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Taxpayers who run into dead ends dealing with the IRS have an option few know about. It’s free, and it can be effective.
After receiving answers from the IRS they think are wrong or no answer at all, most taxpayers believe they have only two choices. One choice is to give up and accept. The other choice is to hire an attorney, accountant, or enrolled agent to try to solve the problem. But there’s a third option, which I recently used and received good results.
The background is that a few years ago I took over managing my parents’ finances. I started preparing their income tax returns, beginning with the 2016 return. I filed a change of address form with the IRS, notifying the agency that my parents’ address of record is the same as my address. I also had my parents sign an IRS power of attorney form, empowering me to act on their behalf on tax matters.
After a while a letter from the IRS addressed to my parents arrived. It said that my parents hadn’t filed a 2015 tax return but had paid estimated taxes for the year. The amount of estimated taxes paid for the year far exceeded the amount they owed in any year I was aware of.
I searched through my dad’s records and found copies of the tax returns through 2014, and I’d prepared them for 2016 and later years. There was no 2015 return. Also, the data needed to prepare the 2015 return was incomplete. There were a few information returns from Social Security and financial services firms, but not as many as were received for the other years.
I prepared a 2015 return as best I could with the information I had. I filed the return, including a copy of the power of attorney form and a cover letter explaining the situation. I asked the IRS to process the return and include any income it knew about from the information returns filed for the year.
I never received an acknowledgement from the IRS of my letter or that I was their agent for tax matters. Instead, after a while another letter arrived addressed to my parents. It said that a return had been filed under my dad’s Social Security number but would not be processed unless he contacted the IRS and provided certain information. Apparently, the IRS was concerned this was a fraudulent return. My parents were living in assisted living and unable to contact the IRS or provide information to them.
So, I contacted the IRS Taxpayer Advocate Service (TAS). This is described as “an independent organization within the IRS” to help protect taxpayers’ rights and solve problems taxpayers can’t resolve on their own. I sent the closest office of the TAS a letter explaining the situation along with copies of the relevant documents.
After a few weeks I received a telephone call from an employee at TAS who identified herself as “Miss Walker.” The promptness surprised me, since the IRS had only recently re-opened most of its activities after being closed for the Covid-19 pandemic. Miss Walker asked for copies of everything. It seems that everything I sent with my cover letter didn’t make it into the IRS system. Miss Walker set a date by which she would be back in touch with me. So, I sent new copies of the power of attorney and the income tax return via email.
Miss Walker called again a few days before the deadline she had given me. The IRS said it couldn’t find a record that the original 2015 tax return had been filed. Since I filed the return shortly before the end of the statute of limitations, it was important that I prove the return was filed on time. Otherwise, the statute of limitations would be considered to have expired and my parents would be unable to claim any refund. Miss Walker asked if I had a postage receipt or some other proof that I sent the return to the IRS by the deadline.
I had something better. I had the letter from the IRS saying it had received the return but would not process it. Apparently, the IRS also was unable to find a record of its own letter as well as the return that prompted the letter. I emailed a scan of the letter to Miss Walker. She called back within a couple of weeks and said the letter would serve as proof that a timely return was filed. She would instruct the IRS to process the return and determine if any refund is due.
I’m still waiting to learn how much of a refund my parents will receive, and I don’t expect to learn the final results soon. But I have confidence now that it will happen.
The TAS can’t solve all taxpayer problems. But if you’re having trouble resolving an issue with the IRS and have tried your best, TAS might be able to help. You can all them at 877-777-4778. Or go to the IRS web site at www.irs.gov and search for “Taxpayer Advocate Service.”