So, I am being fined by the IRS. Do I have any options?

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So, I am being fined by the IRS. Do I have any options?

DJ Cummins
Rental Property Investor · Bethalto, IL · Member since 2014 · 319 posts · 103 votes

Good morning everyone,

So last night I got a letter in the mail saying that our business tax returns were never received, and my wife and I are each being fined $195.00. We own 3 different LLC's, and Mailed all 3 returns (prepared by our CPA) on April 4th. Apparently the other 2 business tax returns found their way to the IRS.

Do I have any options here?  Is there anyway that I can contest this?  I didn't send the paperwork as certified(that will never happen again) so I don't really have any proof.  Something tells me that they won't just take my word for it.  

I finally feel like I have a really solid grasp on this whole REI thing, and then something like this pops up, and I am not sure if there are any options for us other than just paying the stupid fine. The letter said we have to have the $390 check post marked by June 18th.

Thank you in advance!

DJ

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Brandon Hall
CPA · Raleigh, NC · Member since 2013 · 1k+ posts · 2k+ votes
8y

The penalty is a failure to file penalty. Partnership tax returns are due on 3/15, not 4/15.

There should be a number in the upper right hand corner of the notice you received. You could call that number and request a first time penatly abatement for the partnership. However understand that the “first time penalty abatement” is a silver bullet that should be used wisely.

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  • Brandon Hall
    CPA · Raleigh, NC · Member since 2013 · 1k+ posts · 2k+ votes
    8y

    The penalty is a failure to file penalty. Partnership tax returns are due on 3/15, not 4/15.

    There should be a number in the upper right hand corner of the notice you received. You could call that number and request a first time penatly abatement for the partnership. However understand that the “first time penalty abatement” is a silver bullet that should be used wisely.

    6Reply
  • Caleb Heimsoth
    Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
    8y
    DJ Cummins id probably just pay the fine. Next time I’d recommend sending it electronically
    1Reply
  • Carl FischerPro Member
    Rental Property Investor · Ambler, PA · Member since 2015 · 2k+ posts · 1k+ votes
    8y

    @dj 

    @DJ Cummins

    I would pay the fine-keep my silver bullet because it is not much of a fine per se. Let an accountant efile and let him/her take the heat if it doesn’t make it. Consider it tuition!😃

    [email protected]215-283-2868
    5Reply
  • Peter M.
    Rental Property Investor · DFW, TX · Member since 2013 · 953 posts · 910 votes
    8y

    Did you inform your CPA? They may have a better solution.

    2Reply
  • Account Closed
    Accountant · Philadelphia, PA · Member since 2013 · 303 posts · 210 votes
    8y

    Are you in a disaster relief area? Sometimes the IRS issues tax relief for people who've had a storm/flood,/fire, etc. I had extension this year related to winter storm Quinn and Skyler, which were automatically denied because of the date. We had to call for each one and explain the situation. 

    Check the IRS website to see if any relief had been issued for your county.

    0Reply
  • Account Closed
    Accountant · Philadelphia, PA · Member since 2013 · 303 posts · 210 votes
    8y

    like this (https://www.irs.gov/newsroom/tax-relief-for-victims-of-severe-storms-and-flooding-in-indiana)

    0Reply
  • Basit SiddiqiBusiness Member
    Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
    8y

    @DJ Cummins

    Partnership returns are now due 3/15 instead of 4/15.
    The failure to file a partnership return is $195 per partner.

    Did you or your CPA file an extension by 3/15 giving you additional time to file?
    Why would you have any of the paperwork certified? Partnership returns can be e-filed. Did your CPA E-file the return. If anything he should have the date that the return was filed. If your CPA is filing paper-filed returns...I would look elsewhere.

    You may be able to call the IRS and politely request the penalties to be abated. The IRS gives most taxpayers one get out of jail free card. Please be aware that if you use it now - you likely can't use it again.

    Another question to ask is if you and your wife have made an election to file as a "qualified joint venture" instead of having to file a partnership return.

    This election could have allowed you to avoid having to file partnership returns which would also have saved you the fees from having to pay for filing the partnership returns; which I assume weren't cheap.

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    0Reply
  • Dennis M.
    Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
    8y
    Do you really want to argue and fight with federal government over such a small amount ? You gotta pick your battles in life and that is one you won’t win ! Just pay the fine and find a cpa that realizes it’s 2018 and not 1974 . You can file on a computer now !
    1Reply
  • DJ Cummins
    OP
    Rental Property Investor · Bethalto, IL · Member since 2014 · 319 posts · 103 votes
    8y

    Thanks all.  We had to file paper copies this year because my wife's SSN was stolen last year and used to file a fraudulent tax return.  Her company had a breach and 90% of the employees and fraudulent returns filed.  it was a mess. 

    1Reply
  • Nicole A.Pro Member
    Rental Property Investor · Baltimore County Maryland and Tampa Florida · Member since 2013 · 2k+ posts · 2k+ votes
    8y

    If your CPA prepared your taxes, didn't he/she also send them in? That is typically what happens. I never get why some people's first answer to things like this is to just pay with no questions asked. I would bring this issue to my CPA since they were the ones sending in the documents.

    0Reply
  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    8y

    @DJ Cummins I am curious why your CPA isn't giving you the advice others are giving. This seems like a red flag that you need a more qualified CPA.

    1Reply
  • Brian Schmelzlen
    Accountant · La Mesa, CA · Member since 2017 · 477 posts · 476 votes
    8y

    Call the IRS and ask for a 1st time penalty abatement.  Ultimately it was your fault (or your CPA's fault) for not knowing the deadline, but if it is a first time offense occasionally the IRS will waive the penalty.

    It doesn't hurt to call and ask for the penalty abatement.

