When you go talk to them drop a tape recorder on the table. They like to lie and threaten if they can get away with it. Their performance reviews include how much they get. The earlier you get to them the cheaper it is. You can often settle for 10 cents on the dollar when it starts. When they get worked up ,it can get ugly.
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Completely False. In fact, it is against the IRM. If you claim they do this, please cite the section of the IRM where it sez this. Do you even know what “IRM” means?
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Not true, in fact, usually the further you go up the Appeals process the lower the deficiency goes.
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Again, false. There is a thing called an “Offer in Compromise” where you can offer as little as 10 cents on the dollar- once you admit you owe that much and show you can only pay that much. And an OIC is only for Pro’s, not something a Amateur should ever try.
Just making up falsehoods that friends claim to have experienced. Of course my wife worked for the IRS for 23 years. Please help us.
The CPA will drop me as a client? This guy not only took six months to redo my tax return, he did not explain anything to me. And overcharged me. He was supposed to let us know if he spent more than $1000 worth of time and he spent almost twice that, without letting us know. And it is not fixed…
I freely admit that I don’t understand this. I have W2s and I have 1099s and I sent them all in and thought I put stuff in the correct spaces. $3K is a blow but I can deal with it, I can accept that I screwed up somewhere along the line. But $36K is just … wrong. I wouldn’t mind having that kind of income. But I don’t.
I’'m exaggerating. They did not say “ha ha ha.”
I really wish my husband would deal with this. I feel like I’m gonna screw it up worse and worse. But–he talked to them first, and things did not get better after that, so I just don’t know.
FWIW, one of the items at issue on the tax return in question is $1500 that went into a flexible medical spending account and another $700 that went into a flexible dependent-care account.
My understanding was that both these items were deducted from my paycheck through the year, pre-tax–thereby lessening my tax liability–with the understanding that I would use the FSA medical card only for legitimate medical expenses and the dependent-care account would reimburse me only for child care expenses. And I had to provide the tax ID number of the kid’s day care, plus send along statements from the day care before they sent any money back.
Now all that has been added back onto my income.
So…why did I only get to purchase legitimate medical expenses on that card? Why couldn’t I just spend it all on cigarettes and beer?
And how come I had to provide all sorts of proof, etc., for the day care?
I mean, if it was just my money that they were withholding as kind of an enforced savings account, how come I couldn’t spend it how I wanted? But I couldn’t. Yet now it is income.
(Obviously that doesn’t explain the whole amount. This is just an illustration of how completely naive I am about these matters.)
I have a FSA for Medical, for years, and they way mine works is that I send in receipts for my medical expenses unreimbursed by insurance to be reimbursed. Who runs your FSA? (Starting last year we got a debit card for it, and I assume that the administrators look at the charges. They allowed over the counter medicine charges last year but not this year, since verification was too difficult. (I don’t use the card myself.) I’ve never, ever, heard of the FSA payments being added as income. I googled it, and don’t see any odd restrictions on who can use them.
Something about this story doesn’t add up. Where did the CPA say the supposed extra income was coming from? Theft of your SSN is the only plausible thing I can imagine, but the CPA, unless he’s a total idiot, should be able to prove you didn’t make that money very simply.
Can’t you go to the IRS with your CPA?
And, what was the old tax lien about? Was it baseless, or was it legitimate, and about something you misunderstood?
You said something about 1099s. You don’t send 1099s in to the IRS - you list them on Schedule C, assuming your writing is a business. The IRS gets them also. Even assuming you got it wrong, the IRS would basically tell you that you screwed up. That’s unless whoever filled out the 1099 was off by a lot, and your CPA should have told you that.
So, what did the CPA say you were doing wrong? Where did the $80K come from? (That is a lot more than you can out into an IRA unless I’m very mistaken)
Either there is something you’re not telling us, or you used the random number generator option in Turbo Tax to do your returns.
