The Case of the Missing Homebuyer’s Credit

Written by: Cheryl Panattoni, EA

I just closed a case that was related to an audit I handled a few years ago. Back then, as I was reviewing the member’s return for the 2010 audit issue, I noticed that she had never applied for the first time homebuyer credit, even though she qualified for it. The credit was worth $8,000, and I advised her to amend her 2009 tax year to claim it. As long as she held on to the home for 3 years and used it as her principal residence she would not have to pay it back.

The challenge was that the IRS examiner was denying the credit because the member had paid property taxes on a vacation rental (timeshare) in 2009. This, he believed, showed that she’d had an ownership interest in a principal residence during the three-year period ending on the date of purchase of the new principal residence, which disqualified her from being eligible for the credit. The case was further confused because the member had inherited a home that she and her partner had lived in together before she died suddenly.

I was assigned the member’s second case in early July of 2013. I sent out the first response on July 23, 2013, and even though we received a confirmation that the letter was received, we did not receive an answer denying the credit until March of 2014. We sent another response in April of 2014, and our second denial arrived in August of 2014. This time the IRS claimed that the member had sold the home prior to the 3 year holding period.

The issue was even further confused by the fact that the member had transferred the inherited property into a trust and had sold the property for a loss prior to the 3 year mark. We had to submit Form 5405 to indicate that she had sold the property for a loss, along with a copy of the trust documents listing the member as a sole beneficiary.

In September of 2014 we submitted a letter for a Small Case Appeal. I followed up to confirm the IRS had received it, but at some point later they lost the file. Finally, in May of this year I put in a request for help with the Taxpayer Advocate Service (TAS). I had to submit the case to the TAS office twice and make numerous follow up calls.

Yesterday I received a call from the advocate that IRS had closed the case, allowing the credit and granting interest in the amount of $1,515.42. The member will receive a refund of $9,515.42. Needless to say, she is thrilled with the result. gets dozens of comments from customers we have helped every week. Below are just some of the reviews we received last month.

My audit representative was very knowledgeable and courteous. Her guidance and support was very helpful in getting the case dismissed. She also contacted me to make sure I was aware of the next steps and what to expect. It was much appreciated.

Sherif, Osprey, FL


I must say my case was handled very professionally, I was kept up to date at all times, the information portal was easy to use, and most importantly, my case was satisfactorily resolved. I have been paying for Tax Audit services for 10 years and this is the first time I needed to use. This one case that you resolved for me paid for the service five times over what I paid in in the last 10 years. It is a better investment than the stock market. Thank you.

Philip, Utica, MI


I highly recommend, you’ve earned my trust.

Bradley, Naples, FL


My audit representative was outstanding. This was a long process and she kept me informed every step even if just to tell me that we hadn’t heard from the IRS. I trusted her completely and her guidance proved to be spot on. I will never file a tax return without Tax

Dorothy, Dallas, TX


My audit representative did an outstanding job representing me and advising me on my Tax Audit Situation. Everything worked out well with no penalty.

Lee, The Villages, FL


Great service. I wouldn’t submit my return without signing up with TaxAudit.

Herbert, Tucson, AZ


I am completely satisfied with the service provide by TaxResources, Inc. I would not want to file any tax form without their protection.

Donald, St. Paul, MN


I am extremely pleased with the way my issue was handled by my tax audit coordinator and my tax representative, who treated me like a valued client, was knowledgeable, professional and guided me through the process expertly. My tax representative was easy to talk to, responded quickly to my inquiries, was very professional and knowledgeable and I was confident in her professional approach to a resolution to my tax issue. I received a prompt resolution and was kept informed at all times. I am very pleased and will continue to take a membership with Tax Audit. Thank you.

Rose, Mattituck, NY


I feel very comfortable and very satisfied with excellent quality of service provided to resolve my Tax Audit Issue from IRS. My audit has been completely resolved with my satisfaction.

Moreno, San Jose, CA


I thought dealing with the IRS was going to be the ultimate nightmare – considering 2 audits were triggered. However, my audit representative saved me all the headaches and helped me resolve my issues in a timely manner – hard to find words to describe how much I appreciate the help from the TaxAudit team. Thank you!

Catalin, Folsom, CA


I was very impressed with the quick response once I reported receipt of letter from IRS. My representative made this a painless experience and helped alleviate a lot of “IRS anxiety”. Thank you!

Wanda, Pearl River, LA


I’m not sure how I would have made it through this stressful time without the help and patience of my agent. She was wonderful and really helped to ease the pain of being audited by the IRS. Thanks again!

Stephanie, Houston, TX


It was a great relief to have the representation and I was very grateful to my representative for all the advice and time he spent on my case.I will purchase Audit Protection every year and will recommend highly!

Sheila, Calabasas, CA


My wife and I were selected for a full research audit by the IRS. The entire process lasted eight months, and we’re still waiting for the final letter from them confirming that they’re finished. We greatly appreciated all the help we received from our audit representative during this lengthy process. He was always available to answer our questions, and provided really good guidance throughout.

Christopher, Columbus, OH


Tax Audit and my representative was very helpful and save me A LOT of time. I do not know what I would have done with this full audit if it had not been for having the TaxAudit service. I will defiantly buy this service every year when I file.

Daniel, Wilmore, KY


The ability to hand the matter off to a representative was invaluable. If it wasn’t for the representation, I would have just written off the refund because it wouldn’t be worth the stress. really came through.

Michael, Spokane, WA


We are very pleased; the audit team took over and handled the situation for us entirely. They changed the situation from a charge of approx $4,000 to a credit of $15. And we were spared the headache of dealing with the IRS!

