Why won’t the IRS help me?

Dealing with the IRS is made more frustrating by the complete lack of help you will receive from the IRS employees. The publications they print are hard-to-follow and offer no guidance. Any letter you receive from them is packed with methods to pay but little advice on how to fight.

The reason for this is because the IRS (like any gov’t) can’t offer legal advice. If they did, they would be forever embroiled with claims of improper advice. Plus, the employees at the IRS have limited authority and if you don’t ask them to perform specific tasks for you, on the proper forms, they have no legal authority to act.

So, the only way to win your case against the IRS is to know the law thoroughly, know what you want specifically, know which forms to put your request upon and exactly what language to use. Otherwise, your case gets thrown around various IRS offices and “appeals” and nothing gets done. You may call them repeatedly and be assured they are “working your case”, only to find out in 6 months that nothing has happened.

It takes diligence to pursue the IRS. You must follow up with them and make sure they are doing what you request. You have to appease them and make sure you are current with filings and payments.

But, above all, don’t look to the IRS for advice. They aren’t allowed to adequately give advice and it will be deficient. Use the IRS to gather information, then create and pursue the best case possible!

J. David Hopkins, JD, LLM

Identity Theft Letters & Notices from the IRS

Identity Theft has become a major problem in the US but there are different problems associated with different kinds of ID theft. Identity theft of your credit card or bank information has a different effect on you than someone filing false documents on your behalf with the IRS.

The effect on you depends on which false document was filed with the IRS. It could be a return or an income statement or a credit claimed. But, not every false document filed with the IRS is considered Identity Theft:

These are examples of items NOT considered ID theft:

• Your spouse or ex-spouse signs your name fraudulently.
• Your spouse or ex-spouse induces you with duress or fraud to sign a return.
• Your spouse or ex-spouse falsely claims the children as dependents.
• You job or ex-job gave you an incorrect wage or income statement & reported it to the IRS.

Tax-Related Identity Theft: The IRS is only concerned with “tax-related” Identity Theft, which is defined as occurring “when someone uses your stolen Social Security number to file a tax return claiming a fraudulent refund”. See Pub 5027. So, they are only concerned when they lose money, not when you lose money. But, usually, you are not actually damaged when someone claims a fraudulent refund because you will (eventually) will get your lawful refund.

False Forms 1099MISC: What is more damaging is when, unbeknownst to you, someone uses your social security number in the issuance of a Form 1099MISC to the IRS, showing you made Self-Employment Income. When you don’t claim it on your tax return, the IRS will naturally send you a notice demanding payment. But, they won’t label it “Identity Theft” and open an investigation. Instead, they leave it up to you to “correct” the statement (which you obviously can’t do) or sue them in Court.

So, not every fraudulent document filed with the IRS is investigated as “Identity Theft”. Only those where a refund was claimed. This makes the IRS process particularly irritating. Now, your refunds will be frozen and every year the IRS will send you a new “PIN number” for you to place on your tax return.

If you receive a notice from the IRS such as Letter 673C and you know you did not file another return, you might have an Identity Theft Problem. Call the IRS at 1-800-829-1040 and ask them about the particulars of this second filing.

IRS Process: Usually, the process of ID Theft either begins with an IRS investigation (See Letter 4674C) or your request for an investigation. (See Form 14039). They will then send you either Notice CP01 or Letter 5073C. Then, you will not hear from the IRS for a very long time. If you call them they will not release any information to you and they will not send you your “Account Transcripts”.

But, eventually, they will send you Notice CP01A giving you a “Personal Identification Number” to put on your return. You will receive a new notice & a new number every year so watch the mail & keep the IRS advised of any new address you may have (Form 8822).

You will never know exactly what fraud was perpetuated on your account. The IRS does have a special webpage devoted to ID Theft and they have links to their publications:

Publication 5027 –  Identity Theft Information for Taxpayers

Publication 5199 – Tax Preparer Guide to Identity Theft

Taxpayer Guide to Identity Theft

In sum, although tax-related ID theft can be very irritating and frustrating you likely will not suffer any financial harm.

Implications of Claiming Innocent Spouse

When you receive a bill from the IRS or they take your refund it might be tempting to immediately file a claim that you are an Innocent Spouse and not responsible for the tax. However, before you do, you should do some investigation and research.

First, assess the situation. Do you get along with your ex-spouse and can cooperate with tax problems? What exactly is the income, deduction or credit issue that is creating the tax bill? Where are you in the IRS process and what are the allowable options to contest the tax?

The first step is to obtain the tax returns or the tax return transcripts. Then, obtain the wage and income transcripts to determine if income was excluded and the source. For self-employed persons if income was excluded then it is likely that deductions were excluded as well. If you make the effort to reconcile the books and prepare a tax return you may not owe anything at all so Innocent Spouse isn’t necessary.

If it turns out a debt is owed, perhaps the liable spouse can pay it to avoid problems. Usually, when the debt can’t be paid is when a non-liable spouse complains.

On the flip-side, when the ex-spouses have children they will inevitably fight over the dependency exemptions. You may also want to request the other ex-spouse to complete a Form 8332 so you are assured of the dependency exemptions for children.

The procedure to claim Innocent Spouse starts with filing Form 8857. The IRS will give the other party a chance to respond. If you have been a victim of domestic abuse, please provide all the police reports, restraining orders, psychologist and medical reports detailing the abuse.

If you claim Innocent Spouse the other spouse may cause problems in Divorce Court and elsewhere. This makes private resolution nearly impossible. In some case the ex-spouse has filed fraudulent documents or forged signatures on returns. This requires more serious investigation and possibly a criminal charge. So, only make the claim if other methods fail.

If you’re thinking an Innocent Spouse claim is appropriate, please gather all the documents and come consult with our offices so we can construct a solid Action Plan to win against the IRS!

J. David Hopkins

Tax Attorney

If it appears that you need to hire a representative to help you against the IRS there are many options. Who you choose will be a process of elimination. There are generally 3 types of persons who can represent you before the IRS: Attorneys, CPA’s & Enrolled Agents.

An Enrolled Agent generally is an expert in preparing tax returns and can address minor issues, such as a Return Error. They often have experience with bookkeeping, sales and payroll taxes. They are invaluable to maintain an accurate set of books for an on-going business and to prepare accurate returns for the various governmental entities.

A CPA has gone through the ordeal of obtaining an accounting degree and being “certified” by the State as being competent to handle all matters of accounting, financial planning, cost accounting and auditing. They often handle large business transactions and forecast planning. They have knowledge of business accounting beyond simple bookkeeping. Many CPA’s are also CEO’s and CFO’s of major corporations. They have knowledge of large enterprises, but not necessarily Individuals.

A Tax Attorney has endured 3 years of law school to get a Juris Doctor degree and has passed the State Bar exam allowing him or her to represent you before Courts and administrative agencies. Many Attorneys have also obtained a Masters of Laws in Taxation (LLM) degree from accredited Universities. This gives the lawyer a special expertise in IRS procedure, administrative agency law and Tax Court processes. The lawyer is adept at handling personal and business Audits, Exams, Appeals, Tax Court and US District Court.

So, if you want a bookkeeper to prepare your books and tax returns, please see an Enrolled Agent or the bookkeepers at TaxHelpReturns. If you need some business financial and accounting planning advice a CPA is perfect.

But, for most of the problems with the IRS a Tax Attorney is best because the procedures are unique and require specialized processing. As such, Audits, Appeals, Collections and all other advocacy should be advanced by a qualified Tax Attorney.

And, you will find that because of the attorney’s expertise in procedural matters that the cost will be less expensive!

J. David Hopkins