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In 2009 I was audited and I prepared ALL of the documents for…

In 2009 I was audited...
In 2009 I was audited and I prepared ALL of the documents for the IRS. My accountant set up a meeting with the agent and spoke to him once on the phone and once when he came to his office to review my files. I spent 45 minutes in his associated office providing him with ALL the required information they were seeking. The associate spent maybe 2 hours reviewing and making sure my numbers added up. My accountant has been my accountant and a family friend for 25 years. The audit went great. The agent even made positive notes on my account about the detailed information I supplied. My accountant sent me a bill for $7500. I called him up immediately and asked him if he was crazy. His response was "This is what I usually charge my clients" We will talk about it. That day never came but I still kept getting those invoices. Mean while the associate and I were working on my wives internet clothing business tax returns. Again I did most of the work. We came up with a number for the botXXXXX XXXXXne for the year and he told me I would have the return by Friday 4/12. On that Wednesday the associate emailed me saying," the firm has a new policy in place that all clients with past due balances must go on an extension." That Friday I was suppose to bring the return to our banker because we were closing on a business loan. When I got this email I lost my cool and sent an email to both of them insisting that the companies return gets filed or we were going to sue them. The exchange of emails was ridiculous and he refused to take my call. Is there any law that allows the accountant to do that? I have since found a new accountant and had to file extensions for my wife and I who file separately and her business ( they did that filing).
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4/28/2013
Richard
Richard, Tax Attorney
Category: Tax
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Experience: 29 years of experience as a tax, real estate, and business attorney.
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Welcome! My goal is to do my very best to understand your situation and to provide a full and complete answer for you.'

Hi there. In a situation like this, you will want to: i) file an ethics complaint with the AICPA; and ii) to the extent their actions caused you any damages file suit against the CPA and the firm for malpractice. This is action that is a discredit to the profession and to the extent you can substantiate damages, you would be able to recover.
Richard
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Customer reply replied 5 years ago

Hi,


Thank you for the good advice. I want to further explain my situation. I am married but have been filing separate from my wife. We are jointly responsible for $18,900 of Federal taxes from 2007 and 2009. We were both served with notices to place a Fed Tax Lien on us on April 1, 2013. She also has Fed taxes due of $9100 for 2012 which brings her over the $25,000 threshold to make an easy installment agreement. I want to use some of our personal credit line tomorrow to pay $4,000 to bring her under the $25K and have her call tomorrow and try to make a deal to pay $200 per month. I think timing is important here. If thy agree with her offer..do I still have to include all her information (income, expenses, liabilities, on the 433-A Form if I mail it after she makes the agreement but before the 31st of the month. Yesterday I called the IRS, within the 30 day limit and we both signed a Request for a Collection Due Process or Equivalent Hearing. On that form we checked off #6 -Filed Notice of Federal Tax Lien. #7- checked, #8 -Installment Agreement. I requested a Withdrawal of the Lien ( I am a Licensed Series 7 Financial Adviser and might lose my license, if not get terminated from my company, thus losing my income if a Fed Tax Lien was issued. My total tax due for 2007, 2009, 2011 and 2012 is roughly $140,000. I reviewed all our data with the agent. The agent was able to get his manager to approve the Hearing. I was asked to fill out Form 433-A. I was told that the Lien would be on hold and I would be notified after I sent in the 433-A form. He said the process could take 30-90 days. He said it wouldn't be necessary for my wife to call or do anything, but I think I might be better served if I have her call and we pay the $4,000. I had been previously paying $500 per month for our 2007,2009 tax bill.. My tax bill for 2011 was $117,000 because of the situation I explained before about the forgivable loan and receiving the 1099-MISC in 2011. I filed an exension last October and now it has progressed as explained. For 2012 I also paid $5000 in estimated Fed taxes out of the $10,451 that was due. My wife is a Teacher with income from teaching in excess of $100,000 gross. She also is the owner of a Sub Chapter S Corp that had to file an extension for 2012 because of the situation I explained to you before. Last year she had a $7,000 loss. We think she showed a profit of around $25,000 but can't confirm that yet. She takes no salary and has temp employees that she issues 1099's to. My question is...Do we fill out two separate 433-A forms or do we try and combine all the information on one? We also have large personal individual debt ..Bank loans and CC debt ( north of $60K each) plus an SBA Business credit card with a $50,000 line, which $46K is used. . We both signed personally for that 2 years ago and have been using that card to fund her business which netted over $200k in sales in $2012. I also have an Open Am X card ($35k line) under her business name/my name which she buys inventory for. Part of our debt ($60K each) is joint personal debt( bank loan of $13.5K.). Her gross sales for her internet company so far for 2013 is around $130K. All this is done part time. Her inventory is around $70,000. Cash flow is tight now. I engaged another account but haven't finished sending him all the paper work for all entities. I have put together all our binding agreements..ie. Rental of home, car leases, etc as well as ALL our CC statements to send to the ACS We have very little in the way of investments. Under $15K in her name plus her 403B ($35k with loans of $13K) and a Roth IRA under $1500 for me. Any advice..mostly need it on whether I need to combine everything on the one 433-A.