Myron, Wakarusa, KS


You are AWESOME! My Dad was afraid he’d have to deal with the IRS all by himself, but having you there to help him was great. You took care of his tax issues and gave him peace of mind – WONDERFUL!!!

Michael, Ocklawaha, FL

Not All Pay Is Treated Equally

Written by: Jonathan Crosby

In March of this year I was assigned a case for a member who received a notice from the IRS. It was a CP2000 Automated Under Reporter Notice. She had received $81,514 for performing a fellowship for a nonprofit research organization, and the IRS now claimed that the income was subject to self-employment tax. She was being assessed an additional tax liability of $12,323, including penalties and interest.

This was the perfect case for me, as I had recently learned about a 1960 IRS ruling (revenue ruling 60-378) and a 1987 notice (notice 87-31 [1987-1 CB 475]) in which the court held that fellowship and scholarship grants should not be treated as income “derived from a trade or business” for self-employment tax purposes unless teaching or other services are a condition of receiving the award. Armed with this knowledge, I asked the taxpayer the appropriate questions to ensure that she met the qualifications summarized in the court case. I was happy to learn that she had not been required to perform teaching or other services. I asked her to get a letter from the organization attesting to her participation in a non-profit fellowship research program. This was the document we needed to prove our case that she was not subject to SE tax.

Once I obtained the letter along with the member’s Form 1099-MISC, I wrote a response quoting the court ruling in my argument. On July 02, 2015, I received notification that the inquiry was closed with no change to the taxpayer’s original return. Needless to say, the member was extremely relieved and grateful for our service. gets dozens of comments from customers we have helped every week. Below are just some of the reviews we received last month.

My audit representative was very knowledgeable and professional. He gave me the guidance and feed back needed to deal with my IRS issue/concern! Thank you!

Luther, Colorado Springs, CO


Can’t put into words how the team reduced the pressure and anxiety that one has with such an experience.

Glenn, San Ramon, CA


Our rep was GREAT!!! She was very friendly, personable, knowledgeable, clear in her explanations, and overall just a pleasure to work with!!!

Michael, Alta Loma, CA


I am completely satisfied, and grateful, for the prompt and professional process handles issues with IRS Notices. I am especially pleased with my audit representative and his thorough and prompt communications and processes in resolving the case. I have been involved in issues for the past three years with the IRS and we figured out why the issues were occurring and resolved flaws in the reporting of my 1099s to the IRS. I cannot thank all of the staff enough for relieving the stresses of handling IRS issues.

James, Brandon, FL


I was very apprehensive. The team explained the process and walked me through how they thought the process would work. They immediately contacted me when it appeared a scam artist had reached out to me. I cannot be more pleased with the quality and service of my representatives.

Charles, Foster City, CA


Insightful, impressive, and responsive. Thank you,

Cheryl, Great Falls, MT


Much better than I could have ever imagined. Worth every penny!

Robert, San Marcos, CA

My Story of Perseverance and Commitment to Our Members

Written by: Brett Rosser

I was assigned this case in April of 2013. At the time it was an office audit, and it was being conducted by a Tax Compliance Officer (TCO). As I went through the two banker boxes of documents, bank statements and the members’ QuickBooks file, I found that many of the documents were in Chinese. This was due to the fact that the members’ business is importing products from China. I reviewed the documents with the TCO over a period of about six months before she told me about her pending retirement. While she advised me to expect a no-change report, she never did send it, and the case was transferred to a new TCO.

The new examiner contacted me to request more information about the reported income and said that the previous auditor had made quite a few adjustments, resulting in a balance due of about 116K. The new TCO refused to review some of the support documents and made adjustments solely based on the QuickBooks file, which was known to be incorrect. One major obstacle was the Chinese documents, which had to be verified. The member hired a third party to complete an income analysis, identify the numerous transfers, and try to lower the almost 200K in additional income the auditor was applying to the current report with a new balance due of 269K due for this two year audit.

During the analysis the firm completed pro-forma returns so that I could show the auditor what the correct adjustments should have been, but these just seemed to confuse the TCO even more. We were able to get some of the expenses adjusted, but for every step we took forward the auditor seemed to change her focus, make assumptions, and make unfounded adjustments. In my last meeting with the TCO she said, “this is all over my head,” and soon after that the case was transferred to a Revenue Agent (RA).

The transfer took place in January of 2015, twenty months after the case had first been opened. The new RA was equally confused until I met with him to explain the member’s business, the history of the case and the associated records. The RA questioned some of the actions that had been taken previously on the case by the TCOs’. He said he appreciated the effort that had been put into creating the pro-forma drafts. He suggested that the amended returns be signed and submitted so he could accept them. Within a week, the amended returns were sent to the auditor, and three weeks later I received a report that matched the amended returns.

This case proved to be challenging due to the nature of the member’s business, the lack of expertise of the TCOs’, and the transfers of the case within the IRS. After more than two years, finally the case has been closed and the member’s tax liability went from a high of $269k to a final number of $23K. The member has expressed his appreciation and gratitude for the efforts we made on the case and the final results we achieved. gets dozens of comments from customers we have helped every week. Below are just some of the reviews we received last month.

Our Tax Representative made follow-up contact with us following the IRS review of our case to apprise and advise us on how to proceed in bringing our case to closure with the IRS. Our tax representative greatly eased our anxieties and diminished our stressors because the Power of Attorney authorized her to communicate with the IRS. My husband and I greatly appreciate our rep’s advice and expertise, as well as the service she performed on our behalf.



My tax representative was super awesome. I couldn’t have had a better (albeit scary) tax situation. Our rep was patient, helpful, very informative and kind. Super awesome. Give him a bonus and a trophy. Awesome.

