IRS Representation

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    Eric Green

    This is a forum dedicated to IRS Representation.

    Diana Sheltra


    Thank you for setting up this forum. It will be very helpful.


    Lisel Sutter

    Not sure if this is the appropriate place to post this one or not. Please redirect me if not.

    Client under audit is Sole Prop, Garment Industry, Clothing design small lots of denim related clothing products. Sole Prop shows low net income on return,approx $25k net, out of gross income of $275k. Client also has W2 income working in his Father’s business of approx $27k. Wife is homemaker.

    A few potential issues in my opinion might be the following:

    1) 1099’s were issued to several contractors over a 3-5 yr period, a few of which have come back er the years with bad SS#’s. The Garment industry in LA should explain some of that. My concern would be that this may alsobe an employee reclassification audit.

    2) Sole Proprietor/individual under audit, also purchases home in Palos Verdes in year now being audited. The home is now worth 1.2 million, was purchased for $775k several years prior. The Client under audit has his father on the loan paperwork because he assisted him in obtaining the home, client would never have qualified. FYI, side note – client has massive credit card debt due to business expenses, and history of loans that continue. Lifestyle audit?

    This started as a F2F audit in Long Beach, but because I am in San Diego and not LA, I requested a transfer to San Marcos office. The auditor manager agreed to a correspondence audit with them instead. We complied by sending all that was requested. Priority Mail Audit package was signed for as received.
    Schedule C Audit is focus. In response, We submitted a 1200+ page package via correspondence audit to assigned auditor in March, but still nothing from the auditor. I have called multiple times requesting status.

    The audit itself began in late November 2018, was halted due to government shutdown, and then resumed late January 2019, at which time auditor gave us 20+ days only after we had received IAR. I called fo request more time, auditor never responded. Submitted package early March when all docs and records were assembled. No response still. Shall I hold and wait, or call the auditor manager? Is this a usual practice? Client is getting slightly concerned. Recommendations?

    Thank you!

    Lisel Sutter

    Well, my question was answered.First we had the government shutdown, and then apparently the auditor I was working with was transferred. I think this case was in limbo because it originally was not supposed to be a correspondence audit. The new auditor reached out to me last week and shared that she would be the one on the case. I have never had an audit begin, and then completely stop for 6 months. Imagine what the taxpayer was thinking all of this time. Anyway, problem solved, thought I would share now in case anyone else finds themselves in that position.

    Eric Green

    Thank you, Lisel!


    ADVICE Please:

    I have a new client that received a collection notice based on a 2017 Form 1099-C. Taxpayer was clearly insolvent at the time.Can I deal collections directly or do I need to file an amended return with a form 982.

    Eric Green

    Charles, the 982 has to be filed but if you look at the instructions I am sure it has to be with an “original signed return”. You can try an amended return and see if they accept it, but if not then I would file a Doubt as to Liability Offer and submit the amended return with the 982 and the back-up that proves he or she was insolvent.


    Hello All:

    I am a new member, and I need advice on how to proceed on a new client who is a non-filter since 2013. I contacted the IRS and California FTB and asked for an extension. The IRS gives him until 10/24 to file all his tax returns. The FTB gives him until 10/11 to file. My client told me that he could pay all his back tax, interest, and penalty.

    Here are the notices:

    1) This new client received an IRS notice CP503 for the tax year 2014. The IRS assesses his tax due amount is $70K.

    2) He also received another IRS notice CP22A and a California FTB 4601B Code Number 47 Demand for Tax Return for the tax year 2016. The IRS is asking him to pay $280K in tax for 2016. My client believes he owes probably half of the assessed amount.

    3) I found out from the IRS that they were reviewing his 2013 tax. He has not received an audit notice by the IRS yet.

    My question is which year should I file for him first?

    What else I need to consider in this situation?

    Thank you in advance for your help!

    Eric Green

    Belinda, I would first and foremost get the returns all prepared so you can see what the damage is from a liability perspective. It seems the IRS is currently in first position with a 2014 tax assessment of $70,000, but was that from an Substitute for Return or did the client file it?

    Prepare all the returns, including the ones for any year with an SFR. If the client can indeed full pay everything then I would file them each with payment attached. Any interest and penalties that show up should just be paid as well, and he is done.

    If he in the end cannot pay then this gets interesting, as there might be a strategy to:
    1. Pay the IRS 2014 liability
    2. File all the CT returns and set up an IA with them
    3. File the IRS returns and get the IRS behind CA so the IRS will allow a full CA payment as an expense

    Keep me posted as you progress through this, but the critical thing now is the 13-18 return prep.

    Good luck, and make sure you take a good retainer for this!



    Hi Eric,

    Thank you very much for your reply.

    Actually, after reviewing my note, the IRS did an SFR for 2013, 2014, and 2016. I did not get any IRS notice from my client for 2013; I asked him about it and still waiting for his response.

    If he, in the end, cannot pay then should I file his 2013 or 2014 first? (The IRS audit exam unit was looking at his 2013 return.)

    Or, it does not matter of which year I should file first, but the key is to file 2013 to 2018 before the deadlines.

    Thanks in advance for your advice! I asked for $1,000 retainer, but if I have known he owes $280K, I would have asked for more.

    Amy Brosnan


    In one of your classes at NATP you stated that you never actually go to offices for field and office exams. I have two cases each have a one issue exam with the same 10 year RA. He is insisting on a meeting for both cases. I have already sent him the paperwork after a reschedule due to weather and then his brother dying. He gave me two dates and reluctantly gave a third and acted like he was doing me a favor. How would you handle the waste of time going to the appointment? It could easily be done over the phone. We have worked with that office many times; however, not him specifically.

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