In this section, briefly introduce the taxpayer, state the issue and the tax years, and describe the relief requested. Ms. Abigail Adams is a 38 year-old library custodian with only a high school certificate who lives with her elderly father in a rented house. She is a victim of Return Preparer Fraud for Tax Year 2009. She respectfully requests that the IRS adjust her account to reflect the information on her properly-prepared return and abate the tax liability totaling $12,341 associated with a return that was fraudulently filed by a return preparer using her name and social security number.
TAX HISTORY Include the following information in this section:
Filing history of the year or years at issue
Brief discussion of the issues that gave rise to the liability
Discussion of the IRS notice or correspondence that triggered this memo and who in the IRS issued it (Examination, Appeals, Collections). Include a copy.
Discussion of whether the client or the Clinic filed something to give rise to this memo, (e.g. who filed or entered an appearance in Tax Court, the date of Counsel’s Answer, etc.) and whether the Clinic entered an entry of appearance and the date of Counsel’s Answer.
Discussion of where current jurisdiction lies (Appeals, Counsel or Collections or Taxpayer Advocate) and what transpired at lower level of IRS.
Ms. Adams hired Shady Tax Filing Service of Norcross, GA to prepare and file her tax return for Tax Year 2009. (See Exhibit xx which is a transcript of the tax return filed for 2009.) The IRS received a return on February 18, 2010 and issued a refund of $9,830 on March 25, 2010. (See Exhibit xx which is a copy of the account transcript for 2009.) Ms. Adams received a CP 2000 dated June 19, 2012, with a proposed deficiency of $12,341. (See Exhibit xx which is a copy of the CP 2000.) She failed to respond. On November 1, 2012, the IRS issued a Notice of Deficiency to Ms. Adams. (See Exhibit xx which is a copy of the Notice of Deficiency.) She then contacted the Philip C. Cook Low-Income Taxpayer Clinic for assistance with the matter. (See Exhibit xx which is a Power of Attorney Form 2848). Ms. Adams timely filed a petition with the U.S. Tax Court on December 16, 2012. (See Exhibit xx which are copies of the petition and IRS Counsel’s answer.) The case is pending assignment to an Appeals Officer in the Atlanta Office.
STATEMENT OF FACTS Use this section to discuss the taxpayer’s background and current situation, along with a description of the living and working circumstances during the time at issue. For a claim of Return Preparer Fraud, it is important to establish that the taxpayer neither knew about the fraudulent information nor benefited from the increased refund.
Be sure to include and refer to:
A correct and signed return for the year at issue.
Point out that this return shows what the tax liability/refund should be.
IRS Forms 14157 and 14157-A.
Some additional things to consider including:
Specify which claims on the return are true and are false.
What was the taxpayer’s actual employment, income, deductions, and credits? (Use Wage & Income Transcripts as evidence.)
Contrast this income with the income reported on the return.
What was the taxpayer’s actual address or bank account information? (Look to Accurint for address information.)
Contrast this address with the address reported on the return or the direct deposit account.
Did the taxpayer have any children or dependents? (Use tax returns from other years as evidence.)
Include a discussion of what steps have been taken to contact the tax preparer. If the tax preparer is no longer operating or you are unable to contact the business, document this fact in the memo.
Demonstrate that the taxpayer did not receive the full refund. Such as,
Point out that the refund check (or prepaid card) was not mailed to the taxpayer’s address.
Provide bank statements showing that the refund was not deposited in the taxpayer’s accounts.
Have supporting documents and, whenever it is referred to, be sure that it is described, e.g. “Attached as Exhibit X is a copy of the lease that the taxpayer entered into showing that the taxpayer lived at the premises during the period of ____ to ____.”
Ms. Adams is a full-time custodian at Central Library in Norcross, GA. (See Exhibit xx which are two months of pay stubs from Central Library with an average of 38 hours worked per week.) She has worked at the library for the past 13 years, she has neither had another job nor another source of income. (See Exhibit xx which are copies of Wage & Income transcripts from 2008-2011 showing no income other than Central Library; see also Exhibit xx which is a signed statement from Ms. Adams.) In 2009, Ms. Adams received $24,112 dollars in wages from Central Library, with $650 in withholdings. (See Exhibit xx which is a Wage & Income transcript for 2009.)
She has lived for the past 8 years with her 74 year-old father in a rented house at 123 Cherry Lane, Norcross, GA (See Exhibit xx which is a copy of an Accurint report listing Ms. Adams’ residence as 123 Cherry Lane; see also Exhibit xx which are pay stubs addressed to Ms. Adams at Cherry Lane.)
Ms. Adams has no children or dependents. (See Exhibit xx which is a signed statement from Ms. Adams; see also Exhibit xx which are copies of transcripts of tax returns filed for 2007-08 and 2010-11 reporting no dependents).
For the past twelve years, she has had only one bank account, with HomeTown Banc. (See Exhibit xx which are bank statements from February-May 2009).