Tia, Woodbury, NJ


Tax Audit Defense was brilliant. This is the highest value tax service. I will continue using Tax Audit Defense until I no longer have to file taxes.

Amy, Los Angeles, CA


My reps were great. I felt very confident that they researched my situation throughly and professionally. Even though they concluded that I did indeed owe the IRS, they offered suggestions for me to avoid my errors in the future.

Paula, Pensacola, FL


I was really impressed with everyone and the service was great – I really can’t believe how professional the whole service was and is.

Peter, Winnetka, IL


Thank you so much, TAC, for your Amazing service, for your support, help, consideration and professionalism! I am Extremely Satisfied for the Service you and your team provide in my case! I will definetely highly recommend tax audit service because of the way you handled my case! God Bless You!!!!!!!

Janice, Venice, FL


My representative was extremely knowledgeable and patient with me through the audit process.

Brodgerick, Katy, TX

The IRS Does Have a Heart

Written by: Vanessa Elkins

When tragedy strikes sometimes life’s lessons hold the answers. This story begins when one of our Members received a CP2000 notice from IRS on February 23, 2015, with a proposed balance due of $1,858.

There was nothing unusual about the notice. The IRS was questioning retirement income, gross versus taxable. It was the taxpayer’s circumstance that caught my attention and made the case very sensitive in nature. You see, the Member’s husband had just passed away on February 3, 2015. For the next 20 days the Member’s life began to become a nightmare. She discovered that her husband had cancelled his life insurance policy and she was forced to default on all her bills. She had no idea how she would even be able to buy groceries. The Member did not work throughout the course of their marriage and had no other source of income outside of the Social Security she would receive from her husband. When she received this notice she panicked and was extremely upset as she began to explain her situation to me.

What the Member really needed at that moment was to unload all of her troubles, so I quietly listened as she shared her deepest concerns with a total stranger. As she spoke, she was finally able to calm down. It was then that I explained the notice and all of her options. Next I requested a Power of Attorney and all supporting documents. It became very clear as I reviewed the documents that the notice was correct. I starting wondering, “How in the world can I help this Member?” Then I remembered my Grandmother’s story. The exact same thing had happened to her when my Grandfather passed away. She had called the IRS and explained her situation to them and they cleared the matter up for her. I thought about it and decided to give it a try. The worst thing that could happen would be that they would say no to my request.

I called the IRS and explained the taxpayer’s situation and asked if there was anything at all that could be done to help this Member. He asked me for the date of death of her husband. I provided this information with a copy of the death certificate. As he reviewed the file he determined that the total income belonged to the deceased. He then told me to explain to the Member that she would need to wait for the next notice. He would not provide any additional information to me on that call.

When the Member received the notice she called. She was extremely excited and asked, “Is the notice really true?” She had received a new notice with a zero balance due. She could not have been more satisfied with the outcome and thanked me over and over.

This case reminded me once again that when it seems as if there is no help for the Member and they are facing dire circumstances, you can dig a little deeper and go that extra mile. You never know what victory may be waiting for you around the corner. gets dozens of comments from customers we have helped every week. Below are just some of the reviews we received last month.

Everything was outstanding! Expert knowledge and handled situation quickly and completely. Made all aspects of dealing with this IRS interaction painless and worry free.

Christopher, Hollister, CA


I love TaxAudit. I have been audited 3 years in a row and saved thousands of dollars. I am so grateful. Your service is fantastic! I am a member for life. Thank you.

Janet, Fiddletown, CA


The professional staff and audit lead were extremely knowledgeable and their expertise was evident in their continuous oversight, IRS auditor interface and overall case conclusion – which lead to a positive an accurate final outcome. Excellent service was provided and I could not have done this without the help of Tax Audit!

Matthew, Goodyear, AZ


I have never been so glad that I purchased a protection service before! I will continue to use the audit protection through TurboTax!

Jeffrey, Old Town, FL


I was happy working with your team and I will always call on tax audit if I ever need help.

Benjamin, Brooklyn, NY


I have purchased the additional coverage for years and I’m so glad I did. Everyone was professional and educational. Thank you so much!

Becky, Mission Viejo, CA


Although I was not being audited, my tax professional answered all my questions and helped me with the correct response. He even offered to look over my amended state return to make sure I did it right. This was above and beyond!

George, Glendale, CA

There’s Never a Good Time for an Audit

Written by: Arnold van Dyk, Esq.

Over the past year I dealt with a case that was somewhat difficult and unique, both because of the tax issues involved, as well as the personal issues that the members were going through.

The members were under audit for two separate years, and the case was initially assigned to one of our outside representatives in Texas. After the examination there were several adjustments, but the two largest ones were:

  1.  Almost $200,000 adjustment for underreporting income.
  2. Disallowing more than $100,000 for a theft loss deduction the members claimed on their tax return.

A Notice of Deficiency was issued, with adjustments totaling nearly $150,000. This was the amount the I.R.S. was asking them to pay.

When I first spoke with the member, he was very concerned, and even asked me if he was looking at potential jail time. I tried to calm him down and asked him to give me an explanation of the two main issues on the Notice of Deficiency. He gave me the following explanation:

  1. For the underreported income, he had received “loan payments” from a very wealthy friend. All these funds were used in the course of the business. The problem the IRS examiner had was that there were no loan repayments occurring. The examiner believed that these funds had been received as payment for some type of goods or services.
  2. For the theft loss deduction, the member said he’d had gold bullion coins in excess of $100,000 that had been stolen. He did submit police reports, and had tried to establish the value of the coins from a guidebook of U.S. coins. But the examiner did not accept the taxpayer’s valuation because there were too many discrepancies in the description of the actual coins he claimed to have had.

