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

Not Easy ≠ Not Possible

Written by: Sondra Cates, EA

High deductions for employee expenses are a frequent audit target, especially when they relate to education. The rules are very strict and it isn’t easy to qualify. But just because it isn’t easy doesn’t mean it isn’t possible, and it doesn’t hurt to have an excellent team available to defend you when the IRS questions it.

The member had been employed as a director of a non-profit organization. The job required a high level of education and certain certifications in order to keep the position and remain up-to-date with the current standards of the industry. That was the reason she had deducted approximately $31K of unreimbursed employee expenses, which included $29K for her continuing education. The IRS initially disallowed the deduction and billed the member for $5,000. This was based on the position that the supporting documentation was lacking corroboration from the employer.

Upon the member’s departure from the nonprofit, others had also left the organization, including the Executive Director, Deputy Director, and the Executive Committee of the Board. The new leadership of the organization knew nothing about the internal policies specific to the expenses our member had been expected to incur while performing her job duties or whether she had been reimbursed for her expenses.

Learning that she would be unable to obtain a letter of support from the nonprofit, our member was discouraged, and we were too. But we had other approaches to try and we were not ready to give up.

We encouraged the member to write a narrative explaining her situation. In another response to the IRS we included the member’s written statement, along with her job description, certification and exam requirements, and re-certification requisites. The education was not a requirement for the employer; however, it was a requirement to keep her certification and it did not qualify her for a new line of work, two key points supporting her position.

The next response we received from the IRS was a “no change” letter, informing us that the IRS was accepting the member’s tax return as originally filed. The extra effort had paid off; the deductions were allowed and our member did not have to pay anything. She was overjoyed with the result, and so were we!

TaxResources gets dozens of comments from customers, like the one above, we have helped every week. Below are just some of the reviews we received last month.


My audit representative was very good – she was patient, understanding, soothing, very knowledgeable, explained things so that it was easy to understand. She gave me the feeling that her entire focus was on my case and her goal was to serve me. She was thorough, and communicated with me often and clearly. She is exactly who your company should have more of. She deserves a raise!

R. M., Upper Arlington, OH


Extremely helpful and very professional.

J. J., Huntingdon, TN


Glad that I signed up after I completed my tax return via turbo tax. I was apprehensive at first whether it will work for me, but the fast action and professionalism of the Tax Resources team made me confident that I can continue to use their services in the future.

A. A., Perth Amboy, NJ


I genuinely appreciate the whole process and have already renewed my membership for the next tax year. THANK YOU for your help.

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I was very pleased with how promptly my tax issue was resolved. During the process of dealing with TaxResources, Inc., I felt considerable peace of mind and was confident of a positive outcome.

J. W., Tallahassee, FL


My audit representative was very professional, courteous and also supportive. We were out of the country for 2 weeks during the 30 day document gathering period. He asked for and received an extension on our behalf. He remained in contact and reported to me our status as documents went through Tax Resources to QRC and then to IRS. He reported the extended wait time for the IRS and reported on the multiple reviews taking place. He maintains a sense of calm and even a sense of humor during an anxious time of being audited. Thank you.

C. F., Brentwood, TN


They are the BEST and very professional. IRS had no other questions or comments after they submitted the missing information for my 2010 Tax Return. Thank you and keep up the Good Work.

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G. R., Darien, CT