You're all done with your taxes for the year and you're relaxing on a beach hoping to never hear about taxes again. Then - you receive an IRS notice for a return that TFX has prepared. While certainly unpleasant, please don't freak out - the first step is to analyze the nature of the IRS notice.
In general, there are three reasons for why the IRS could have rejected/questioned your return:
- The client did not provide correct information
- TFX made an error in tax preparation
- The IRS agent who reviewed your return woke up on the wrong side of the bed and decided to take it out on you.
If TFX prepared your return and it is later discovered that the return requires amendment, please see these illustrative examples of how the amendment would be priced. You will receive a full engagement letter outlining the costs when we review the IRS letter and analyze your situation.
- Client did not properly report interest and dividend income from a U.S. bank. Gross income remains below $100K, Amended return required to report additional income. The cost of amended return is $100 for form 1040X
- IRS disallowed moving expenses deduction. Client does not have supporting documents and assumes higher earned income. Income increase result in higher tax but IRS did not adjust foreign tax credit. Amended return requires adjustment to form 1116. The cost of amendment is $100 for form 1040X.
- Client missed reporting of retirement income. With the addition of retirement distribution income increased from $90k on the original return to $120K on the amended return. The cost of amendment is $200 ($100 for form 1040X and $100 for income over $100K)
- Taxpayer missed reporting 5 (of 10) brokerage transactions. The cost of amended return is $125 ($100 for Form 1040X and $25 for brokerage transactions). If original return had 10 brokerage transactions they would be all included in flat fee (10 brokerage transactions). Since this is an amended return, the additional transactions are not free even though they fit into the 10 transactions limit. There is no double charge for the previously reported transactions.
- The Social Security number provided by the client on the original return was incorrect. The IRS disallowed personal exemption and assessed tax. Amended return not required. The client is advised to send a copy of the social security card and an explanation letter to the IRS with the request to allow personal exemption based on the corrected social security number.
- Client did not report interest in a foreign corporation. There was no income distribution to the client from CFC. No changes to form 1040. The cost of amendment is $600 ($500 base price for form 5471 and $100 form 1040X).
- Client did not report foreign corporation and did not report dividend distribution from the corporation. With the newly reported dividends income exceeds $100K and with the balance on corporate account threshold for FATCA is met. The cost of amendment is $800 ($500 base price for form 5471, $100 for gross income over $100K, $100 form 8938, and $100 for form 1040X). *If the additional dividends do not lift the client over $100k threshold, this would be $700.
Amended return results from the error made by TFX. The Amended return is free regardless of the error type (incorrect calculations, data entry errors, omission of Treaty exemption, etc.
No reason listed - the IRS version of 'Just Cause'
- We recommend you call the number on the notice and ask the agent to send a written notice outlining the reasons for the changes/rejection.
- If you wish, we can do this for you under our 'representation service', but this is a billable hour project and we recommend that you take this administrative task yourself. Once the notice arrives (reason for IRS - proposed changes) - then we can analyze it and determine a plan of action to get you back into compliance.