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Ignored Examination Letter

khorshed
Level 4

My client a ride sharing driver, filed his 2019 1040 on time in 2020. However, it seems he stretched the expenses a little more than he should & the IRS sent an examination letter, which he completely ignored.

He came to me for the first time in Dec 2023 asking to do his income tax for 2019, 2020, 2021 & 2022 and (of course) he didn't mention anything about what I indicated above.

I prepared all 4 years & told him to mail in 2019 income tax. Less than 3 weeks later he received a letter from the IRS demanding about $40k inclusive of $10K of penalties & interest. Of course he accused me of wrong doing. I told him there's noway that the IRS will respond that fast to a mailed-in return, and I asked him to create an online account with IRS so I can see what exactly happened. After i investigated the account I realized the facts I mentioned above. When I explained to him these fact the truth start to come out.

The IRS eliminated ALL the expenses he indicated on his return & taxed him on his total income without any expenses.

Though I am considering not to return his phone calls, I am also considering helping him out, earning extra income & gaining some experience. My question is how can I approach this with the IRS? I thought about amending 2019 but of course he doesn't have a copy of 2019.

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1 Best Answer

Accepted Solutions
BobKamman
Level 15

Learn about audit reconsideration. 

https://www.irs.gov/pub/irs-pdf/p3598.pdf

Now that IRS knows where to find him, it's likely that the collection notices will continue, and they will eventually ripen into eligibility for a Collection Due Process hearing.  

https://www.irs.gov/pub/irs-pdf/p1660.pdf 

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16 Comments 16
BobKamman
Level 15

Learn about audit reconsideration. 

https://www.irs.gov/pub/irs-pdf/p3598.pdf

Now that IRS knows where to find him, it's likely that the collection notices will continue, and they will eventually ripen into eligibility for a Collection Due Process hearing.  

https://www.irs.gov/pub/irs-pdf/p1660.pdf 

khorshed
Level 4

Thank you

Taxprohere
Level 7

Your timeline isn't making sense: He filed his 2019 tax return timely in 2020, but then came to you in 2023 to file 2019 (again?) and the other years.  How did he explain away that he blamed you for his audited 2019 previously filed?   I would end any engagement (after payment for my services) for a client who tried that.

 

BobKamman
Level 15

It made perfect sense to me.  Believe it or not, taxes are not the most important part of many people's memory or priorities.  At least, until IRS starts trying to collect them.  

George4Tacks
Level 15

I read something just a bit different. Client never did file 2019. There was a 1099 issued for the rideshare and no return filed = IRS filed a return for the client including all income and all expenses known to IRS (i.e. ZERO) and probably sent a letter to client that they forgot about when they came to the preparer. Regardless, Bob gave the right answer. Just remember all new clients are either ignorant or idiots and need training. A $40K bill from IRS helps to get their attention and makes the education easier. 


Answers are easy. Questions are hard!
PATAX
Level 15

@Taxprohere I am hiking on a path through the woods with my trusted dog and I come upon a fork in the path. To the left,  the path is obscured with thick brush and poison ivy and Fallen trees and infested with dangerous Critters and ticks and so forth. To the right the path is clear and wide. Which direction do you think I go to?

IRonMaN
Level 15

To the left since you are an adventurous sort of guy.  Only wimps would go right.


Slava Ukraini!
Taxprohere
Level 7

@PATAX   It isn't a fork but a dagger.  Someone in the brush is throwing it at your back.  Your dog, smart dog, runs home because he doesn't need to deal with forks in the first place, and eats from his bowl where's there plenty of food with no poison.

 

khorshed
Level 4

Believe or not I see a lot of those every year (ones with missing 1099). But this is the first time I see someone ignored an examination letter.

khorshed
Level 4

When he came to me, he didn't mention anything about filing 2019 or the examination letter, and when he received a letter from IRS demanding $40K he tried to blame for doing his taxes wrong.

BobKamman
Level 15

@PATAX   

Medieval and early modern tradition recognized only three professions: divinity, medicine, and law, which were called the learned professions. Accounting did not come along until much later: The Wikipedia article on this subject lists the historical sequence of development in the United States, showing surveying achieving professional status first (George Washington, Thomas Jefferson, and Abraham Lincoln all worked as land surveyors before entering politics), followed by medicine, actuarial science (think insurance), law, dentistry, civil engineering, logistics, architecture and (finally) accounting.

What the original three professions have in common is that their ethics recognize a duty to help all people, not just those that practitioners approve. Religious leaders try to save every soul. Doctors try to save the lives of illegal drug users. Lawyers defend those who are accused of even the worst crimes.

That doesn’t mean tax professionals need to emulate Mother Teresa. But maybe we should follow a 90/10 rule. If we like 90% of our clients, let’s put up with 10% who really don’t deserve it. As long as they pay their bills on time. They’re humans, too. And maybe all it takes to change their path, to the one without thick brush and poison ivy and fallen trees, is your professional assistance.

PATAX
Level 15

@BobKamman Well said. I agree with you Bob. I have helped many in the past. I have done my good deeds. But now I have to take it easy.

IRonMaN
Level 15

I think Bob is currently at the 91% / 9% level with his client base and is looking at taking over this client to get him back to the 90/10 split that he is in search of 😜


Slava Ukraini!
Taxprohere
Level 7

We are in a profession that helps a variety of clients by explaining, coaxing, having the patience of Job, fighting the good fight, being Good Samaritans to guide taxpayers along the path.  But I would wash my hands/disengage from a client in primarily three situations: refusal to pay the prep fee, deliberating taking an unethical position after being explained the laws, and when guiding a client across treacherous waters to safe harbor, client pushes you out of the boat.  My interpretation of the OP was the client may have known the IRS letter was from his own doing, blaming the OP (for some angle like P&I coverage maybe?) I'd be curious what happened after the OP explained 2019 was not his preparation, did the client offer a mea culpa? 

 

PATAX
Level 15

You forgot the fourth reason: B.O. Years ago a client that we call "Jabba the Hutt" came waddling into my office. Heidi got a sniff of him and immediately started howling. He looked at me in bewilderment and said in his British accent: "What in the Queen's name is disturbing Heidi this day?" I replied to him: "You do not know?" He replied: "Most certainly not my friend." I said to him: "Maybe that swarm of flies that followed you into my office is a hint."

qbteachmt
Level 15

"but of course he doesn't have a copy of 2019."

The IRS has one; just ask.

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