Jack, one of our clients, received a noticed from the IRS, they have asked for $8,700. He was quite worried as he was not able to understand what it was about, and this was easily seen on his face as he came to our office. We consoled him that we will explain as to why he received this notice, but felt sorry that nothing can be done to revert it back. We did not promise but said we will try our best to avoid this penalty.
The notice was due to missing social security income and Cancellation of Debt. After discussing with him, it was later found out that cancellation of debt was true. The forms that were listed on the notice were pointing towards a short sale, there was no income reported on his return. Our task as audit defense was to find out if he qualifies for any provisions that enable taxpayers to eliminate COD from income.
In concern to social security income, the notice from IRS claimed that he did not include any such income of his tax return. He only reported the amount that IRS had been looking for, he manipulated with the social security income of his disabled son on his return.
As audit defense, the information received by us regarding our client showed that he had manipulated with the figures several times in the past over debt cancellation. This way he was able to exclude income generated from cancellation of debt for short sale from his taxable income. When asked about his social security and if he received any lump sum payment, he confirmed he received payment for two previous years.
As audit defense, we asked for returns of previous two years and hoped that he will have them. We than calculated the taxable amount on his social security income. We prepared all the related documents and send them to the IRS. We informed out client that it will take eight to twelve before we get any answer from them.
After forty-five days when we called the IRS, they told they had recomputed the amount and a notice will be sent shortly to the member for a refund of $ 950. When we called our client to convey this message, he was his usual self, may be because it was difficult for him to digest what we said. We asked him to call us back as and when he receives the refund. The recomputed notice arrived in his mailbox two weeks later, and he gives us a call.
His voice crackled with emotions as he was talking on phone, and said he was really grateful. His voice was filled with excitement and was surprised too that he received the refund. He expressed his thanks over and over again.
As H&T audit defense service provider we are here to help anyone who walks to our door. This is what we have been doing since years.