, should they receive it by the said deadline December 2nd? Should I just send that as well to be on the safe side?


 


What if IRS corrects but not in time, and at the same time Tax Court officers start a new process? Would they communicate with each other at that point? would I end up answering two authorities - or paying the corrected deficiency twice?


 


 

Expert:  taxmanrog replied 1 year ago.

Thanks for getting back! I will answer your questions one at a time.

 

First, your big issue is with the $20k of excess Nonemployee compensation from the incorrect Form 1099. Let the IRS worry about that, and after it is settled, they will recalculate the tax from the $1000 of dividends and capital gains.

 

You probably will not hear from the IRS before the DecemberXXXXXfiling deadline. Especially with the Federal shut-down. So I would have the petition ready to send. I would send it via Certified Mail, Return Receipt Requested. There is a fee of $60 that must accompany the petition, but it is worth paying.

 

There will be no overlap between the IRS' process and the US Tax Court. What will happen once you file the petition is that the office that was working on your examination will stop their work and collection efforts. The entire process will move to the IRS Appeals area before moving to the Tax Court. This is where it will be straightened out. In fact, when you file the petition, on page two you will note your allegations. When the Chief Counsel has to answer them, they will see that they have made an error, so it may not even get that far.

 

It will never get to trial, it will be settled in your favor long before that. I just had a case that we settled literally less than a week before the trial. The process to get to that point took almost two years! So don't wait for something to happen tomorrow! It will take a long time.

 

But as I said, you will prevail!

 

If you have any more questions, please ask away!

 

Again, thanks! Have a great week!

 

Roger

Customer: replied 1 year ago.

Hi Roger,

I have a few more questions. I prepped the letter below based on your template (FILE 1) and mailed to IRS. Faxes dont work due to shutdown.

I am also preparing the petition file. I couldnt quite figure out what part of FILE 1 to write in Q5 (5. Explain why you disagree with the IRS determination in this case (please list each point separately):) and what part to write in Q6 (6. State the facts upon which you rely (please list each point separately):. They seem to ask the same thing and require the second part of FILE1, but not the first part. Can you please review the letter below and let me know how to proceed?

Also a few quick questions:

The instructions on tax court page say: Dont include SSN on petition file, but your template had it. So, black out in main file and on notice?

Certified and FedEx are both recommended for delivery. which one is safer? Signature on delivery is needed, but shoutdown may continue.

Should I include my wife as an additional petitioner in the petition doc or not?

I chose NC (where my residence is) as location just in case it goes to court. Is that fine?

I checked small cases court. Less than 50K, right?

Attachment: 2013-10-15_221457_2011_tax_petition_deletes.pdf

Attachment: 2013-10-15_221540_petition_kit_deletes.pdf

Thank you very much.

FILE 1

The Petitioner hereby petitions for a redetermination of the deficiency set forth by the Commissioner of the Internal Revenue Service in his Notice of Deficiency with the following information

Notice date: September 3rd, 2013

Social Security Number:

AUR Control Number : XXXXXXXXX

And as the basis for his case allege as follows:

 

  1. Petitioner resides at The Petitioner’s telephone number is. The tax return for the period was electronically filed with the Internal Revenue Service.
  2. The notice of Deficiency (a copy of which is attached hereto and marked “Exhibit A” was mailed to Petitioners on September 3, 2013 and was issued by the office of the Internal Revenue Service at Philadelphia, PA.
  3. The deficiency as determined by the Commissioner is for income taxes for the calendar year 2011, in the amount of $6,453, all of which is in dispute.
  4. The determination of the tax set forth in the said Notice of Deficiency is based on the following errors:
    1. In determining the Self Employment income, the Commissioner erroneously increased the Taxpayer’s income by $20,000
    2. The effect of this erroneous increase in income is an increase in the Petitioners’ tax liability for the year 2011 by $5,918 plus an additional increase of $535 in Self Employment Tax, resulting in a total tax increase of $6,453. Additionally, $1,291 of IRC §6661 (tax understatement penalty) has been assessed, for a total balance due of $7,744.
  5. The facts upon which the Petitioner relies as the basis of his claim are as follows:
    1. In 2011, The Petitioner received a check from B.E.Aerospace (hereinafter BEA) for contract work performed.
    2. The Petitioner did not cash the first check. A second check was issued. The Petitioner did not cash that check either. Finally, both checks were canceled, and $10,000 was wired to the Petitioner.
    3. In February 2012 while preparing 2011 taxes , The Petitioner received an incorrect Form 1099 for the year 2011 showing $30,000 of nonemployee compensation. The Petitioner contacted BEA, who (supposedly) submitted a corrected form 1099 to the IRS.
    4. In September 2013, The Petitioner received the said notice from the IRS regarding this increase in tax. The Petitioner contacted BEA again and received a copy of the corrected Form 1099 (a copy of which is attached hereto and marked “Exhibit B”).

WHEREFORE, the Petitioners ask the Commissioner to reevaluate the case and determine that there are no deficiencies, or reduced deficiencies, due from the Petitioners for the year 2011.