Did you ask him? I mean, did he refuse to tell you what was going on, and then you wrote him a check? If you have as little income as you say, your taxes can’t be that complicated. How did you do them? It might be worth buying a copy of Turbo Tax, put all the income in from last year, and see what it says. It won’t be exactly correct, since the tax laws change, but you’ll have a baseline at least.
The one thing I asked him was about the FSA, the flexible spending account, specifically the dependent-care part of it.
The deal here was that money was deducted from each paycheck and went into the account. As I accumulated child-care expenses I sent in proof of what I had paid, up to the amount that had been deducted from my check, and my employer sent me a check for that amount.
Then my employer added the amount ($700 for the whole year) back onto my W2, somehow. I thought this seemed wrong. But that was one of the discrepancies. A minor one, but one I understood, sort of.
ETA: My employer put the dependent care and medical deductions on a 1099. I don’t know why. I freely admit my ignorance on this subject.
The CPA said no, if I wanted to claim the child care credit I had to fill out another form. And he filled out that other form.
So my question was: If this is just ordinary income and gets taxed as such, why did I go through all the nonsense about proving it was for child care and sending in the day care center’s tax ID?
He mumbled something and then had me fax over all the statements I had for the whole year, and figured out some schedule something-or-another.
That was for a very small part of the discrepancy and one that I thought I understood, but obviously I had it all wrong.
I did this for several years and for all the other years it worked as I thought it would, or at least, it seemed to. I suppose now the IRS will come back and charge me again for all the child care deductions for previous years. Can’t wait.
If you go behind his back and fuck with his talking with whatever IRS Agent that he is working with, then it could happen. You gave him a POA, he has already got your Deficiency down to $3000- which as you said “you can deal with”. Do not go behind his back. He is working for you and it seems like you have a “small” (yes, I know to many here $3000 isn’t “small” but for the IRS it is) but significant *and legit *tax problem.
Do send him whatever recent notice you got- but it happens fairly often for another notice to be already in the pipeline and sent out even though a deal is being worked.
If you signed a contract for no more than $1000 then yes, you might have a problem; but I’ll bet he is within whatever contract you signed. You may think you agreed to no more than $1000 but that could have been just for add’l hours not his fee or he could have added expenses or something. But really if he is a CPA, his charges are 99.9% to be within whatever contract you signed. Have you paid him yet?
If your own CPA thinks you really owe $3000 then certainly you fucked *something *up on that years tax return. Now, I certainly can sympathize and agree those IRS Deficiency notice can be scary but the IRS is not evil. Just uncaring.
It’s incredibly late, but I wanted to respond to your thread before I head to bed. I work for my family business and this type of stuff is our specialty. I’m not a lawyer (either is my dad, the owner of the business. You actually don’t need a lawyer to do any of the stuff you’re getting done-- lawyers just get into it because they can charge a buttload and wave around their law degree. CPA and Enrolled Agent certification are more than enough). I’m definitely not your lawyer. Hell, I’m a pathetic college student that is majoring in History and Political Science to get as far away from taxes as possible. 
Anywho, in regard to the $80k, tell the guy with POA to call the IRS and ask for both the Payer Information and the Individual Master File for the last 15 years. One, it’s good to have copies of these things anyway, but also this will help you understand how the IRS did what they did.
The PI is just all the income information the IRS has for you for every year- W2s, 1099s, W2Gs, you name it. The IMF is the action the IRS shows on your account for every year. Let’s say you’re looking at some particular year. The IMF will show your adjusted gross income, exemptions claimed, itemized or standard deduction, amount owed/refunded. Then below it will have a time line outlining when they got the return, if and when they made adjustments to the return, what adjustments they made, etc. etc.
Oh, your CPA or lawyer should know this, but do NOT let the IRS mail the above to you- they’ll take MONTHS. Have them fax it while on the phone, they’ll do it. In fact, they can’t say no.
