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Posted by citizen_average on February 27, 2007, 3:36 pm
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I have been filing Federal and California taxes for the last
18 years. For for the first time ever, I have received the
honor of being audited :) I received the letter 2194 (SC),
form 4549, etc. for tax years 2005.
Basically, I have always done my taxes myself, the old
pencil-paper- calculator way. My 2005 taxes are very boring:
-- only W-2 income (self & spouse)
-- a small amount of interest.
-- No other income, no adjustments.
-- Only personal exemptions and itemized deductions
-- itemized deductions consist SOLELY of state taxes,
property taxes, and mortgage interest
-- ABSOLUTELY nothing else.
Per IRS, I am subject to AMT just based on high California
state taxes, and property taxes. No ISO, no option income of
any kind, no "funny" income, no other deductions, no tax
shelters. Absolutely nothing else.
Anyway, IRS was kind enough to complete the form 6251 for
me, and walking through the lines, I agree with their
calculations, so I will pay. More or less happily (I mean, I
have not cursed even once since receiving the notice, and I
can afford to pay the AMT). So, my blood pressure is not
high :)
I have a couple of questions.
1. I file my taxes in California; it goes to Fresno, CA but
the audit letter is from Andover, MA. Just curious, why is
being handled from an office across the country?
2. Letter includes name of an IRS employee "Mrs. XYZ" (it
actually says Mrs., not Ms., how quaint!), and lists contact
hours as 4:30PM to 11PM (but does not say time zone). That
is an amazingly odd hours to contact! Is IRS outsourcing the
audit job to accountants in India, sitting in Bangalore?
That would explain the odd hours!
3. The notice also includes "Failure to file / failure to
pay - IRC 6651" penalty equal to 10% of the AMT amount (IRS
otherwise agrees 100% with my tax filing; only I never did
AMT before, and they figure I needed to do it for 2005). I
DID file taxes in time, I paid in time (through payroll
deduction, and one extra payment on Jan 15, 2006). When I
filed 2005 taxes in 2006, I received a small amount of
refund.
So, is there anyway IRS will waive the penalty? Can not
including AMT form 6251 be considered a failure to file/pay?
The 10% penalty seems steep. What "magical words" should I
write in a letter, or should I utter on phone, to plead that
the penalty be waived? Based on my family's income, I CaN
NOT say that the penalty amount of less than $500 is a
hardship on me. Still, if they waive it, that's a couple
Chinese take-outs for me & my family :) So, how do I plead?
4. The letter also includes INTEREST computation, at 7%
(SEVEN!) COMPOUNDED from 4/15/06 through June, 06, and at 8%
(EIGHT!) COMPOUNDED from July, 06 through now + 30 days
(yes, all the way to next month!). Boy, where is IRS earning
that high rate of interest? Even the best online savings
account have returned between 4.5% and 5% during this time,
and the yield on US treasury's 26 week bill auctions have
been only about 5.3%. How can IRS justify charging such a
high interest rate?
Anyway to get IRS to use a more reasonable interest rate,
like 5%? Can the interest be waived, or abated, fully or
partially, under any circumstances?
5. One of the forms says "Can you pay the full amount within
120 days?" My answer is YES, and YES means no need to setup
install payment plan. Fine. But will the interest continue
to acrue during this time, if I pay within the 120 days? Or
does it mean I get 120 days, interest-free, to pay?
6. If interest continues to acrue, suppose I paid right
away, within the next 3 to 5 days (mailing time from
California to Andover, MA), will IRS refund me the excess
interest from the payment date to the next month? (They have
computed interest all the way to now + 30 days).
7. Are the interest and penalty going to be be deductible on
my taxes for 2007, when I file it in 2008? Or should these
be deducted on 2006 taxes which I will file in a month,
assuming payment was due on 4/15/06?
8. Quite unsually, all the material inside is nicely laser
printed, even the signature of the "Operations Manager,
Examinations" (boss of Mrs. XYZ listed on page 1) is scanned
image, not a real signature.
However, the whole package was mailed in an envelope, which
was HAND- ADDRESSED IN INK, in real-old-lady handwriting
style, with so much ornamentation around the serifs of
letter "R" and what not. Kind of like one of those old
archived documents from 2 century ago. I suppose some bored
old lady in mailing department at IRS, or perhaps the
auditor Mrs. XYZ herself, like to doodle on outgoing audit
notices!
Anyone else receive hand-addressed letters from IRS?