 

Date: October 14, 2013 Signature:

 

 

 

Expert:  taxmanrog replied 1 year ago.
What you have listed as File 1 is the Tax Court Petition that you need to file. Your initial letter to the IRS should be something similar, but not as formal. I will draft one in a few minutes and attach it. The two pages that I attached before were the actual US Tax Court petition that you should file.

I always put the SSN on my USTC petitions. I know there is identity theft, but if I send it certified to the USTC, I know the people who have it have access to my info plus many others, so I am not at much risk.

As far as mailing it, both FedEx and the USPS work. I use the USPS because it is the carrier that is originally authorized for almost all IRS work. I send things Certified Mail, Return Receipt Requested. That way, I actually get an original green card back from the IRS, with its own postmark on it, and signed by the IRS, with the IRS stamp on it as well. That goes a long way to proving receipt! With FedEx, you have to log online, and print out your own tracking history, and your own proof of delivery. I prefer having one that the IRS actually signs and sends to me!

I will repost in about an hour with a sample letter for you.

Thanks!

Roger
Customer: replied 1 year ago.

I have already mailed the FILE 1 type of letter to IRS.

 

I will file the petition November 25th assuming I wont hear back from IRS on time.

thought I would file the petition_kit - fill in the form and submit instead of writing a separate letter.

Should I also attach the letter (FILE1)?

Should I also attach the corrected 1099? It says somewhere in the petition kit : "Please do not submit tax forms, receipts, or other types of evidence with this petition." How would they know the facts without the corrected 1099?

What about the additional petitioner (list my wife or not)?

Thank you!

Expert:  taxmanrog replied 1 year ago.
I have filed dozens of petitions for the USTC, and have never used their fill-in-the-blank forms. I always draft my own petition. I just feel that I am better able to explain when things are free flow, rather than boilerplate. The line you point to about not submitting tax forms is one reason. By using my own, I can attach any exhibits I want.

I would attach the corrected Form 1099. In the narrative where you say that they sent you a corrected Form, put "(See Copy at Exhibit A)" and then label the copy of the Form 1099 as Exhibit A.

As far as including your wife, that would depend on if you filed a joint return or not. If you did, then you have to include her on the petition, as the IRS finds you "joint & severally" liable for the tax, and anything that affects the return affects both of you. IF you filed as married, filing separate, then you do not include her.

I hope this helps! Let me know if you have any more questions. I am always happy to answer them!

Thanks again!

Roger
taxmanrog, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 407
Experience: Licensed CPA, MA, MST with 29 year's experience. Teach Accounting and Tax courses at Masters level.
taxmanrog and 4 other Tax Specialists are ready to help you
Customer: replied 1 year ago.

Hi Roger,


Quick question. Got this letter from IRS now. The deadline for petition is Dec 2nd. Should I file the petition or not?


 


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Expert:  taxmanrog replied 1 year ago.

Yes! Go file the tax court petition soon! Before December 1, I would say!

 

The 60 days that the IRS needs is beyond the last date for filing the petition. By filing it now, you can always get it dropped if the IRS changes their position, as they should.

 

They need additional time to arrive at the correct answer, but if they don't, you want to have that last chance for someone in Appeals to be able to correct the matter.

 

Thanks for getting back to me. If you have any more questions, please let me know.

 

Have a great weekend!

 

Roger

Customer: replied 10 months ago.

Hi Roger,


 


I need your expert advice for one more round of communication with the IRS. You know the history of this appeal to the tax court. Now I received the following letter from IRS. What exactly are they saying?


Does that mean that they havent received an updated 1099 from the company?


What should I do at this point?


Should I Find myself a tax attorney to represent me in the case? I am outside the country all of this year.


 


My petition and IRS response are attached.


Regards,

Attachment: 2014-02-01_194924_2011_tax_petition_deletes.doc

Attachment: 2014-02-01_195017_irs_letter_jan_2013.pdf


Expert:  taxmanrog replied 10 months ago.
Only the first page is loading. Can you paraphrase what they are saying? Or perhaps scan the pages separately?

It is a good thing that Appeals will look at it! They usually have some brains and can make things happen.

I was able to read the tax court petition. It looks good. That is why you are where you are now.

Roger
Customer: replied 10 months ago.

Here are the pages. Thank you.


Attachment: 2014-02-01_235742_irs_1.pdf

Attachment: 2014-02-01_235806_irs_2.pdf

Attachment: 2014-02-01_235828_irs_3.pdf

Attachment: 2014-02-01_235920_irs_a1.pdf

Attachment: 2014-02-01_235939_irs_a2.pdf

Expert:  taxmanrog replied 9 months ago.
OK, I was able to open this. I had to save it to a PDF, and when I opened it, the ID blocking was missing, so I can see who you are! I won't save it though.

What you have received is boilerplate response. The IRS is only saying that they do not have knowledge of what you were alleging. That means that they have not contacted B.E. Aerospace for any confirmation yet, and have not received or matched anything yet.

Someone from Appeals will contact you and will try to work things out with you. You will explain to him or her what happened, and they will investigate. It should be resolved in your favor.

Good luck! If you need anything, let me know!

Roger

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taxmanrog
taxmanrog
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Licensed CPA, MA, MST with 29 year's experience. Teach Accounting and Tax courses at Masters level.