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A Savings of $350k!

June 12, 2023 | Written by: Kate Ferreira
Real estate images on a smart phone
In September of 2022, Rory and Ava discovered that they had received a notice from the IRS. Upon reviewing their notice, they realized they received an IRS Letter CP2000 for their 2020 tax year. The IRS was questioning their real estate sales and the amount that was reported on their tax return. Since all of this took place in 2020, Rory and Ava’s memory was a little fuzzy on the details two years later. They began to comb through all their paperwork, looking at each document and trying to figure out where they went wrong. Unfortunately, the notice was proposing an amount due of over $350,000! This was clearly no small amount and after the shock wore off, panic set in.

When looking through their tax return for the 2020 tax year, they discovered that they had purchased audit defense with TaxAudit for the 2020 year. They reached out to TaxAudit’s Customer Service Department and started a case. After uploading a few documents, their tax return, notice, and personal identifying documents, they were able to get their case moved to a Tax Professional. Muhammad was the Tax Professional assigned to their case and he quickly began the process of reviewing the documents provided to come up with a game plan. Since the IRS was questioning real estate sales, documents pertaining to the home were needed. If anyone has ever purchased or sold a house, they know that the documents that come from these actions could fill an entire storage cabinet! So, Rory and Ava were tasked with tracking down specific documents, such as settlement statements for the sale of the house and documents showing improvements that were made to the house over the years. Having lived in the house for over three decades, finding these documents was no small feat.

Muhammed worked with Rory and Ava to help provide insight into what documents would be accepted by the IRS for the improvements made and though this process took time, in the end, a good number of documents were able to be gathered to issue a response to the IRS. A best-case and worst-case scenario was provided to Rory and Ava. The best-case scenario was that their documents would be accepted by the IRS, and they would no longer owe the large amount proposed. The worst-case scenario was that the IRS accepted a portion of the documents but still charged additional taxes owed, plus penalties, and interest for an amount due of over $275,000.

The response was sent, and the waiting game began. After two months, a letter from the IRS was received indicating that they needed more time to review the response. After the time proposed for additional review had passed, Muhammed followed up with the IRS to get a status report. He was told that a new recomputed notice was in the works, with a proposed amount due of $2,000. This amount was much better than the worst-case scenario; however, the amount being proposed did not line up with the calculations that were made. Once the recomputed notice was received, Muhammed sent an additional response to the IRS. Once again, the waiting game began, and after countless calls and follow-ups, a third and final response was received from the IRS.

The response indicated that the IRS had accepted the documentation provided and Rory and Ava owed the IRS $0! Muhammed, Rory, and Ava were all pleased with the outcome and at the conclusion of their case, this is what Rory and Ava had to say.

“Muhammad carefully analyzed the issue raised by the IRS notice, discussed the various related issues related to addressing the IRS notice, and made clear, fully explained recommendations. Muhammad's assessment, and the steps he recommended, led to a full resolution of what began as a highly stressful, frightening matter.”

*Some names and identifying details have been changed to protect the privacy of the individuals. 

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