    0Reply
  • Dennis M.
    Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
    8y
    I once got a certified letter in the mail from the IRS in July that stated I had never filed my federal tax return that past year and they wanted a bunch of documentation to show I did and so fourth . Scared me pretty good .. well I immediately called up my tax guy and told him about the letter .he said “ oh I must forgot to mail them in , sorry !” Needless to say I never used him again . Another time I bought a new Chevy camaro out of state and went to a little ma and pa notary in my state and paid the registration and tax there .. well they somehow forgot to mail the state my thousands in taxes and I went through a nightmare when the title was to be sent to the lender 6 weeks later and it wasn’t cleared ! Lesson is don’t deal with incompetent people when your money is involved ! Older business people especially have screwed me over due to lack of technology skills and there incompetence.
    0Reply
  • Michael PlaksPro Member
    Tax Accountant / Enrolled Agent · Houston, TX · Member since 2014 · 5k+ posts · 6k+ votes
    8y

    @DJ Cummins

    1. Having your wife's ID stolen would not prevent eFiling of the partnership return(s) - it would only interfere with your personal tax return. The Partnerships should have been filed electronically.

    2. I strongly disagree with the advice to pay the penalty. The IRS will automatically remove this penalty if you have not had late penalties before. No need for a reason, but if they ask - mention "first-time abatement." No need to argue anything, it is pretty much automatic. Save this for the future? Huh? Just don't miss the March 15 deadline in the future.

    3. Get a second opinion on whether you even need to be filing separate tax returns for your LLCs. Often, it is better to file them as part of your personal tax return.

    3Reply
  • Account Closed
    Lender · Pensacola, FL · Member since 2017 · 658 posts · 626 votes
    8y
    Originally posted by @DJ Cummins:

    Thanks all.  We had to file paper copies this year because my wife's SSN was stolen last year and used to file a fraudulent tax return.  Her company had a breach and 90% of the employees and fraudulent returns filed.  it was a mess. 

    FYI -- Out of an abundance of caution, I got a PIN from the IRS as part of its pilot program to expand the offering to a larger base.

    https://www.irs.gov/identity-theft-fraud-scams/identity-protection-pin-pilot-program

    I filed my personal tax return using TurboTax. The software asks if a PIN is needed and provides a screen. TurboTax also lets me know by email when the IRS accepts my return.

    Although I've never had my identity stolen (as far as I know), I can't file my return early because the K-1 forms arrive toward the end of March.  The PIN gives me peace of mind.

    0Reply
  • Chris K.
    Attorney · Nashville, TN · Member since 2015 · 1k+ posts · 1k+ votes
    8y

    @DJ Cummins

    The easiest answer is to tell your CPA to deal with it UNLESS he or she already warned you that you must file by March 15. In any event, the CPA should really handle the filing for you.  

    Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

    0Reply
  • DJ Cummins
    OP
    Rental Property Investor · Bethalto, IL · Member since 2014 · 319 posts · 103 votes
    8y

    Thank you all for your responses.  The IRS did receive our taxes, but they were post marked after March 15th(werent completed until March 24th it looks like).  We are going to go ahead and pay the fine, and have a talk with our CPA about possibly getting some/all of that money back.  Tough spot as he is a close family friend.

    DJ

    0Reply
  • Michael Plante
    Deland, FL · Member since 2017 · 2k+ posts · 1k+ votes
    8y

    $200 I would send it without hesitation.   

    2Reply
  • Natalie KolodijBusiness Member
    Moderator
    Tax Strategist| National Tax Educator| Accepting New Clients · Member since 2014 · 3k+ posts · 4k+ votes
    8y

    @DJ Cummins

    Why are you paying the fine? 

    I had this happen with a client this year. Based on everything she told me we woudln't have to file the brandnew partnership. Then in preparing her personal return in April...there was a document that said otherwise. 

    So I filed the partnership late. 

    I called the secret special Tax pro only IRS number. 

    It took a 6 minute (I timed it) phone call to have them wave all penalties- easy peasy. 

    It's a first time abatement penalty. The IRS gets it- lots of people get mixed up year one. 

    However- your tax pro should have given you a heads up this would happen. Did they know you have the P-ships prior to March 15th? 

    Either way, maybe find a new tax pro- but I'd ask him to call and request a the abatement first. It really is super easy and this is literally the type of situation it exists for. 

    ALSO

    SEND THE CPA THE NOTICE. 

    If you ever get any thing from the IRS let your tax person know asap. People tend to put it off but it's all time sensitive  and it helps if we get it as soon as you do, 

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    1Reply
  • Nicole A.Pro Member
    Rental Property Investor · Baltimore County Maryland and Tampa Florida · Member since 2013 · 2k+ posts · 2k+ votes
    8y
    Originally posted by @Michael Plante:

    $200 I would send it without hesitation.   

     Would you mind helping me understand why you'd pay without hesitation? Is it because $200 is a small amount and/or not worth the "trouble" to question it?

    If I'm on the right track with your line of thinking, where do you draw the line that something is worth questioning rather than just paying it away? How many small unexpected bills becomes an amount worth pushing back on a bit to possibly keep?

    1Reply
  • Linda WeygantPro Member
    Investor and CPA · Arvada, CO · Member since 2015 · 2k+ posts · 3k+ votes
    8y

    I agree that you should ask for the penalty to be abated.  You are unlikely to need the first time abatement relief in the future now that you know the due date. 

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    1Reply
  • Michael PlaksPro Member
    Tax Accountant / Enrolled Agent · Houston, TX · Member since 2014 · 5k+ posts · 6k+ votes
    8y
    Originally posted by @Michael Plante:

    $200 I would send it without hesitation.   

    Sweet! I PM-ed you my address.  :) 

    0Reply
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