Grateful Beyond Words

May 01, 2013 | Written by: Ron Stein, EA, MBA
realtor holding up a key next to small model house


I recently helped a Member who was quite worried about the notice he received from the IRS. He did not understand what it was about, and he did not have the money to pay the $8,726 they were asking for. I assured him that we would be able to make sense of the notice for him, but I couldn’t promise that he did not owe the money. I would need to dig a little deeper to find that out.

The focus of the notice was Cancellation of Debt (COD) and missing Social Security income. After speaking with him, it was clear that the cancellation of debt was correct. Both of the 1099-C forms listed on the notice were related to a short sale, and he had not reported the income on his return. I needed to find out if he qualified for one of the provisions that allow taxpayers to exclude COD from income.

As for the Social Security Income, the IRS notice claimed that the Member had not included any of the income on his tax return. In fact, he had included more than the amount the IRS was looking for, as he had incorrectly reported his disabled son’s Social Security income on his return.

As I gathered information from the Member I discovered that he had been insolvent at the time of his debt cancellation. This meant that the cancellation of debt income from the short sale could be excluded from his taxable income. I asked him about his social security. Did he receive a lump sum payment? He said he had and it included payments for two prior tax years. I asked him for the two prior year returns and crossed my fingers that he would have them. I then asked a colleague for her assistance in calculating the taxable amount of his Social Security income.

My response to the notice included insolvency worksheets, a Social Security worksheet, and Form 982. I sent it in and explained to the Member that it would be 8-12 weeks before we received an answer.

Forty-five days later I called the IRS and was told a recomputed notice was going to be sent out and the Member would receive a refund in the amount of $940.81.

I called the Member to let him know that he would be receiving a refund. He didn’t seem very excited, and I thought that perhaps he didn’t believe me. I asked him to call me when he received the recomputed notice and the refund and explained that it would take about two to three weeks for the refund to be sent. It arrived in his mailbox three weeks later, but he didn’t call me.

After four weeks went by and I still had not received the recomputed notice with the refund amount, I pulled the IRS transcripts and discovered a refund had been sent out about 10 days before. I called the Member to close the case, and he confirmed that he had received the refund.

This time our conversation was different. The Member said he was very grateful, beyond words, and his voice crackled with emotion. He said he was so happy he received the refund and surprised as well. He expressed his gratitude over and over, and was quite sincere. “I would have been financially ruined if I had to pay the notice. I’ve been there once before and didn’t want to go again,” he said. He decided to buy our audit protection for the next year, and told his entire family to do the same.

I’ve worked here for over one year and called many Members with good news. This Member wins the prize for how happy and grateful he sounded with the results.
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