We decided to file a petition with the Tax Court to dispute the claims, however, shortly after filing the petition, the member called me with some horrible news − he had been diagnosed with brain cancer. The doctors told him his prognosis was not good. I told him to focus on taking care of his health, and we would do our best to take care of the IRS issue for him.

After this call my interaction with the member was limited. I left him messages with status updates as needed, but I did not hear back from him. A few months later his wife called to let me know that he had passed away. She was somewhat distraught, obviously because of her husband’s passing, but also because she did not know how she could possibly pay the amount of money the IRS claimed she owed.

Fortunately, their case was assigned to a very sympathetic I.R.S. Appeals Officer. She looked at all the facts of the case and considered all the issues and arguments we had made on the issues. She removed the adjustment for the unreported income entirely, and allowed almost half of the theft loss deduction the members had claimed. This brought the final agreed upon settlement amount to less than $23,000 of tax due. The member’s wife was very happy and relieved. While the member was not able to share in this good news about the outcome, I hope he knows that we did everything in our power to help him and his family in this difficult situation. gets dozens of comments from customers we have helped every week. Below are just some of the reviews we received last month.

My audit representative was fantastic! She is responsive, a very good communicator, and clearly understands the tax law. I would highly recommend her to anyone!

Patrick, Cumberland, RI


My audit representative was very patient and informative. I was 100% confident that she was well versed, experienced, and educated. I had no doubt that my audit from the IRS would be resolved correctly and to my best legal advantage. I felt as though she really cared about my tax audit, that I understand the process and reasons for the audit. She guided me through the process and was helpful in where to get the information that she needed to complete the audit process from our end. I could not have been more satisfied with her service, expertise, and professionalism.

Jeffrey, San Antonio, TX


My audit representative did an excellent job in replying to the inquiry from the State of Missouri Department of Revenue. In short order, she prepared the necessary documents to support the deductions claimed. The State quickly closed the case without any adjustments. I highly recommend the professionals at!!!!

James, Ballwin, MO


Easy to use, good service that gives peace of mind.

John, Oklahoma City, OK


Everyone was courteous and professional. My audit representative was polite, professional, and reassuring. I will continue using Turbo Tax and include Audit Defense on future tax returns. This was (albeit brief) an awesome experience. Thank you.

Phyllis, Aldan, PA


Having somebody to represent me from a tax audit is very stress relieving knowing that everything will be settled, done in a timely manner, and in a professional way! Thank you for all your help!!!

Jennifer, Carlisle, PA


I could not have been more pleased with the service and responsiveness of your representatives. This is a most professionally provided service and well worth the annual fee.

William, Minnesott Beach, NC


I’m so thankful for Any questions we had were answered, our concerns were addressed, and all along I had the ease of knowing that in the end we would do the best we could given that we had qualified representation. Well worth the money. It was so hassle-free I was completely amazed.

Brian, Houston, TX


Our audit representative was great. All of our audit issues were resolved without a hitch.

Mark, Santa Ana, CA


TaxAudit has eliminated the anxiety I once felt about dealing with the IRS or State agencies. I would NEVER be without TaxAudit. It just might me the best money I have ever spent. Thank you TaxAudit. I no longer fear a letter from the IRS.

Sharon, Savoy, IL

Today was a Gentle Reminder of Why I Love my Job

Written by: Karen Luckart

My daily job can be routine and sometimes not so routine. Correspondence from the IRS can be unsettling, to say the least, for our members. Recently, a case came across my desk that was one of those “not so routine” cases. I was able to lend an ear to a person in need, and it made my day.

In the midst of making a series of routine first contact calls, I dialed a number to make an introduction. When a woman (our member) answered the phone, I was greeted with a shaken and broken tone. I introduced myself and explained why I was calling. The woman on the other end of the line began to cry. While reminding myself not to cross “that personal” line, I asked if everything was okay.

Normally, people are shaken up because of the unknown regarding the audit notice they have just received. But this was different. And then, just like that, out came a whole lifetime of moments and memories. The member, still crying, shared with me the loving life that she’d had with her “brilliant” husband. She described him in detail − what he looked like, what his voice sounded like. She told me how they had moved from their house by the beach to their house in the mountains because of his love for architecture. He’d enjoyed restoring houses to their former glory. As I listened, I could hear her smile as she described more details about their life together and the memories they’d shared.

As she continued with her story, her voice began to exude sadness and she started to cry once again. She described an urn that she was holding in her hands and explained that her husband had just passed away at the beginning of the month. She had just received his ashes about a half hour before I called. I apologized for my timing.

The member continued to talk, telling me about her husband’s cancer and untimely demise. She said the audit could not have happened at a worse time. I tried to think of something to say to her, something that we have been trained to say. But I had nothing; instead, I just listened. By the time she reached the end of her story, she seemed to be at peace. When I got off the phone with her, I had to get up and walk away from my desk.

Today, I could not be more grateful that I had the pleasure of being on the receiving end of this phone call. The woman just wanted someone to listen to her. It was a good reminder that when we pick up the phone, one hundred percent of the time, the person on the other end just wants to be heard. At times it is easy to forget to be personable because the calls and interactions can become somewhat routine. People can be frustrated, rude, or whatever the situation may be. And sometimes, on days like today, moments like this remind me of exactly why I love my job. gets dozens of comments from customers we have helped every week. Below are just some of the reviews we received last month.

2013 was the first year I used TaxAudit. Because of my experience I will use it every year from now on.