If they say you owe $80k, they’ve done what’s called a substitute for return. That means they’ve gone back and amended your return to say what they want to say. This is tricky because they do not overturn those suckers easily. We always get them over turned, but the IRS puts up a hellova fight. You’re essentially (but not technically) going to be audited when you try to show that you were right. Sometimes we luck out and it’s easier, but sometimes we have to place calls to Congressmen because the IRS isn’t following the law.
You (or your CPA, actually) is going to redo your tax return and submit it to a group called the Audit Reconsideration Unit. This process will take a bit of time, but any good representative (CPA, Lawyer, etc.) can make it so they wont attach your wages, put a lien on you, etc. etc. during this time.
Now you mention that you were getting letters from the IRS saying one thing, while your rep is saying another. The IRS will continue to send you letters saying you owe random amounts of money throughout the entire process. Honestly- and I know this sounds awful- it has little if nothing to do with what your rep is doing. When it comes to the IRS, the right hand has no clue what the left is doing. You will get letters that make absolutely no sense, but don’t worry about it. Worry about what the IRS phone jockey is telling your rep (assuming you can trust your CPA).
Also, the original rate you paid of $2500 is competitive. Knowing what I know about our competition and such, I’d say with that $80k and the SFR, you’re going to probably end up needing to pay out at least another $3500 to a good representative. Those substitute returns are not easy to get off. I’m not saying this to scare you or anything, just giving you an honest heads up.
Oh, and for goodness sake: don’t go with someone who charges you by the hour. Most of the better places don’t because we realize there is no way to guess how long the work could take and it isn’t fair to our clients if we get held up on hold with the IRS for 3 hours. We work off of retainer, as do most of the others we recommend to folks.
Can I ask what year is in question? Remember, the Statute of Limitations for IRS 1040 stuff is 10 years from the date filed. You might be almost out of the woods anyway, which is another road we suggest to some of our clients.
If you have any specific questions, the email is in the profile and I can try to answer them the best I can. You know, in a non legal, I’m not your lawyer- I’m just some random college student on the internet who listens to Britney Spears and happens to have a dad that’s been in the business for 30 years who I’ve worked with since I was 16 sort of way. Phew. That was a run on sentence if I’ve ever seen one.
There’s no going to take part in. The CPA just calls the IRS from the comfort of his/her office while playing poker on the computer. Trust me on this. I mean, it’s not that there aren’t intense and stressful negotiations going on, it’s just that the most than can happen is the CPA can put the agent on speaker phone and the OP can sit in and listen.
And DrDeth is right. If you go behind your CPA’s back and call OR get other representation of any sort, it’ll do two things: make the CPA’s POA be revoked (just IRS protocol) and basically undo the work he’s done already.
Yay for posting three replies (this is what happens when I read the thread after posting.
The answer to your question is slim to none. The only people they really arrest are ring leaders of tax evasion groups. We have clients that owe millions and are nicely protected thanks to us. So long as Hilarity N. Suze has a good rep, she’s fine. Hell, even if she doesn’t have a good rep, the worst they’ll do is stick a lien on her and either put a levy on her pay check or levy her bank account.
Yeah, we’ll get a lien or a levy off for $500, but JUST the lien or levy. If you want ongoing negotiations on the base amount OR you have an SFR- the case here- we charge a minimum fee of $3500. Our rate is competitive, from what I’ve seen.
Something that the new IRS commissioner has told them to cut down on tremendously. It’s damn near impossible to push one of those fuckers through in the last couple of years- and that’s speaking as someone who works for a well established rep business that’s been around for a while.
When I transferred back to the US from overseas and decided it was time to file my previous five years worth of tax returns, the IRS were kind, polite, helpful, and understanding. They set me up with a cool payment plan of just $100 a month. I was so happy with that experience, that I was in a great mood when I called the Franchise Tax Board (I’m a California resident). I asked them what kind of payment plan I could have to pay the taxes I owed them. Their response: “Pay it ALL now.”
