Posted on 02/17/2010 5:52:42 PM PST by Bean Counter
My wife and I have had a small accounting business since we met, and even though we formally closed the company 2 years ago, we have a couple of private clients that we continue to do monthly bookkeeping and tax preparation work for. 2 of our clients on 2 different coasts have come under almost identical scrutiny from the IRS of late and it is troubling to say the least. Allow me to explain.
Client 1 is in Portland, OR and had been incorporated and operating at the same location for over 30 years. He is a one man artisan craftsman with a small shop in a local business mall.
Client 2 is a Christian Minister and Family Counselor in Charlotte, NC. He is also a one man operation and has been incorporated and operating in the same location for decades.
We have been preparing payroll tax reports for these 2 businesses for decades. We maintain their books in Quickbooks, and use the program software to prepare IRS spec Forms 940 and 941, and all other associated payroll tax reports. In order to do that, we have maintained an active and up to date payroll subscription on Quickbooks, because you cannot use the payroll feature at all if you do not. All of their payroll tax reports are disgustingly simple, as they are for one person only. Client number one used to have an employee part time, but when the landlord jacked his rent, he laid her off, so now it is just him.
Both of these gentlemen have been visited recently by a "collection agent" for the local IRS office. My wife has personally spoken to both of them and verified their identities, so that is NOT an issue.
These two agents, in two different offices are requesting multiple copies of payroll tax reports that they "do not have a copy of". They want multiple copies of 940's in multiple quarters in multiple years, along with the 941 for that year, and a copy of every corporate tax return (Form 1120) for the last five years, all with original signatures, of course.
My wife was explaining the latest incident to me this evening (client number 2) and I blew a gasket. There is no formal notice whatsoever to either client. They are current with all of their tax filings and tax payments. We were required to enroll them in EFTPS quite some time ago, so all of their payments are made on time and remitted immediately to the IRS and the State. They have extensive electronic records covering all of the EFTPS transactions and the associated reports, and original paper records with original ink signatures for everything that pre-dates EFTPS.
We have had no notice whatsoever that questions any of the work we have done for either client, so we don't think this is some investigation of us, either. In any case, we have done nothing that warrants investigation.
It is tempting to tell these people to go pound sand, but if we piss them off, they will take it out on a client. The minister in North Carolina is not the guy to go do battle with the IRS; that is what he hires us for, but dammit! I HATE that we have to charge him for the time and material it is going to take to assemble all of this data, send it to him for original signatures, and then just give it all to some collection agent for the IRS for no good reason.
ALL of these forms were filed on time, with the respective agencies that needed them.
ALL tax payments have been made and accounted for.
ALL tax returns have been accepted and NONE are under audit that any of us are aware of.
And, if we don't send ALL of them to this babe at the IRS she will hound this poor minister to his grave for no reason whatsoever.
Rant mode/toggle/off...
What is the time requirement for retaining records in this case?
Could the recordkeeping at the IRS in various places be so bad that the records were lost?
IIRC, the IRS did just hire a bunch of people. They’re trolling for dollars.
bump
That was my first question, sice the gov irs website has the parameters that need to be met. I’d look at that first. the 5 year window needs to have an explaination of what they are looking for.
Have you tried submitting an official request for copies of the documents from the IRS? I would want to know what response they provide. If they produce them, then you can ask why the IRS agent could not call them up. It would be an interesting experiment that would not necessarily upset anyone.
Of course, by posting this, you’re toast, as am I for responding...
If you sent 940’s quarterly and 941’s annually that could be part of the problem. It’s the 941’s that are supposed to be sent quarterly and the 940’s that are annual.
The other thing that comes to mind right off the bat is if they are paying “contractors” instead of employees for certain services. The IRS is hell bent for leather on the issue of whether a “contractor” should be treated as an employee with all withholding done at the corporate level rather than at the individual level.
THings to think about....
1. Are these people Republicans?
2. Could this be a part of perfecting something that enlarges and goes against incorrect accounting practices of corporations, e.g., ‘corporations are the bad guys’.
Sounds like you’re the front line and quiet way to perfect the strategy, since your clients wouldn’t have $1000/hour/lawyer legal team advice.
He not only distinctly recalled having filed those years, as in every year, but that he had had refunds all those years as well. The IRS insisted he file, he asked them for the data (very simple employee filing), filled out and signed the forms to get them off his back, and then had three refund checks to contend with.
He banked them, assuming the IRS would discover their error and want the money back.