Joseph, Alta Loma, CA


My audit representative was really great to work with. Even down to the fact that she adjusts her work hours on the west coast to accommodate clients on the east coast. I expected to work with someone that knew how to correct the problem and she certainly was that, but the part of the service that made me the happiest was the communication. Getting audited, even knowing that I was not wrong, is a stressful event and my representative kept me 100% in the loop, always accurately communicated next steps and always delivered on what she said. Her ‘bed- side manner’ was fantastic!

Adam, Reston, VA


Audits are extremely stressful and intimidating. Having an intelligent, compassionate audit rep relieved a lot of my stress and made it as easy as possible.

Melissa, Artesia, NM


My audit representative handled my case extremely well. The process took over a year to resolve and he did an excellent job keeping me abreast of the processes which were complicated and took over a year to resolve due to IRS work loads. I am extremely pleased with my experience with Tax and find it foolish not to have the protection afforded by paying for this service. I could have never navigated this myself with the IRS. Thank you!

Wayne, Beverly Hills, FL


How scary to get a letter from the IRS. Our audit support team walked us through every step of the way and we were able to provide all the required supporting documents. The day we got the letter stating no additional paperwork had been requested and the IRS had not made any changes to our refund we were over joyed. Our Audit support team was an excellent partner during this process and money well spent.

Tammie, Wartrace, TN


Saved me a ton of headache and thousands of dollars! Lots of peace of mind knowing someone qualified was fighting for me. My audit representative even fought them on the last $10 or so, which probably created extra work for him but he suggested we do it anyway. After I got off the phone with him today I signed up for the yearly plan so I know I’m covered in the future. Thanks for making this scary, pricey situation vanish.

Dennis, Brooklyn, NY


Signing up for the service was one of my best decisions. All I had to do after receiving a notice from the IRS was to provide documents requested by the TaxAudit personnel and she took care of everything else. I will continue to purchase this service when I file my tax returns.

Soonkyu, Fair Lawn, NJ


My local representative was extremely helpful and obtained excellent results with my audit.

David, Goodyear, AZ


This process was very well organized and professional. My audit team member was wonderful. She persisted with the IRS and got a resolution in my favor. Tax Audit worked so well I went back and purchased it for previous year’s taxes. Thanks again.

Victor, Suwanee, GA

California Jet Set

Written by: William Daly, CPA, EA, MST

A few months ago I received a “Check the Box” audit for a married couple living in one of California’s most famous wine regions. The IRS was questioning the large mortgage interest expense deduction on their Schedule A.

The members lived on a ten acre lot where their main home was situated. On this property there was also a farming activity as well as a residential real estate rental, which were both reported on the members’ income tax return.

The members had purchased the property with a $2.3 million interest-only mortgage. Of this amount, only the interest on the first $1.1 million would be deductible as a mortgage interest expense. Because of their high income levels, the members were also subject to the AMT. This meant that, among other things, the members would not benefit from the deduction of the real estate taxes on their large parcel of real estate.

The members had paid over $160,000 in mortgage interest and $25,000 in real estate taxes, but they were only able to deduct $63,000 of the mortgage interest expense due to the limitation. The remaining $122,000 was not being claimed anywhere else on the income tax return.

After speaking with the members at length, I learned that they leased out several acres of their land to grape growers who used it to cultivate grapes. They also explained that the lot had originally had only one home, and that they had constructed a new home on the property to live in, while the original home is rented out to a tenant. That was when I checked the tax return again and learned that the Schedule F and Schedule E had no mortgage interest or real estate expenses listed.

I advised the members that they should be allocating the interest expense and the real estate taxes among the farming activity, the residential real estate rental activity and the primary residence. I suggested that they use the real estate property tax bill to get an idea of the relative values of the land for the two residences, and I explained that any losses on both the farming and rental real estate activities would not be currently deductible, as these two activities would be considered passive losses. But the good news was that the gross income from these activities could be reduced to zero with the allocation of the mortgage interest and the real estate taxes, and any unused losses from these activities could be carried over to future years until the property was ultimately sold.

The members thanked me profusely for bringing my observations to their attention. Not only did their audit result in a “no change letter,” but they were thrilled that they would have the opportunity to file amended federal and California income tax returns for the open years, which would get them back a tremendous amount of money. This solution certainly paid for the great California wine that was used to toast the resolution! gets dozens of comments from customers we have helped every week. Below are just some of the reviews we received last month.

A huge Thank-you to your amazing staff and especially my audit representative. She is a true professional and made my experience with tax great.

Thomas, Grandy, NC


After a few years of paying the ‘insurance’ to be represented in the event of an audit, I was audited by the IRS. I contacted TaxAudit and was guided through every step necessary to provide the appropriate information to the IRS to challenge their position. I recently received notice from the IRS that they agreed with me (i.e. TaxAudit) and the case was dropped…nothing due. The piece of mind provided so professionally by TaxAudit was deeply appreciated. Thank you!

Craig, Buffalo, MN


My audit representative was great! She worked so hard on my case. was so easy to use. She made the audit process painless. She did all of the communication with the IRS and was able to work with them to lessen the amount of tax I owed.

Karen, Brighton, MA


Everyone was very professional. They made a very stressful situation much better. My audit representative explained every thing with clarity. I felt assured that whatever the resolution it would be done correctly and with the best outcome. I recommend your service to everyone who uses Turbo Tax to do their taxes.

Carol, Graham, WA


I am very happy that I signed up for this service. This was my first audit in 53 years and it would have cost me had I not done so. I would have paid what the IRS requested but TaxAudit did not accept that and I ended up paying nothing!

