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One thing nobody's mentioned yet - don't ignore the letter or miss the deadline to respond! Even if you haven't hired help yet, send something in writing acknowledging receipt of their notice and stating that you're in the process of gathering records and seeking professional assistance. I made the costly mistake of missing the 30-day window to contest an IRS assessment, and it severely limited my options after that. At minimum, request an extension while you find representation. You can always do this yourself even before hiring someone.
Thank you for mentioning this! The letter gives me 45 days to respond or file an appeal. Should I just send a simple letter saying I'm gathering documentation and seeking professional help? Or is there specific language I should use?
Yes, send a simple letter acknowledging receipt of their notice (include the notice number) and state that you're gathering documentation and seeking professional representation. Request an extension of time to respond fully - typically 30 or 60 additional days. Keep it professional and straightforward - don't try to argue your case yet or make any specific claims about your tax situation until you have professional guidance. The goal is simply to prevent default assessment while you get your team together. Send it certified mail so you have proof of delivery.
Been through this. For $140k, definitely get a tax attorney first, then let them decide if you need a CPA too. Don't cheap out here - a good tax attorney literally saved me about $70k on a $120k assessment. Make sure whoever you hire specializes in tax controversy/IRS disputes specifically. Regular CPAs who just do tax prep often make things worse in audit situations. Look for someone with at least 10+ years experience dealing with the IRS.
Just to add something nobody mentioned - if your brother had ANY self-employment income (like mowing lawns, babysitting, etc that he got paid for directly, not through a company with a W-2), the filing threshold is much lower - only $400 for self-employment income! So if any of his income wasn't from a regular employer, different rules apply.
Oh that's interesting! He did do some weekend yard work for our neighbor and got paid about $300 cash throughout the summer. Does that count as self-employment? And would that change whether my parents can claim him?
The $300 from yard work would technically count as self-employment income, but since it's under the $400 threshold for self-employment tax, it doesn't trigger a required filing on its own. Your brother would add this to his total income though if he does file. This doesn't change your parents' ability to claim him as a dependent at all. The dependent qualification is based on age, relationship, residency, and support tests - not on whether the dependent files their own return or how much they made (within certain limits that your brother is well under).
Lots of great advice here but I want to add: even if your brother isn't required to file, having him file his own return is good practice for learning about taxes! My son started filing at 16 and now at 20 he's way more financially literate than I was at his age.
This is so true! I wish someone had taught me about taxes when I was younger. I was completely lost when I had to file on my own for the first time in college.
Just a heads up - when you're married filing separately, there are a bunch of other limitations beyond just the mortgage interest deduction. You lose a lot of credits and deductions when you choose MFS status. Have you considered whether filing jointly might be better overall, even with this mortgage interest situation?
We're definitely not in a position to file jointly given our separation, and I think we're past the point where we could amend to file jointly anyway. She's already filed her return claiming the full mortgage interest deduction, so I'm just trying to figure out if I can amend mine to get my fair share of it. But thanks for pointing that out!
When I went through my divorce, I learned you can actually request your ex's tax transcripts from the IRS if you filed a joint return in any previous years. Might be helpful to see exactly what she claimed so you know what you're dealing with.
Something similar happened to me, and I found out it was because I didn't include my SSN on every page of the documents I sent in. Apparently if they can't immediately identify who the paperwork belongs to, it sits in a pile somewhere. When you resend your documentation, make sure your SSN, the tax year, and the notice number appear on EVERY SINGLE PAGE. Also include a copy of the notice itself as the first page of your package. I learned this trick from my aunt who worked at the IRS for 20 years.
That's a great tip! I definitely didn't put my SSN on every page, just on the cover letter and the forms. Do you know if there's any specific format they prefer for this info? Like should it be in the header or just handwritten at the top?
The IRS prefers it in the upper right corner of each page. You can handwrite it or type it, but make sure it's clear and includes both the SSN and the tax year in question. Something like "SSN: XXX-XX-XXXX Tax Year: 2021" is perfect. Also, don't staple anything! Use paper clips if you need to keep pages together. Staples slow down their processing because they have to remove them to scan everything.
Has anyone mentioned the Taxpayer Advocate Service yet? They can sometimes help in situations like this where there's been an obvious breakdown in normal IRS processes. They won't represent you like a tax attorney, but they can often cut through red tape and get someone at the IRS to actually look at your case. They're free to use and pretty effective for situations exactly like yours. Google "Taxpayer Advocate Service" + your state to find the contact info for your local office.
TAS has been swamped since the pandemic. I tried using them last year and they told me they were only taking "hardship" cases where people were facing immediate financial harm. Worth a try though!
Edwards Hugo
Another way to check for potential offsets is to look at your tax transcripts. You can request these on the IRS website, and sometimes they'll show codes that indicate an offset is being processed. Look for transaction codes 898 (refund withheld) or 896 (refund offset). Not foolproof but might give you some info.
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Declan Ramirez
ā¢Thanks for this tip! I just checked my tax transcript but I'm not sure I'm reading it correctly. Would these codes show up before I file my taxes for this year or only after I've filed and they process my refund?
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Edwards Hugo
ā¢These codes typically show up after you've filed and your return has been processed. They indicate that your refund is being diverted to pay another debt. Before you file, the transcript wouldn't show these specific codes. However, if you've had offsets in previous years, you might see these codes on your past transcripts, which could indicate you might face the same issue again if the underlying debt hasn't been resolved.
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Gianna Scott
Don't forget to check with your state department of revenue too! IRS offsets are federal, but states can also take your state refund for debts like unpaid tickets, toll violations, etc. I found out the hard way when my state refund vanished last year for a parking ticket from 3 years ago that had doubled with penalties.
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Alfredo Lugo
ā¢That's a great point. My husband had his state refund taken for child support arrears even though he was current on payments. Turns out there was an accounting error and we had to fight to get it back. Always good to check with both federal AND state before counting on that money.
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Gianna Scott
ā¢Yes! And what's worse is that sometimes the different government departments don't communicate well with each other. I had paid the ticket but it wasn't properly recorded in their system. If you're concerned about state offsets, most states have their own offset programs you can call to check, similar to the federal TOP system. Just search "[your state] tax refund offset phone number" and you should find the right contact info.
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