Thanks a lot for your answers, and discussions. I welcome
your suggestions, tips, guidance, and what-have-you. Even
flames welcome! (but our esteemed moderator will likely snip
that!)
Average Citizen from the Golden State
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<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
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Posted by TxSrv on February 27, 2007, 8:23 pm
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citizen_average@yahoo.com wrote:
> 1. I file my taxes in California; it goes to Fresno, CA but
> the audit letter is from Andover, MA. Just curious, why is
> being handled from an office across the country?
More efficient to centralize volume operations in a
particular tax issue area.
> 2. Letter includes name of an IRS employee "Mrs. XYZ" (it
> actually says Mrs., not Ms., how quaint!),
If that EE actually exists, it's her preference.
Conversely, certain IRS ops are permitted to use pseudonyms
on letters. One advantage is when you call and ask for that
person, they know what kind of a letter you have (like here,
the AMT project). Another is not having the name/number in
a volume operation documented, because if you call that
person and he/she is real helpful, and you pass it along,
that person could get flooded with ordinary inquiries.
> and lists contact hours as 4:30PM to 11PM
> (but does not say time zone). That
> is an amazingly odd hours to contact!
Could be a nigh-shift project.
> Is IRS outsourcing the audit
> job to accountants in India, sitting in Bangalore?
I doubt it. Congress, fwg media alarm, would go ballistic.
> 3. The notice also includes "Failure to file/failure to
> pay - IRC 6651" penalty equal to 10% of the AMT amount.
Your 1040 sounds as though filed 2 months late. This
penalty is not for failure to compute AMT.
> IRS otherwise agrees 100% with my tax filing;
One can't assume that, as it's possible your return should
better have been selected for other issues, and it's a
mistake to have limited to AMT. Once they do so, the return
is "closed" after you sign the 4549. So, unless you have a
good argument on why filed late, I'd be careful on pursuing
relief from the penalty. Other people, like a manager, may
review your arguments, plus rest of the return, and decide
that the penalty issue and anything else be referred to your
local Area Office for audit completion.
> Anyway to get IRS to use a more
> reasonable interest rate, like 5%?
Interest rates are set by law, with certain Treasury rates
as a base. Compounding was recently added by Congress. No
way can IRS ignore the law as to statutory interest rates.
> But will the interest continue to accrue during this time...
Interest accrues until paid.
> 6. If interest continues to accrue, suppose I paid right
> away, within the next 3 to 5 days (mailing time from
> California to Andover, MA), will IRS refund me the excess
> interest from the payment date to the next month?
They'll refund interest you pay between date paid, if before
the computation date in any notice or 4549.
> 7. Are the interest and penalty going to be be deductible
> on my taxes for 2007, when I file it in 2008?
No.
> Anyone else receive hand-addressed letters from IRS?
That can be a cost issue, as in no budget for the
technology to print labels/envelopes cheaper, or simply the
items inside have your SSN which will show through a
window envelope. Too expensive to fix that problem.
Fred F.
<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>
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Posted by Harlan Lunsford on March 1, 2007, 6:47 am
Please log in for more thread options TxSrv wrote:
> If that EE actually exists, it's her preference.
> Conversely, certain IRS ops are permitted to use pseudonyms
> on letters. One advantage is when you call and ask for that
What? still using fake names? I thought congress made em
stop that practice long ago.
I still use the name Sue Samples, a name used on
correspondence from Atlanta long ago as wife of Junior
Samples, my mythical and hypothetical taxpayer when I with
to project what if scenarios for a return.
(Their kids are Modine, Buster, Cleo, and Sudie - the baby)
ChEAr$, Fred,
Harlan
<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>
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Posted by TxSrv on March 3, 2007, 4:29 am
Please log in for more thread options Harlan Lunsford wrote:
> What? still using fake names? I thought congress made em
> stop that practice long ago.
Congress merely wrote restrictions in 1998 into law,
matching internal rules IRS used. Apparently
inconsistently. One exception is physical threat. The
Center I'm think of used a nonexistent manager's name on all
exam letters. Work 50,000 cases a year, bound to be a few
threats. Or perhaps even they stopped since 1998.
Fred F.
<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>
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Posted by Seth Breidbart on March 1, 2007, 6:47 am
Please log in for more thread options > citizen_average@yahoo.com wrote:
>> But will the interest continue to accrue during this time...
> Interest accrues until paid.
Last year I was underwithheld and filed late (with an
extension). I got a letter from the IRS that said basically
"You owe $80 interest already and if you pay it within a
month we won't bill you any more."
Seth
<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>
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