David, Moraga, CA


I can’t begin to express how much I appreciate and our audit representative. When I received my IRS notice I was paralyzed by fear and worry. Once he was assigned to me I began to relax when I realized how competent he was and knew he was sincerely interested in helping me. Knowing my situation completely he continued to look for various ways to deal with notice and finally came up with a smart and clear idea that would satisfy the IRS and help them understand too. Yesterday, I received a “no change” letter from the IRS. Needless to say we owe addressing the complicated IRS notice and rules entirely to our audit representative and You are my heroes!

Jeffrey, Tustin, CA


I’m going to definitely recommend this to everybody that I know. I had a wonderful experience. My audit team was outstanding.

Tarryn, Jacksonville, FL


It was greatest help I could imagine. Exceptional service for a small price.

Kauser, Arverne, NY


Tax Audit did great. My frustrations are with the IRS that took a year to decide that my return was fine as filed. So glad I had your service to calm me down!

Patricia, Clearwater, FL was the best experience we ever had. They were prompt and efficient and know how to handle the case. We are very happy with the results and most of all, case was closed with no fees.

Ellen, Hillside, IL


The service was wonderful. I signed up again this year!

Brian, North Lawrence, NY


Will definitely be purchasing Tax Audit protection from TurboTax every year forward from now on. Well worth it.

John, Mystic, CT

Keeping It Simple Helps

Written by: Jonathan Crosby, EA

In August, I was assigned a case that was different from any other case I have ever worked. It was challenging in the way a serious jigsaw puzzling is challenging, and it required the same type of patience and commitment.

The IRS had sent out a soft notice in July asking our member for clarification of $626,842 in retirement distributions from 2012 that they couldn’t account for. After a review of the return I could understand their confusion. It turned out that the taxpayer’s son had been moving his mother’s retirement funds around in an effort to maximize the returns. The records showed $6,880,800 in distributions. The majority of the funds were re-characterized, and only $609,047 had been reported as income.

On further investigation and questioning, I learned that when the son prepared his mother’s return he had consolidated some of the thirty-seven transactions because the software program could only handle up to thirty transactions. The other issue that added to the challenge was that four of the re-characterized transactions had taken place in 2013 − within the required one year time frame − however, the IRS wasn’t able to connect the dots just by looking at the taxpayer’s 2012 return.

My first course of action was to understand, recreate, and validate what the son had done while preparing the return. I pulled the taxpayer’s transcript, which included seventy-two pages of transactions and multitudes of Form 1099-R Forms representing the distributions. The codes in box seven of the form were varied as well, from the common to the rarely seen:

  • Code 2 − Early Distribution Exception Applies
  • Code 7 − Normal Distribution
  • Code N − Re-characterizations IRA Contribution made for TY2012 and Re-characterized TY2012
  • Code T − Roth Distribution, Exception Applies
  • Code R − Re-characterizations IRA Contribution made for TY2012 and Re-characterized TY2013
  • Code Q − Qualified Roth IRA Distribution

After sorting through the various transactions I was able to paint a picture of what had transpired and connect the dots. But I still needed to recreate exactly what the taxpayer’s son had done in Turbo Tax.

Meanwhile, the taxpayer received a second notice showing an amount due of $74,931, which included penalties and interest. I knew the taxpayer didn’t owe this, I just needed to be able to explain what had happened in a manner that whoever reviewed the document s could understand.

Almost three months after my letter went out to the IRS, we received a response stating that the taxpayer owed the same amount listed on the original notice. Based on the reviewer’s notes, it was apparent that he or she didn’t understand what was in the response package. Not to be deterred, I got on the phone with an IRS Representative and went through the material I had sent, page by page. When we were finished he understood the situation and agreed to make the changes I requested.

The taxpayer received a “no change” notice in January, which means she owes the IRS nothing. Needless to say, both the taxpayer and her son are extremely relieved by the outcome and grateful for our service. And I am looking forward to my next puzzle. gets dozens of comments from customers we have helped every week. Below are just some of the reviews we received last month.

My audit representative did an outstanding job handling my case. He was available when I needed to talk with him and very professional in how he handle our questions/concerns with this issue. He made what could have been a real bad experience a whole lot more pleasant and enjoyable if you can consider a tax audit enjoyable. Job Well Done!!

Wayne, Commerce Township, MI


My audit representative was great! He eased my anxieties and kept me informed throughout the process. I am very happy that I chose to purchase Audit Defense through Turbo Tax!

Amy, Reseda, CA


I am so glad that I had this service. I will always select it in the future.

Maria, San Leandro, CA


I am thankful for the professional, courteous, supportive handling of this audit.

Ronald, Minneapolis, MN


I decided to use Tax Audit because it was offered through Turbo Tax. I had no idea I would be audited, but my audit representative did a fantastic job and I will definitely be signing up for your protection for my future returns.

Stephen, Charlotte, NC


I don’t normally provide perfect reviews but in this case it is well deserved. The entire tax audit team provided prompt and professional service throughout the audit process. It turned a frightening experience into an easy one. I’ve subscribed since 2002 and definitely recommend your service to others!

Louis, White Plains, MD


I was panicked when I received the notice. From my first conversation with the coordinator I was calmer than I thought I could be. I was VERY grateful to have the audit support. My audit representative knew what to do, what to say to help me understand the process. Thank you.

Janet, Tucson, AZ


I was very worried at the beginning that my tax assessment will be a big headache but the made it easy for me all the way. It was an excellent experience that I would not hesitate to recommend to all my friends.

Antero, Norwalk, CA


It was worth Way More than what I paid for the service. I am very pleased.

Michael, Santa Rosa, CA


The peace of mind, having the audit handled for us is worth purchasing every year. All the information requests were clear and easy to upload. Having the IRS visit done by a professional had a better outcome than we may have had trying it on our own.

