CP2000 & installment plan - what options?

[Catherine]

Client came to me new last year for 2010 return; no problem with a pretty straightforward situation.

Then he came back with questions on "what can be done" for 2008 and 2009 returns (much more complex returns). Brought with him CP2000 letters for each year's return -- one dated March 2010, the other dated February 2011 (nothing like being right on top of things, I guess). He is making payments. Talked to IRS with a POA and they say they sent the letters, but there is NO indication on file that he ever responded (agree/agree partially/disagree). However he did enter into a by-phone installment agreement.

Looking over the 2008 & 2009 returns, they were done flat-out wrong. Big box "prep" place where whoever it was asked no questions and plugged in numbers wherever they saw fit. Client may well not owe the IRS (or at least, not nearly so much). I still need to go through the IRS "changes" on the CP2000 letters.

However, before I spend several hours on this, I'd like to know his options. Since he never agreed to the CP2000 changes, will the IRS accept amended returns? Or, by making payments, has he tacitly accepted their changes so there is no sense taking the time to prepare and submit amendeds? (In other words, is he sunk and therefore it's not worth my time and fee before we even start looking?)

TIA,

Catherine

[joanmcq]

The tax would have been assessed when he missed the dates to respond to the notices. Once the date to file a tax court petition has passed, the tax is automatically assessed.

You can try for an audit reconsideration.

[Catherine]

Thought of that, but there was no audit. Someone on another forum recommended trying to file an amended return. We may give it a try and see what (if anything) they do with it.

If they won't take/accept/process it, he's really no worse off than right now.

[grandmabee]

isn't there also a form 911 for doubtful liability?

[jainen]

>>there was no audit<<

CP2000 is an audit. Apparently the proposed tax has already been assessed, the time to appeal or file in tax court has passed, and the taxpayer has agreed in writing to pay it.. He can still file in District Court, but this is a difficult situation to resolve in the taxpayer's favor. The IRS can literally ignore anything you ask about. The MAY pay attention if he has a very compelling story, but he doesn't get much sympathy for using a lousy cheapo untrained preparer. If there is a lot of money at stake, I'd turn it over to one of the law firms that specialize in fighting the IRS. Otherwise, pay what he agreed to.

[joanmcq]

I've had luck with audit recon, but mainly where the 'cheapo preparer' was supposed to be taking care of it. Maybe saying he assumed the 'pro' did it correctly?

It's hard to justify ignoring IRS notices, but simply 'taxpayer was not able to submit supporting documentation' can get the audit recon.

[Randall]

I've had some success with writing a letter explaining everything (truthful reasons for the situation), enclosing amended returns (if only to show what the tax should have been). Show the total tax per year as should be, the amounts paid, and how much would be left to be paid or overpayment, etc. I compose the letter, but the letter is from the client to the IRS, signed by the client. No telling if it will help but that's about all I can do for someone in this situation.

[JohnH]

I agree 100% with Randall. I've never seen IRS ignore a truthful letter from a taxpayer, even when the answer is "no". Including a 1040x is also helpful, because it gives IRS a way to resolve the issue within their normal channels if they decide to accept the info.

I've also never seen them refuse to do an audit reconsideration when there was not a taxpayer-signed agreement to the assessment (even after the time had passed) but maybe I just have lucky clients.

[DougO]

Even if you want to consider the CP2000 an "audit" you still are within the 3 year statute so what prevents you from filing an amended return. I think the letter explaining the situation along with 1040X is your best route. If you are dealing with substantial dollars to the taxpayer you should do your best to represent their interests. Make sure your amended amounts can be well documented should Uncle want more information.

[Terry D EA]

I'd say go ahead and try to amend the return. It appears the time to petition tax court has passed and nothing obligates the IRS to accept an amended return. However, in this situation, what is there to loose? Not being able to give the client anything position out of this is might be hard to jusity a fee, but nothing ventured nothing gained.

[Catherine]

Thanks to all -- will go the letter with amended return route.

Catherine