January 01, 2011 | Written by: Mark D. Olander, EA, USTCP
Since the publication of Malcolm Gladwell’s bestselling book, Outliers: The Story of Success, there’s been a lot of buzz about the “10,000 Hour Rule.” Meeting this rule is what many sociologists consider to be the key to success in any field. The theory is that practicing a specific task for 10,000 hours is what makes an expert, and that greatness can be achieved, for example, by working at something 40 hours per week for five years. Well, guess what? Most Audit Representatives at TaxResources meet the 10,000 hour rule, and those who haven’t met it yet are well on their way. This month’s case shows how an Audit Representative from TaxResources with lots and lots of practice gets you through an audit with ease.
The members received a notice from the IRS concerning an “error” on their 2009 tax return. The letter stated, “The Residential Energy Credit is limited to $1,500. You claimed more than $1,500.00. We reduced the credit.” The members didn’t know what to make of it. They had purchased a new solar electric photovoltaic system and a new solar water heating system during 2009, and the company they’d purchased the systems from had provided them with a letter showing the federal tax credit amount they would be eligible to receive. They called TaxResources right away to report their notice.
After speaking with the members and reviewing their tax return, the Audit Representative assigned to the case realized immediately that the notice was incorrect. The IRS had confused the Nonbusiness Energy Property Credit with the Residential Energy Efficient Property Credit. Both credits are on the same form (Form 5695), and the members had claimed both. The home energy credits are complicated, and the requirements for claiming them seem to change every year along with the allowable amounts, so it’s no wonder the IRS had made a mistake…
The Audit Representative explained to the IRS that, while the Nonbusiness Energy Property Credit is limited to $1,500, the Residential Energy Efficient Property Credit allows for a credit of thirty percent of qualified property costs with no cap for 2009. Since the members had spent more than $45,000 on qualified solar energy property, the credits were calculated correctly on their tax return. He sent documentation to prove that the members had purchased qualifying solar property. Since it would be several weeks before they would hear back and he was confident about the information he’d submitted, the Audit Rep advised the members to put the audit out of their minds. He assured them that he would continue to argue their case if necessary.
Exactly three months from the date the package was sent to the IRS, the Audit Representative and the members received their response. The IRS issued a “no change” letter, allowing the credits and agreeing that the members were due a refund. Everyone involved was happy to learn of the successful results of the audit.
Here is the note the members sent to TaxResources to show their appreciation for their Audit Representative:
Our Audit Representative was efficient, professional and quickly understood our situation. He took care of it completely. We appreciate him, and are grateful to have purchased Audit Defense. It paid off handsomely!! Thanks
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