Peter, Glen Ellen, CA


We are so thankful for TaxAudit. Our audit representative is an excellent professional who walked us through the process with ease. She was extremely attentive to detail and guided us diligently. She is consistent yet not cold, and very well focused on the target issues. We wouldn’t know what to do without her help. We commend her highly with confidence to represent anyone who’s faced with a tax audit. Please continue your excellent service.

Maria, Winston Salem, NC

Truck Driving Man

Written by: Chuck Long, EA

Often when assigned new cases, we find members who have made what initially appear to be insignificant errors and end up owing substantial amounts of tax. These errors are sometimes due to procrastination, misstatement, or incomplete understanding of the tax law, and the amounts owed can be staggering.

Our member was a truck driver who worked for a trucking company whose compensation payments were arranged by a third party. The drivers were issued debit cards which could be used to pay their “over the road expenses” (i.e. fuel, maintenance, scales, towing, etc.). The cards were refilled by the company with the drivers’ compensation and were used in lieu of a paycheck. Also subtracted from the debit card and the drivers’ gross compensation were the lease payments for the truck tractors. With this system the drivers do not have to carry cash and the record keeping for their income and expenses are all reported on one statement.

The system seemed like a great idea until the member decided to assign his tractor lease to another truck driver. Due to litigation the assignee was involved in, the member was unable transfer the vehicle into his name. The member agreed to allow the assignee to drive the truck without transferring the lease or getting the debit card for the vehicle switched to the new driver’s Social Security Number.

The member procrastinated, and even after the new driver’s legal problems were settled the lease was never assigned and the debit card never transferred. The result of this was that the member received a 1099-MISC showing $49,646 of additional income that had been paid to the new driver. The member did not issue a 1099-MISC to the new driver and received an IRS notice stating that he owed $17,775 of additional tax and interest, including a “Substantial Understatement” penalty. The member was surprised by the additional tax and didn’t recall receiving the additional 1099-MISC form.

The member contacted the new driver, who was forthright about the amount being his income. But a year and a half after the fact seemed to be too late for the member to report the income and issue a belated 1099-MISC. The member contacted the debit card company that had issued the 1099-MISC, and while they promised to research the matter they said it would be several weeks before they could trace the income and determine to whom the credits had been issued.

After discussing this case with my colleagues, we decided the best way to proceed would be to respond to the notice by explaining the circumstances. This would hopefully by time so the debit card company could complete its investigation. Meanwhile, sending a response to the IRS would make it less likely that they would close the case.

Due to the member’s occupation as a long haul trucker, it was difficult at times to keep him focused on getting the necessary documents together and staying in touch with the debit card company to make sure they completed their investigation. Fortunately, the member was tenacious enough that we were able to get the necessary documentation and respond to the notice.

While I never heard whether the debit card company ever finished its investigation, the point became moot when we received the notice from the IRS changing the amount owed from $17,775 to a refund due of $237. Our member was thrilled that our joint efforts had garnered such a favorable outcome. gets dozens of comments from customers we have helped every week. Below are just some of the reviews we received last month.

My audit representative was very calm and reassuring which kept me from panicking. I was very comfortable leaving this matter in her capable hands. I am extremely grateful for her expertise and professionalism.

Gail, South Boston, MA


Being audited for the first time and dealing with the IRS was a scary experience. My audit representative provided us with the templates and expert advice and experience to create professional quality reports needed for the audit. Thank you so much for the assistance. Look forward to working with TaxAudit.Com if we ever need more assistance.

Michael, Tuttle, OK


My audit representative saved the day, and saved me over $20k. He was extraordinarily professional and courteous despite my blatant ignorance of tax forms. My taxes were complicated and his analysis of all the tax filings determined my mistake and led him to a solution; further, he explained this solution very simply and thoroughly line by line on the forms. He was always kind enough to help me understand each change and never made me feel inferior for my mistakes. He was persistent with the IRS about changes that he had to explain to them several times. Ultimately, the IRS owes me $189 after all of this – I couldn’t have asked for a better and more smooth outcome. I will be a customer for life and will be telling all my friends whenever the IRS comes up in discussion. Thank you!

Bradley, Tucson, AZ


I was pleasantly surprised with the level of attention and the quality response that I received. Excellent value. It is not something that I have frequently experienced when dealing with other service providers in any field. Thank You.

Edwin, Tampa, FL


I’m very satisfied with the audit defense. My audit representative was very professional, helped me understand the whole process, and was very polite. He is a very valuable person, I am very satisfied with his work, and will recommend Tax Audit to my friends.

Luis, Port Saint Lucie, FL


I’m very thankful that I chose TaxAudit. I couldn’t imagine going through an IRS audit without such professional representation.

Paul, Christiansburg, VA


This experience has surpassed my expectations. Everyone I dealt with was so professional. I was kept informed throughout the entire process, and the tax representative was amazing. He is the best. Overall, I was completely satisfied.

Annette, Cumming, GA


Worth every penny. I have used this service every time I use TurboTax!

Francois-Michel, Washington, DC


Your service was fast, effective, and absolutely professional in all respects. Any concerns we had after being contacted by the IRS were dissipated immediately after our initial contact with TaxAudit. Thank you!!!

Theodore, Claymont, DE

Stupid Criminal Tricks

Written by: Carolyn Richardson, EA

Most clients find out they have been the victim of return identity theft when they receive a notice from the IRS or a charge from a credit card company, but in a recent case one client found out he’d been the victim of identity theft when he got a check – a check that was supposed to go to the ID thief.