DiosaBellissima what incredibly comprehensive well thought out posts 
Okay, okay. Thanks, DiosaBellissima, for the explanation.
Here is my problem. The CPA’s amended tax return says I owe approximately $3000, or around $650 more than I already paid when I sent the return in (it’s for 2004). Not $3000 more. So that’s okay. Not great, but okay.
But…since I only got a copy of the thing, I assumed the CPA sent the amended return in, and the IRS demand for $36K came in after that. So what’s this mean?
I’m hoping the CPA calls me back to explain this.
I assume I can deduct the CPA fee from this year’s return.
Yes, I agree.
First of all, I’m glad that I can do anything that remotely comes across as well thought out at 2 AM. I’m going to attribute that entirely to my awesome college-student-fu.
Anywho, have you asked the CPA? If he’s not getting back to you in a timely manner (didn’t you say 6 months to prep a tax return? sheesh!), you might want to consider finding other representation. I’m in no way suggesting this is a quick process, but your settlement with the IRS shouldn’t be something that’s terribly drawn out.
Just as if that was that an IRS error (the $36k). If not, ask him where it came from and what he’s going to do about it. If he can’t you a straight answer, see above. Sorry if I’m coming across as perhaps a bit quick to tell you to be on your toes and maybe look elsewhere; it’s just that I’ve seen so many of our clients get royally fucked by some lawyer or CPA who pretends they know what they are doing, but in reality have no idea how to handle back taxes and negotiations. In reality, this is a highly specialized area and very few CPAs or attorneys choose to exclusively focus on it because it is just so much (complicated) work. It makes me feel horrible when I tell someone they are going to have to pay us another $3500 on top of the God-knows-how-much they’ve already payed to some cheat (but I gots to pay for my college and car too, so thems the breaks and such). In a case like yours though, I’d imagine that any decent place might give you a bit of a break. I know we tend to take that into consideration when quoting a price for folks that have been screwed around (especially for those that were screwed over by one of the giant offer mills).
If the IRS is rejecting that 1040x he did (the amended return), then he’s somehow managed to screw up. Don’t take this the wrong way as it’s abundantly clear to me that you’re an intelligent person, but did you check over the entire amended return to make sure everything sat right with you? We’ve had clients that didn’t check their return from other guys and ended up being audited because other guy put 10k of random deductions/ charitable contributions for them. Sweet, isn’t it?
The key here for you is that you demand that this CPA get your IMFs for you so you can see exactly what is going on. Honestly, he might not even have to call to get them- we have access to an IRS database where we can pull them right off (and we’re a smaller firm, so it’s not just because we are big wheelers and dealers). But if he does have to call, it’s really not a big deal at all. In fact, he can ask at the end of another call so he doesn’t have to sit on hold again.
Once you get those IMFs you’ll know exactly what action has been taken on your account and you can be brought right back up to date with whether or not your CPA is doing his job.
On edit: There’s actually no reason you can’t go down to your local IRS office and ask for the IMFs. Just tell them you want the POA for XYZ to stay on. They’ll give a non-rep more guff about this over the phone, which is why it’s probably better to locate the elusive and unpublished-address- having office.
I’d want to be there (on the phone) for at least one call, just to hear directly what the IRS says, and to ask questions at the time of the call.
No issue with this.
I don’t know for sure, but did you deduct the childcare expenses on your return AND have an FSA for them? Experts, please correct me if I’m wrong, but I’d guess that if you pay for the expenses out of pre-tax money, you can’t deduct them. I don’t know why you’d get a 1099 for them as opposed to an amended W2. Which would take precedence?
Diosa, whenever we’ve made a mistake (usually resulting in a bigger refund) the IRS gives us something, and we’ve been able to figure it out. If the problem was on an old return, wouldn’t she either get a bill or at least some notification of the problem during that tax year?