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socrateaser, Lawyer
Category: Tax
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Experience:  Retired (mostly)
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A series of personal problems led to my not keeping up with

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A series of personal problems led to my not keeping up with certain matters in my life--one of them, filling returns for 06,07,08.   I always filed an extension and fully intended to file the returns. In fact, I thought I was due refunds on some of them. I'm not completely sure but now think I may owe in one year.

Therapy has helped and I went to an accounting firm who said it was good that I came to them and that I hadn't received notice of deficiency. They said they'd contact the IRS to assure that didn't happen and would prepare the returns.   Sometime after the meeting, and before any work was done on the returns, I received a notice of deficiency.   The person I met with at the firm had been hard to reach--not returning phone calls and emails until several attempts.   When I notified him of the deficiency notice, he--eventually--wrote back that he couldn't comment on it as he hadn't seen it. Moreover, I received in the mail from the IRS a power of attorney that had been filed by the firm ===but it was different from what I signed. To my surprise, the accountant changed the power of attorney to make it broader and the IRS returned it to me as incomplete. However, the firm had already received info from the IRS --presumably based on the 'falsified'? power of attorney.   Naturally, I decided to leave that firm.

I found a woman who seemed good at the first meeting--she has an office in her house. I gave her lots of information and the requested power of attorney. Afterward, before any work began, she called and was very unprofessional --sort of hysterical. Later she apologized saying there had been a death in the family--but her behavior continued so I tried to find another firm. (My therapist helped me.)

Unbelieveably, this firm at first said the returns are so simple I should do them myself using Turbotax. That was one principal. I gave --per their request--one-half of the requested fee and signed a client letter and power of attorney.
The 'woman' principal spoke with the IRS --I specifically said I didn't want an extension (as was being suggested) as I wanted to complete this matter. Work began on my returns. I was then asked to meet with the named 'partner' in the firm
who said he required more money for the project or would stop work. A new client letter was 'demanded'--which I reluctantly signed--as I'm in no shape to negotiate. In checking since, it seems the fee is 'outrageous' given the work. And, of course, if I ask for a meeting or email them, they're charging me (for what I believe was originally a 'project basis'.)

I don't know how the IRS would view it if I change yet another time--and the deadline is near. (The named partner told me he asked the IRS for an extension but the 'woman' said he misunderstood and that wasn't so. The woman spoke to the IRS--apparently to the person where the returns will be sent--which now makes me very uncomfortable.)   I get conflicting info from parties in the firm--and have even received an in-house email (inadvertantly, I presume?) from support staff discussing how their billing software isn't working and hasn't been working.   

(The counselor joined on a telephone call with me with the firm as was concerned about several things--thus, it's not just my take on it.)

I don't think I can trust this disorganized? firm to represent me to the IRS. I intended no harm/wrong in not filing--it's due to personal matters. I want so much to get this and other matters in my life in order--now that I have help via counseling--and need some expert advice on the next step.

Since I've already paid for the returns, could I send them to the IRS myself--maybe with an explanation similar to above--and then wait for a response to see if I need further representation? (The returns are not in my possession yet--we're missing two numbers needed to complete them.)

Should someone else prepare the returns--using Turbotax and I'll submit those?   Do I want any affiliation with this firm via the IRS?

How best to handle this, please?

Thank you.

P.S. I'm new to your site and just received a message that my question has been opened to all tax experts. I'm not sure what that means--thought I had selected one person--but naturally do not want this too be a generally published matter in any form. I've tried to not identify the accountants involved. Thanks.

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Submitted: 6 years ago.
Category: Tax
Expert:  socrateaser replied 6 years ago.

I'm sorry for your troubles, but it is not surprising. Reality is that resolving IRS issues is in many ways quite deterministic. Behind "the curtain," the government has very strict rules and only where the law is ambiguous do things get sufficiently murky to make for an argument.

The result of all of this is that 99% of all income tax issues have an extremely narrow range of solutions, and your representative must try to make things seem a lot more mysterious in order to make the high cost of representation seem to be worth the price of admission.

In your circumstance, when you don't file a return, the IRS will do nothing, perhaps for years, and then it will send out a substituted tax return and assess a tax liability, which then requires the taxpayer to file a return rebutting the IRS's "guesstimate" of the tax liability.

So, the answer to the first question of whether or not you can file your own returns using a commercial software package, is "yes" -- unless you have some unusually complex tax issues, such as may be involved with allocation of expenses or depreciation associated with a business enterprise.

Assuming that you can file your own return, then once you do, the IRS will want you to pay the taxes, plus interest compounded daily from the date when the original tax return was due, based upon the short-term fed rate applicable to each quarter year during which the tax was due, plus a 5% penalty for each month that the tax return was late, up to a maximum of 25% per return.

Conversely, if you are owed a refund, then the government would owe you interest at the same rate (but without the penalty), and you would owe a penalty of $100 for any return where you were late in filing (which can be waived by the IRS phone rep).

The sum of all of these calcuations represents your tax obligation. If you cannot pay, then you can request an installment plan, or you can make an offer in compromise, for approximately what the IRS would be likely to be able to collect during the next 60 months from you.

And, if you can manage to squeeze by until all three tax returns are at least three years beyong their filing date, plus another 240 days from the date when the tax was actually assessed (typically, the date that you file your returns), then you can wipe out all of the tax liability by filing for bankruptcy.

If you don't pay, and you can't make any payment arrangements, then the government will garnish your wages according to the IRS rules for garnishment, which basically will leave you with about 15% of your after-tax disposible income, until the debt is paid. And, if you have any assets, such as a home with equity, then the IRS can levy/seize those assets and sell them to satisfy your tax obligation.

That is the whole deal. In my view, the only time that you actually need a professional to represent you is where there is something over which an argument can be made, or where you simply don't understand what's going on, and you just want someone to deal with it for you -- because the stress is too great, or of course, where the government intends to levy your assets or investigate you criminally.

The IRS very rarely conducts criminal investigations, because throwing taxpayers in jail costs the government more money than the taxes to be collected, and unless the taxpayer is working, there's no way to collect or obtain future taxes.

In sum, from what you've described, you need to prepare your tax returns, file them and then figure out if you can negotiate a payment plan that will permit you to have a life, going forward. And, you may want to have someone else prepare them, just because you appear to be stressed by the whole affair. As for whom to use, in my view, an IRS Enrolled Agent or CPA is the minimum required. You do not need a tax attorney (yet), because they are generally lousy accountants, and their use is mostly where there is an arguable dispute to be made.

Hope this helps.

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Customer: replied 6 years ago.
Hi,please see my follow-up question/s. Thank you.
Expert:  socrateaser replied 6 years ago.
You will have to direct me to the question, because it does not appear in your question list. Perhaps you used a different anonymous userid account.

You may want to modify the question by putting my userid on the title line, e.g.: "To socrateaser."