Thanks

Hi there. Since you have joint tax liability as well as separate tax liability, it's not a black and white situation. But, what you do have going for you are two things: i) you're dealing with the IRS at a time when they are more willing than ever to work things out with taxpayers because they are not only underfunded, but also because there are so many U.S. taxpayers struggling as a result of the financial problems of the U.S.; and ii) you have income and the IRS understands that if they take steps to put that income in jeopardy, then they are not likely to get paid anything or much less. The best alternative is to work with you in either an installment arrangement or offer in compromise to allow you to not only to settle your past obligations but to also do whatever they can to prevent your income from being in jeopardy. Thus, if you explain the situation to them regarding the tax lien, it is likely that they will forebear from filing the lien if you comply with whatever agreement you reach with them. Before you fill out either the 433-A jointly or separately...and they are likely to require a 433-B for your wife...wait until you've explained the entire situation to them and take direction from them on how to present your information.
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Customer reply replied 5 years ago

I did explain to them the situation. I was asked by one of the first agents I spoke to if my wife had any other sources of income and I told them about her other business and gave them the Fed tax ID and the name. The last agent I spoke to never brought it up in the almost two hours we were on the phone. So they must have that on file. They are working with me and said they would hold off on filing the lien. He said after it goes to the ACS unit for review of all my documentation and meeting should there be one, it would come to the IRS to work out a deal. The most important question I have, one which you might not know the correct/legal strategy to take is...Should we pay off the $4,000 NOW to get her under the $25,000 or do I just wait and see what plays out and use the $4,000 available credit when I know exactly what they are willing to settle for? I guess I should call them back tomorrow and further explain the situation.

I would wait if it were me. You can always pay them the $4,000, but once you've paid them that, you've lost the leverage with regard to that money.
Richard
Richard, Tax Attorney
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Customer reply replied 5 years ago

Hi,


I hope to make a deal with the IRS over the next few months. They told me it takes that long for the ACS to review, write me, see me, make a decision, write me and then send off info to the IRS. My question is1) will they ask for current (90) days from now updates information 2) If not and we are able to make a deal ( installment agreement or a Offer and Comp) and stay current on our taxes, if in the future our income goes up can they come back and ask from more money. I know that the installment deal you have to remain current or they cancel it. But on an Offer and Comp can they come back if your income increases.


 


Also my mother-in-law has been living with us since November. I know that she needs to be with us for a year to have her as a tax deduction. Will the ACS consider her as a deduction during this process. We pay 90% of her expenses and she pays us nothing.


 


We are also in the process of looking for a new place to live. We rent our house and the owner is giving the house to his daughter as a wedding gift. We are trying to buy a house but this process has put things on hold.