Seven years went by, and he finally spent it.
The IRS, evil though they are, don’t just show up unannounced in person and start asking for copies of records without saying why they want them.
Well, my bad, a little googling tells me they sometimes DO just show up... but you don’t have to tell, or give, them anything. Check this out:
I hope you/they get it straightened out with a minimum of cost and inconvenience. Sorry for what you saw earlier as disrespect, but I didn’t intend it that way. Cheers.
The IRS transposed my middle child’s SS in their database (it was correct on the tax forms) but of course they couldn’t seem to fix the problem and some days they couldn’t seem to understand it.
First they notified tham that we had provided them with an invalid number, sent them photocopies of the BC and the SS card. The following year they seized our tax return for back taxes and fees, fines, etc because they retroactively refigured our return with one less dependant due to invalid SS# For another year and a half I kept phoning and faxing and mailing and they kept sending bigger due notices with bigger threats.
Occasionally I would get someone on the phone who professed to understand it was their error but they were always unable to access the file to affect the change.
Long story short, I finally contacted my US Senator with the documentation and asked him to get it fixed. By then they had seized two tax returns and would have held a 3rd. Got a nice letter back from the senator’s office and a check from the IRS.
So data loss, computer systems that don’t function, files and records buried in basements and staffed by people who don’t care and whose job security and union memebership means they don’t have to care.
Well, the IRS is incompetent, to say the least. I’ve been reading a blog about folks who filed for the First Time Home Buyer’s Credit. The IRS really messed up on this one, they’re months behind on getting the payment to those who filed, and just keep kicking the can down the road with excuses to the home buyers because of incompetency within the agency. Anybody care to read the blog, it’s here (scroll down, for pages of complaints about the IRS’s handling of this boondoggle):
http://www.lvrealty.net/news/first-time-home-buyer-tax-credit
I think the answer to your question is, Who knows?
Most likely the IRS office in question has hired new people, and they are fishing through the files looking for someone they can sock for some money. Who knows whether there is any logic in it?
I ran into a similar situation a few years back and it wasnt until I got ahold of 2 US Senators and got them involved that things calmed down. If you have a Republican Senator.
5 years is too long if the returns have been filed. The SOL has run for everything but criminal stuff. My guess is something about the returns your are filing are not matching to something, perhaps w-2’s, perhaps payments or perhaps when the FTPS was started something in the names did not match.
If you are not a CPA or attorney, find one that can get a POA and have them talk to agent. Clients are clueless in interpreting what they are looking for.
Yes, they do. They also levy accounts without notice. It happened to me, because - even though the 1065s, and 941s, and 940s all were pre-printed with the proper address - they had a mailing address for notices that I hadn't lived at for more than 10 years and were sending all their correspondence there for the better part of a year.
And it was over THEIR error of assigning me new EINs every year because whoever typed my information into the database mis-spelled my company's name. Thus every annual return was flagged as a new business and a new EIN was assigned.
Then one day, here comes Mr. Revenue Officer to my office to inform me they had levied my corporate AND private bank accounts and I had 24 hours to produce my dozens of missing tax returns on my 7 other businesses or I would face civil and criminal prosecution.
2 years and $250,000 later I finally got them to drop their lawsuit (they declared me as uncollectable - I'm still guilty because it has not been adjudicated otherwise, but they will no longer try to collect). Of course, I'll never see a dime of the money I spent (which was about 1/10th of what they were charging me with), and the liens are still on my house and cars (even though I've been trying to get them removed for the last 3 years - yes, personal assets liened against for a corporate issue).
Now the latest fun? I closed that business in 2007 and my CPA (a senior partner now at D&T) and business lawyer properly shut everything down with the Federal Government and the State. The IRS - every 4 to 6 months - insists I filed a 2008 return and never filed a 2007 return and that I have thousands of dollars of penalties to pay.
When I FINALLY get through to someone who will provide a FAX number where my lawyer and CPA can FAX the 2007 return and the last "we screwed up" letter from the IRS absolving me of the error, I get another letter stating they screwed up and absolving me of the error.
And 4 to 6 months later, the same crapola starts over again...
You would probably do better in appeals or by using the advocate, I have had great results for clients using both.
They offered to cut the penalties and fines in half if we would just send them a check! WTF! They can't seem to find that particular 1099 they say we screwed up on as well... just send the money!
It's small enough to just comply with their demand, but this smells of harassment, and I'm going to make them prove it!
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