Taxes: Who You Gonna Call?

Because the federal government and the states are in difficult financial shape, they’re stepping up efforts to collect tax revenue. We’ve seen a large increase in letters from the IRS and state governments requesting more information or more tax dollars, based on their evaluations.

In some cases, the tax authorities are correct, but in many cases, they are only fishing. So who are you going to call when a tax letter comes to your mailbox?

We hope you’re going to call BWFA. Our team of tax professionals is ready to assist you. We’ll work with government auditors to fix the problem. It may take some time to completely resolve the issues—perhaps as much as a year. But we will stick with it and make sure that the details are handled properly.

Here’s an example of BWFA going to bat for one of our tax-preparation clients. The client received letters from the IRS and the Comptroller of Maryland requesting payment of taxes due for 2010 and 2011 because of a distribution from a Health Savings Account. The taxpayer correctly took money out of this account because he had medical bills to pay. The distribution should not have sparked any extra taxes. With our assistance, the client resolved the 2011 tax issue (and even received a refund!), and we’re close to resolving the 2010 issue.

Some of our clients do not use our tax-prep services, but we have still been able to help them when a tax question has occurred.

1. A client filed his return late, so Maryland has requested an additional tax payment. On behalf of the client, we wrote a letter to the state and requested a one-time waiver of the penalty.

2. An investment client received an IRS letter seeking $20,000 of additional taxes due to non-reporting of capital gain income. This occurred because the IRS did not know the client’s cost basis for the original purchase of the investments. After we created a report that showed the purchase price (cost basis) of the investment and subtracted that from the gross proceeds reported to the IRS, we found that the client did not owe any additional taxes—and is actually due a refund. This type of audit also affects the client’s state return, and we’re preparing a Maryland amended return to get a refund of those taxes as well.

The lesson to be learned is that you should call or e-mail BWFA and let us know that you’ve received a tax letter. We can’t fix what we don’t know is broken! You don’t even have to be an ongoing tax client to avail yourself of our services. We’re here to help ALL of our clients.

By Bob cassel  |  EA  |  CFP