Sunday

Life is stranger than fiction.  The IRS agent (MsKR) who was through my office last week to look over that very complicated client return for 2008 sprung a surprise on me that second afternoon that she was in my office.  It turns out that she had also done some routine background checking on the preparer (LtPC, of course) as a normal protocol of her primary audit.  With no previous notice of any sort to me, it seems that my file had been flagged for an investigation of a family matter that went back over twenty years!

MsKR:  I'm not sure if you were aware of the Service's new capabilities, but our IT people have been designing programs to cross-check Social Security numbers of preparers with open-issue returns that have been sitting in the equivalent of our dead-letter office.  Your number hit my screen this week since I was assigned to be here.

LTPC:  Uh, I've signed a lot of returns in the last twenty or thirty years.

MsKR:  Actually, you didn't sign the return I've been tasked to review.  Some CPA in California named, let me see, yes, Howard Something was the preparer. We've lost track of him.  But you did sign returns beginning around 25 years ago for Philip and Margaret, right?  From the last name and some other confirming facts that I am not able to disclose, I assume that Philip and Margaret were your parents.

LtPC:  I already don't like anything about this.  There is such a thing as a statute of limitations, ya' know  Not to mention the facts that, a) Philip and Margaret are no longer with us, b) whatever records existed way back then, are long gone, and 3) there's no money to collect, regardless of your conclusions.  I'm seriously offended that the IRS would expend resources on this kind of ghost-hunting.

MsKR:  Oh, you'd be surprised at our profitability of this effort.  The computers do most of the work for us, and after that Bernie Madoff thing, Enron and World Com, Congress has given the Service extra funding to go hunting for others.  I mean, when these scandals hit the papers, the media is always pointing to the IRS (and George Bush) as to why the government didn't discover the crimes sooner.  We have been told by Washington to dig deeper.  So we are.

LtPC:  Hmmmm.  Haven't the lawyers been able to block these old cases?  I mean, really.  Don't you have better things to do than chase ancient history?

MsKR:  We've won every suit filed by the defense lawyers.  The big firms in C-town, LA and The Big Apple have set up dedicated tax guys to settle these inquiries as soon as they come to them.  The math is usually such that it's cheaper to pay us than the lawyers.

LtPC:  OK.  You've pretty much ruined my day anyway.  I'm certainly not going to hire a blood-sucker.  What's the deal?

MsKR:  Well, as you are aware, there's no statute for non-filed returns, and that's kind of the situation here.  It looks like Philip and Margaret operated a dairy farm in Southern Iowa for many years, right?

LtPC:  Right.  Sure.  We milked a small herd of Guernsey's.  But I'm almost certain that they filed all of their returns.  After my Dad passed away in 1994, I remember going through old records, bank statements and tax returns that went back to the '40's. I burned stuff for two days in their 55-gallon-drum, non-EPA-approved incinerating device in the back yard of their house.  Heck, they never made any money!!

MsKR:  Our missing tax return identification program (M-TRIP) suggests otherwise.  It says here that there is no record of a return for 1977.  LtPC, I'm telling you that you have a problem.

LtPC:  This is a joke, right?

MsKR:  Hardly.  I have M-TRIP on my side.  And, since you just said that you destroyed all of those records that could possible prove otherwise, I think you need to consider contacting other family members and working out a plan to pay the tax due.

LtPC:  I'm almost afraid to ask.  As a matter of fact, I can't believe that I'm asking this question because the concept is so ludicrous.  How can my parents possibly owe tax now from 1977?

MsKR:  The M-TRIP shows that there were numerous livestock transactions at the Bloomfield sale barn in the Summer of 1977.  It looks like 43 head of cattle were sold for a gross price of $19,078.16.  And the Wapello County Assessor's Office is showing real estate sales of $48,950.00 on land in Green township recorded as owned by Philip and Margaret as joint tenants.  Finally, a bigger cattle operator from Oskaloosa issued a statement showing that he bought $1,750.00 of baled hay from your Dad.  That's over $70,000 of income that our non-filer system computed tax on of just over $9,000.

Lt.PC:  No way.  There has to be a mistake.

MsKR:  Here's the  tax assessment notice.  You have 30 days to respond.

LtPC:  I don't know what to say. 

MsKR:  Obviously, you have my contact information.  Call me next week after you have had the chance to consider all of these facts.  We have a very strong case and are under orders to collect the taxes due.

*******

To be continued.

BCOT