Sales of sold business still arrived to clients' bank account.

[Adri]

Need some expertise help please.  

New Client M. sold his restaurant business in 2022. Sale was not reported on his return. It seems he sold it at a loss and just wanted to transfer the business so the new owner would continue with the operation. What M sold/transfer was the kitchen mobiliary that had been bought also as bulk. 

 He paid somebody to do all the needed paperwork but apparently that person also forgot to change the merchant and account information, so, credit card companies continued to pay M's bank account. For part of that year and until the correction was made, M would transfer that income to the new owner. M has good records of those payments.

Last year IRS sent a letter to M proposing changes to his tax return because credit card companies reported income from 1099-Ks as M's income.  That letter was not answer and now M has received a letter of Notice of intent to seize (levy). 

Should I go back and answer the CP2000 Response Form with an explanation?

Should I file an amend as well as give a 1099NEC to the new owner but new owner is a Partnership so the 1099NEC part may not apply? 

Should I call collections and ask for more time?  

At this point I just want to take the correct action and your advice will be greatly appreciated. 

Thank you 

How would 

[BobKamman · Accepted solution]

Someone else had the same problem last week.  

https://accountants.intuit.com/community/proseries-tax-discussions/discussion/re-how-to-correct-a-ta... 

See my answer there.  "It is WAY too late to be filing amended returns.  Now you have to be careful not to miss the IRS notice allowing 30 days to request a CDP hearing.  Assuming the new owner is cooperating, get a letter from them (with complete name and EIN) explaining that they had bought the business by 2022  and that they reported the proceeds on their return. "  I also suggested looking into audit reconsideration.  

"Mobiliary" is an elegant word.  Is this a Mexican restaurant, by any chance, and the kitchen equipment is called "muebles," literally "movables" ?  Or maybe it's French.  Remember the Credit Mobilier scandal of the Grant administration.  (Which had nothing to do with the French bank of that name.)  

[Skylane]

Yes reply to cp2000 and include an amended return with sch c , 4797 and explanation including buyers TIN etc… including  a 1099NEC to the buyer can’t hurt…. I’d Include documentation showing the sale of the business….Most importantly get a retainer upfront and make sure you include an engagement letter.

[BobKamman]

The CP2000 is ancient history.  Here is the IRS publication on audit reconsideration, but you really need to know how to stop the collection process if you are already at the "Notice of Intent to Levy" stage.

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

[Skylane]

I missed the levy reference. Do what Bob says

[Adri]

I can not stop laughing. Yep, it is a Mexican restaurant and I didn't realize I wrote the word mobiliary which is such a bad translation to the word I was trying to express. 🙂  well, The good thing is that you explained the solution very well so now I know how to go about it.   

Thank you very much. Translated... Muchas gracias.