An Apology from the IRS!

A couple of weeks ago an 86 year old client of mine received a letter from the IRS stating that she had taken a frivolous position on her 2009 tax return (which I prepared).  The letter threatened that if she did not file an amended return within 30 days to eliminate the frivolous position, she would be fined.  The letter did not refer to the nature of the frivolous position.  Needless to say, my client was quite worried.

Having no idea what the IRS could have possibly found wrong with the return, I called, and spent many minutes on hold both before and during a conversation with an IRS agent.  Finally the agent told me that it did not appear that there was anything wrong with the return, but that she would have her supervisor call me early the next week.  Apparently, the fact that my client had had about $40,000 withheld thinking she would owe substantial tax on stock sales (she had mostly losses) triggered an alert by the IRS.

Of course, no one called.  I called back and was told that someone would call me that afternoon around 2:00.  No one called back, so after a few days, I placed my third call to the IRS.  This time, I was informed was the return was fine, and that a letter of apology had been authorized and would be mailed out within a week.

So, happy ending, but my client will end up having to pay my fees for having to deal with the IRS to straighten them out.  The thing to remember is that the IRS (NC Department of Revenue, etc.) can be wrong, and sometimes very much so.  Sic your tax lawyer on them, and you may get very good news, as my client did this morning.