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jgordosea, Enrolled Agent
Category: Tax
Satisfied Customers: 3161
Experience:  I've prepared all types of taxes since 1987.
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My client was asked to sign a Form 4549. Can the client

Customer Question

My client was asked to sign a Form 4549. Can the client later submit evidence to lower the taxes by filing a 1120X or request for refund?
Submitted: 2 years ago.
Category: Tax
Expert:  jgordosea replied 2 years ago.
If this form is being presented as part of an audit it is best to present the additional evidence prior to signing or to continue discussion of the issues by addressing the agent's manager.
Form 4549 proposes a determination that you owe more taxes. This is the auditor's proposal and may be revised if you present further evidence to the auditor or represent the evidence to their manager (especially if the auditor does not seem to be incorporating all of the evidence).
If you do not have the evidence ready to present then not signing will likely just lead to a Notice of Deficiency based on the auditor's proposal as seen on the 4549.
Of course appeal is possible later; but now is the time to ensure the record has all of the evidence and issues raised; as you will not often be able to have an appeals officer consider anything that was not presented to the auditor.
See, for example, the article at
"Under the new AJAC Project, any investigatory or exploratory efforts should be performed by Examinations before the case is assigned to the Appeals officer. As a matter of policy, IRS Appeals officers “will not raise new issues”[4] and, generally, “will not return cases to Examination for further development.”[5]"
Please ask if you need more information or clarification to understand the need to have all the issues raised during examination and not later in appeals.
Thank you.
Customer: replied 2 years ago.
Thanks for your prompt response. This is the case where deposits shown in bank statement do not agree with the 1099 received. The client feels that they can submit evidence to lower the tax in the future, maybe in 3 months or so pending verification of deposits that is shown in bank statements vs. 1099. (bank shows more money). IRS wanted to close the case because it has taken too long for the taxpayer to come up with proof. We thought maybe its better to settle now and then amend the tax returns later to reduce the tax liability when there is sufficient evidence. What do you think? Because the tax liability is over $100,000 maybe taxpayer can ask for installment agreement for now.
Expert:  jgordosea replied 2 years ago.
Hello again,
I still maintain that you want to raise the issue as to the explanation of the amounts deposited that are not properly counted as income (transfers, loans, etc.) now rather than later.
Once the Notice of Deficiency is filed you will have to get audit reconsideration. That is, it will be at the option of the IRS to allow or not allow changes in the future on an amended return.
That is, you should not expect to be able to make revisions later.
If there are issues with getting the evidence now, that should be addressed with the auditor (or their manager). If there was failure to provide information due to less than reasonable care by the taxpayer the IRS will want to close the case.
Installment agreement is certainly possible but the main problem is getting the evidence to the auditor or at the least getting the issue raised and documentation in the record as to the timing that the evidence will be available and why (also perhaps the lack of fault of the taxpayer in providing the evidence).
Hope this helps to clarify now and not later is when to get the issues in the record.
Thank you.