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I just received a CP71C from the IRS, Notice Date Aug. 27th,

Amount Due by Sept. 11th...
I just received a CP71C from the IRS, Notice Date Aug. 27th, Amount Due by Sept. 11th for the 2007 and 2008 tax years.... i was a non-filer and failed to respond to IRS corresponence due to illness. The amounts due are huge (400k per year) because they are based on 1099B gross sales proceeds with no provision for cost basis.... in reality, i probably have little taxable income, if any, for both years. What is the best strategy to take to avoid collection action and to straighten things out???
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Answered in 23 minutes by:
8/20/2012
Angie
Angie, Tax Preparer
Category: Tax
Satisfied Customers: 226
Experience: Bookkeeping, Profit and Loss, Balance SheetsAll types of US Taxes, Tennessee taxes, Personal, business, payroll, sales tax etc.
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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.

Thanks!
Angie
Angie, Tax Preparer
Category: Tax
Satisfied Customers: 226
Experience: Bookkeeping, Profit and Loss, Balance SheetsAll types of US Taxes, Tennessee taxes, Personal, business, payroll, sales tax etc.
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Customer reply replied 5 years ago


The website you referred me to seems to allow for ordering a transcript of filed returns..... not an IRS generated printout of information reported to the IRS...pleade advise.

When you begin entering your information, you will have the option to choose "account transcript" or "return transcript" If you choose "account transcript" you will receive a transcript summarizing all information reported under your social security number by others. . If you cannot do this online, you can call 1-800- *829-1040 or use the number on the notice you received. Either way should end with the same result.

Thank you!

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Angie
Angie
Angie, Tax Preparer
Category: Tax
Satisfied Customers: 226
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Experience: Bookkeeping, Profit and Loss, Balance SheetsAll types of US Taxes, Tennessee taxes, Personal, business, payroll, sales tax etc.

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