In February of 2010, Ms. Adams visited the office of Shady Tax Filing Service at 111 Main Street, Norcross, GA to have her return prepared. This was the first time she had used a return preparer. (See Exhibit xx which is a signed statement from Ms. Adams.) With the W-2 Ms. Adams provided, the return preparer used a computer to prepare a Form 1040EZ while Ms. Adams waited. The preparer told Ms. Adams that she was due a refund of $460, but if she wanted her money now, he would give her a check for $400 and route the refund to his own bank account. Ms. Adams agreed, and she authorized the preparer to electronically file her return by completing a form. The return preparer gave Ms. Adams a check for $400, which she promptly deposited into her bank account, and an unsigned copy of the prepared return (see Exhibit xx which is a copy of the bank statement for February 2010 showing a deposit of $400 by check; see also Exhibit xx which is a copy of the Form 1040EZ given to Ms. Adams.)
On February 18, 2010, the IRS received an electronic filing of Form 1040 for Ms. Adams. (See Exhibit xx which is a copy of the return transcript.) The filed return reported $24,112 in wages, $3,010 in withholdings, a $10,000 business loss from “construction” income of $20,000 and travel expenses of $30,000, four children as dependents, and a refund of $9,830 due to a combination of the high withholdings, EITC, and child tax credit. The return directed the refund to be directly deposited to account number xxxxxxxxxxxxx, and the refund was issued on March 25, 2010. (See Exhibit xx which is a transcript of the 2009 returning indicating a direct deposit; see also Exhibit xx which is the account transcript for 2009 showing the refund issue date). Ms. Adams’ sole bank account does not match the number given on the return, and she did not receive a refund deposit from the U.S. Treasury in March or April of 2010. (See Exhibit xx which includes bank statements for March and April 2010.)
On August 18, 2012, Ms. Adams attempted to visit the office of Shady Tax Preparer Service at 111 Main Street. She found that the office was no longer at this address, and had been replaced by a restaurant. (See Exhibit xx which is a photograph taken by Ms. Adams of 111 Main Street.) There are no records on the internet of Shady Tax Preparer Service at 111 Main Street.
Ms. Adams has prepared and signed a Form 1040 EZ for Tax Year 2009. (See Exhibit xx.) She has also completed and signed IRS Form 14157 and 14157-A. (See Exhibits xx and xx.)
Ms. Adams understands that she has made these claims under penalties of perjury. (See Exhibit xx which is a signed statement.)
APPLICABLE LAW This section does not include facts. References should be made to Code sections, cases, regulations, and IRS published guidance (such as revenue rulings). A return that has been altered by a return preparer after the taxpayer’s signature is null. I.R.C. section 6065 specifies that “…any return … shall contain or be verified by a written declaration that it is made under the penalties of perjury.” This requirement has been affirmed by the U.S. Supreme Court as part of the four-part “substantial compliance” test for determining if a return is valid. Beard v. Commissioner, 82 T.C. 766, 777 (1984), aff'd per curiam, 793 F.2d 139 (6th Cir. 1986).
When a return has been altered by a return preparer without the taxpayer’s knowledge, the taxpayer’s signature is not able to document that the taxpayer was able to verify the contents of the return. As such, the return does not comply with section 6065 or the substantial compliance test of Beard, and the return is not valid.
IRC section 6404(a)(3) gives the Secretary the authority to abate any tax liability that has been erroneously assessed. Treasury Regulation section 301.6404–1(a) provides, “The district director or the director of the regional service center may abate any assessment … if the assessment has been erroneously or illegally made.” Further, the Internal Revenue Manual states, “According to the Code and Regulations, the Service has the authority to abate tax.” 184.108.40.206 (10-09-2012).
APPLICATION OF LAW TO THE FACTS Do not mention new facts here. All facts should be set forth in the Facts section. The IRS has proposed a tax liability based on a return that was modified without Ms. Adams’ knowledge by a return preparer. She had no knowledge of the fraudulent information contained in the return, and she did not profit from the excess refund. Any tax liability stemming from the portion of the refund related to the fraudulent information should be abated for Ms. Adams because the liability has been erroneously assessed based on a null return.
Ms. Adams was unaware of any income expenses not related to her job at Central Library, of any claimed withholdings in excess of the amount reported on her W-2, and of any children claimed as dependents. Because of the claimed business loss, inflated withholdings, and fictitious children, the IRS issued a refund that was larger than that due to Ms. Adams. However, Ms. Adams did not receive the refund issued by the IRS because the refund was deposited into an account neither owned nor accessed by Ms. Adams.
CONCLUSION Ms. Adams respectfully requests that she be relieved of the proposed tax, penalties, and interest resulting from the income, withholdings, expenses, and dependents fraudulently reported by her return preparer for Tax Year 2009. She also requests that the IRS accept her properly-prepared 2009 Form 1040EZ and adjust her income and withholdings accordingly.