I hope you have managed to stay safe and well! We focus on resolving tax issues in Prince William County and throughout the lower Northern Virginia area.

IRS contacts taxpayers regularly (at the addresses they have on file) regarding tax obligations in the form of a Notice of Deficiency.  The notice is usually worded in such a manner that a taxpayer will see it as no big deal and possibly “blow it off” or just set the notice aside. However, this is the time for the prudent taxpayer to exercise due diligence on their behalf, and take the time to consult his/her tax records, to compare them to the information listed on the notice.  This notice will often suggest/estimate that an additional tax is owed. In a sense taxpayers should treat these notices as exactly what they are. A correspondence audit! Yes, an audit being conducted via paper correspondence. The notice will have give options on whether or not the taxpayer agrees or disagrees with the assessment, and a small list of remedies. First, and foremost of which, will be to simply submit the suggested additional tax, along with the notice.

Failure to respond will prompt other notices, each one with a more definitive stance that the tax is actually owed by you the taxpayer. Here’s a scenario. Let’s say you sold your principal residence (primary home you live in), and you neglect to fill out the home sale worksheet and attach the proper schedule to your Form 1040. IRS receives a copy of the 1099-S from the title company that facilitated the closing of the sale of your home. This 1099-S will show how much of the proceeds from the sale of the home were received, but not the amount actually given to the seller. Meaning, it will not show whether or not the home was encumbered by a mortgage, nor the amount of said mortgage at the time of the sale. So, of course IRS will assume the full amount of the proceeds were received by the taxpayer.

This would seem like an easy fix. You dispute the claims on the notice of deficiency, gather all of your necessary documentation, and submit the disagreement via fax (recommended), and consider the matter resolved, in accordance with Internal Revenue Code Section 121 exclusion, the taxpayer meets both the ownership and the use test, and qualifies for the exclusion of the gain up to $250k ($500k if married filing jointly). However, it could become your worst nightmare, when the IRS is dragging its feet (which is in its interest to do so), and starts to send notices of the option of protecting your rights in U.S. Tax Court, and petitions for relief are dismissed with the explanation that sufficient documentation has not been presented. At this point you should be seeking representation if you have not already done so, and be pursuing every avenue, including TAS (Taxpayer Advocacy Service) for assistance. 

You are not at the mercy of the IRS, and you have the right to a plethora of options and remedies to make Internal Revenue look at the full picture, as opposed to what’s in their own interest.  We realize all of these notices and terminology can be overwhelming and confusing to most taxpayers, and that’s why we’re here to help you with all of your tax resolution/representation needs.  Now and in the future. Don’t put off addressing your tax situation. You could be costing yourself more than you know by delaying. Feel free to contact us with any questions you may have in approaching your specific tax situation.