Our member filed his return for 2012 in a timely manner and asked that the IRS debit his bank account for balance due. A few weeks later, he received a check in the mail for about $7,500 from TurboTax’s third party processor with the explanation that they could not deposit it directly to his account as asked. The member had never heard of the processor and thought the check was some sort of scam so he just held on to it. In September he realized the IRS had never removed his balance due from his account, so he called TurboTax for an explanation. That’s when he found out that the return transmitted by TurboTax to the IRS wasn’t the one he had prepared and thought he’d filed. Fortunately, he had audit defense so he called us to ask what he should do now that his own return was officially late.

The IRS instructed us to have the member return the check back to TurboTax and have TurboTax write a new check to the IRS noting the taxpayers name, SSN and tax year on it, and to mail in a filed return with the payment due. The member mailed us a signed return with a check for the correct balance due, and we mailed it in with a letter explaining what had happened, along with a copy of the check from TurboTax. We requested that the IRS flag the taxpayer’s account for ID theft, process the mailed return and payment, and apply the TurboTax check back to the taxpayer’s account to wipe out the refund.

From there, things went downhill. The IRS received both checks and the tax return, and the checks were cashed. But they did not apply the TurboTax return to the taxpayer’s account, despite the fact that the name and SSN were on the check memo. The IRS reversed the fraudulent taxes and withholding and assessed the correct taxes and withholding and payments, which left the taxpayer’s account with a balance due in the amount of the ID thief’s refund amount.

In February, the IRS started issuing erroneous refund notices to the taxpayer, demanding repayment, which we replied to twice showing that the TurboTax check had cleared the Fresno service center the previous October. Calls to the practitioner priority line were fruitless, as they said that the ID theft unit had the case and would eventually get the payments sorted out. In the meantime, the member also started receiving scam phone calls from someone pretending to be the IRS, which we told him to ignore. When the IRS issued a notice of intent to levy – despite our being told just three weeks previously that the account was frozen – we called again. This time practitioner priority was able to see that the check was in a temporary account for some reason, and they referred us over to the ID theft unit directly. The ID theft unit couldn’t see the temporary account, but agreed to put a “hard trace” on the TurboTax check to find the payment.

Approximately a month later, practitioner priority confirmed that they had found the check and applied it to the taxpayer’s account. There was still a small balance due because of processing fees TurboTax had not returned to the IRS, but the taxpayer paid those immediately and TurboTax refunded that amount to him. It only took a year plus one month to clear up the problem, caused by the taxpayer being honest and wanting to return the fraudulent check to the IRS. Thus proving that no good deed goes unpunished. gets dozens of comments from customers we have helped every week. Below are just some of the reviews we received last month.

As painful and soul searching as it is when you receive an audit notification, the audit itself went smoothly with the help of

Alicia, Santa Ana, CA


Excellent and well worth the annual fee from Turbo Tax. Managed the process, kept us on track and provided helpful advice. We had never experience an audit and were very nervous but our audit representative took away all the stress and fear.

Jay, Manhattan Beach, CA


I am so glad that I decided to purchase TaxAudit protection when I filed my return. Even though I had never been audited, and was sure there was no reason I would be – sure enough it happened. The service and support from TaxAudit was excellent. One of the best decisions I ever made. Thanks!

Clinton, Cary, NC


I must admit when contacted by the IRS I was a little nervous, but when I contacted Tax Audit I immediately felt I could relax. My coordinator and representative made it very easy by thoroughly explaining each step I must do. I’m not a real wizard on the computer but my audit representative was so patient with me, and put me at ease with her kindness and keeping me informed of each step that was coming. On the first submission the IRS came back with me owing around $1,100 and I was all set to send in a check but my audit representative said that wasn’t acceptable. She gave me a couple of suggestions and resubmitted the claim to which a no change to the original tax return came through, which saved me that $1,100 dollars.

Janet, Kalamazoo, MI


I received IRS notice stating I need to pay $9000 regarding retirement income reported in K1 and few other misc items. I was scared and without tax audit’s help I’d have just paid that amount. With timely, courteous, and professional help and knowing they are there to support I got that erased and instead filed an amendment resulting in $7887 refund to me. I can’t imaging filing my taxes without purchasing TaxAudit in future.

Neha, Fremont, CA


My audit representative was extremely helpful and responsive throughout the process. My experience was very favorable, and I intend to share this with others and include Tax Audit support on future returns.

Kevin, Mulberry, FL


My 2010 taxes were audited by the IRS, who claimed my monthly retirement checks was income from being self-employed. It took me 18 months to resolve the issue alone, and without a clear-cut disposition. Then in September 2014, the same issue arose again on my 2012 tax return. This time I called on the experts at for help, who acted on my behalf without me dealing face-to-face with the IRS. In early December I received a written notice from the IRS stating,”… the information you provided resolved the tax issue in question and that our inquiry is now CLOSED (emphasis added by me). Amount due: $0.00.” I am grateful to the team for the efficient and professional manner in which they removed the tremendous potentially financial and emotional burden that my wife and I were carrying. Thanks, team!

Lawrence, Reedville, VA


No one likes an audit, but I really felt my needs were well taken care of. My audit representative did a great job of guiding me through step by step. I was informed throughout the whole process, and was very satisfied with the services provided.

David, Grand Junction, CO


Not only did my audit representative help us resolve with a favorable finding, he was able to reduce our monetary load by convincing the agent to eliminate penalties. And he made suggestion for future accounting and filing procedures to reduce potential issues.

Gene, Custer, SD


This has been a great experience. Their professionalism and competence made this experience extremely easy to handle. My most sincere thanks to them and to TaxAudit, I will continue to sign-up for your audit protection on all my future filings!

Daniel, Southern Pines, NC