Good morning. When the delay is due to their process, the IRS does not typically require you to continually update your information. And, the IRS, even if they can, rarely changes either an Installment Agreement or OIC if your income increases. The Installment Agreement because they are already collecting in full; and the OIC because it represents a moment in time and an effort to get you back on your feet. And, they are collecting their normal income taxes on your increased income. Yes, the IRS will take into account your dependents, including MIL. Under the IRS guidelines, they allow certain living expenses, including rent and/or mortgage.
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Customer reply replied 5 years ago

Hi,


 


It's been over a month and I just received a letter setting up a July 9th phone meeting with the Appeals division. Our request for a hearing was approved and no tax lien will be put on us until July 9th if we are able to work out an agreement. A few things have changed. I want to give you a short review. We owe about $18,000 in back taxes (2007 & 2009 ) that were part of an installment agreement which I had that is now null and void because of my individual unpaid tax liability from 2011. It's about a $120,000 problem. I continue to pay the $500 per month from the installment agreement. We are both current on 2013 taxes.


 


My wife is trying to buy a house. She is on the hook for the $18,000 plus she just filed her Corporate tax return (Sub S) and she hasn't filed her personal return yet. She owes about $20,000 to Fed and $4,000 to the State. She has a preapproval letter for a $450,000 mortgage but she needs to file her personal 2012 return. Her best friend for 35 years past away about 7 months ago at the age of 41 and her husband is going in with her on the house and putting up $100,000 for most of the down payment. Her portion of the down payment is $10,000 plus the $25,000 closing cost. Her friend will be on the deed. They need to give a $25,000 deposit which will come from him. She also needs to be careful that they don't try and put a lien on that $25,000 that will be in escrow. Timing is the issue. The bank will run another credit check in the next 2-4 weeks. She hasn't filed her return yet but will need to do so before the bank goes forward with her on the commitment letter. It needs to be clean. Which means she needs to take $25,000 of her $55,000 and pay off her current (2012) Federal and State tax liability now. The Letter from the Appeals dept is asking for an updated 433-A form from both of us. Her last 433-A form from 30 days ago showed a value of her stock portfolio of $12,000 ( $9,000 came from her grandmother's estate about a year ago). It's now worth $55,000 with $21,000 in cash as I type. I had her in a very good Option investment. Her total liability is $18,000 (which was from our joint returns) plus $20,000 (2012 due). I think I would be in a better situation when I talk to the agent on July 9th if she is totally off the hook and they won't be able to use any of her assets or salary ($125,000) per year as a teacher and her online clothing business that she made $25,000 last year as a basis to pay back what we owe which is mostly all my responsibility actually but she is on the hook.


 


How do you suggest we move forward? Is it possible to call back the IRS and make a separate deal for her to maybe pay $9,000 (1/2 of the $18,000) now and get her off the hook for the balance, making it only my responsibility?


 


I know it's complicated but any good suggestions would help. I have showed them that I am insolvent.


Thanks.

Hi there. Is the friend going to be on the $450,000 mortgage as well?
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Customer reply replied 5 years ago

He is prepared to be on if we need him to be on. My wife will be making the payments and taking the deduction.

Thanks. The good thing is that the IRS will move slow enough so that you can get this bank loan funded before the IRS will every get your updated 433-A reviewed. What you might want to do before you update the 433-A is to put what's left of the $55,000 in a different form than a liquid asset...such as advancing it to her friend via a loan so that the asset shows up on the updated 433-A as a note receivable rather than a liquid asset. She wants to file her 2012 tax return and pay her tax. Then, just about the time the 433-A is due, call the IRS and ask for an extension because you're still compiling information and want to make sure it's complete. The IRS will gladly issue that...as long as you are communicating with them, they have no issue with granting more time to allow you to prepare an accurate 433-A. Then, she can get the loan closed and then you can work with the IRS on your tax issue. :)
Richard
Richard, Tax Attorney
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Experience: 29 years of experience as a tax, real estate, and business attorney.
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