Complaint Review: Etaxes.com Steven Kassel - San Bruno California

I've been in the tax business for 22 years and at no time have I ever told anyone that I had special contacts within the Internal Revenue Service. It's a ridiculous claim and it's absurd. We were hired by non-taxpayer JPW in February, 2007. Ostensibly, we were hired to determine why the California Franchise Tax Board claimed that Mr. W. had not filed a 1997 state tax return and why the state of California had filed a return for him. We also endeavored to determine what returns had and had not been filed over the past ten years. After I received the details from the IRS, I wrote Mr. W a very long detailed letter. March 23, 2007 Dear Mr. W: In accordance with your requests we have discovered a significant amount of information from the IRS. First, I wanted to explain how the IRS handles delinquent return problems. Under Federal law, there is no statute of limitations for the filing of delinquent returns. That is, the IRS may pursue late returns no matter how far back that goes. However, under IRS Policy Statement P-5-133, a copy of which is attached, the IRS generally does not pursue delinquent returns more than six years old. There are some caveats to that. They include a prior history of noncompliance and whether the non-filing is willful. For reasons I'll state later, I have some concerns about these two areas. Second, according to IRS records, you have no outstanding taxes owed, but you have several returns that have not been filed. Let's go through each year. I'll start with the years for which IRS shows a tax return on the system. 2001- You voluntary filed a married joint return showing a balance due of $1,554.01 on 7-15-02. Records show that you filed an amended return on 12-16-02 showing no tax due and wiping out the previous balance; 2002- You voluntary filed a married joint return showing a balance due of $2,178.35 on 5-12-03. With estimated tax credits and withholding credits more than sufficient to pay the tax due, a refund of $2,820.80 was sent to you on 5-12-03; 2003- The IRS processed a Substitute for Return (SFR) on 7-24-06. An SFR occurs when the taxpayer is believed to have a filing requirement but does not file voluntarily. The transcript for this year appears a bit different than the hundreds of SFRs we have seen in the past. It appears that you may have agreed to the assessment and paid the proposed tax of $2,135.12 on 4-6-06. The assessment wasn't made until three months later after which you were billed for penalties and interest which were fully paid by 9-25-06. We attached the wage and income transcript IRS sent us for the 2003 tax year as well; 2004- You voluntarily filed a married joint return showing a balance due of $2,649.34 on 5-29-06, which was paid with the filing of the return. As you will see, IRS had a minor processing issue as they appear to have confused the 2003 and 2004 tax years. That did not cause any significant problem. However, the tax return was filed a year late resulting in late filing and late payment penalties as well as interest. It appears that you paid the penalties and interest in full by 7-20-06; 2005- You voluntarily filed a married joint return showing no tax due on 5-15-06. I'll now discuss the years for which the IRS has no records of a return being filed. 1997- The IRS shows no return having been filed for 1997. Their online system does not go back prior to 2000 so it will take them awhile to send us the income information they have for tax years 1997-1999. We will send that to you upon receipt. You provided documentation showing that the California Franchise Tax Board (FTB) prepared a return for you under their procedures known as a Filing Enforcement. Based upon their records, you had a balance due of $9,089.71 plus additional penalties and interest for a total of $10,598.58 as of 11-27-06. You did not provide a breakdown of how they comprised the tax calculation. You stated that you had timely filed original returns with both the state of California and the Internal Revenue Service. However, the signature date on the copy of the Federal return you provided shows a date of 4-14-97. Of course, the correct due date of the return isn't until 4-15-98. I presume you recently prepared the returns and they were not prepared in 1998. You also stated that you recently filed a return with the Franchise Tax Board, a copy of which you provided showing tax due of $256. However, because you stated that you did not attach the Federal (1040) return the FTB may ask you to provide a copy of the 1040 in order to process your state return, which brings up another can of worms. As I stated earlier, under Policy Statement P-5-133, the IRS generally does not pursue returns more than six years old. However, because the state of California does share information with the IRS and because you have a prior history of non-compliance (the SFR for 2003 and an unfiled return for 2000), you might have a problem with the Feds for 1997. The 1997 Federal return you provided shows tax due of $3,976. Of course, with penalties and interest you would owe roughly $12,000 today. So, the big question is should you file a 1997 Federal return? As a matter of law, obviously the answer is yes. You have a filing requirement and your income is more than sufficient so that you must file the return. In my professional opinion, you should file a 1997 return, but definitely not the one you recently prepared. I should also inform you that alerting the IRS to any other problem will likely touch off a request for that delinquent return. And beyond all that, the California return you filed for 1997 is predicated upon the Federal return which you prepared, but did not file. We have other very serious concerns about the Federal 1997 return you provided. Several items are non-deductible expenses or at best expenses that must be depreciated or amortized. They include Schedule C, Part V expenses of $14,900 for Purchase Business, $13,800 for Down Payment of Charter Boat and $8,000 for Transportation without any additional documentation having been supplied. As such we strongly advise against filing this return as the information will clearly not pass even a cursory review; 1998- The IRS shows no return having been filed. As stated previously, the IRS does not have immediate access to income information for 1998. We will send you the information upon receipt; 1999- The IRS shows no return having been filed. As stated previously, the IRS does not have immediate access to income information for 1998. We will send you the information upon receipt; 2000- The IRS shows no return having been filed. I099 information provided by your broker to the IRS shows that you do have a filing requirement for the 2000 tax year. We have attached the information provided to you by the IRS. While you may have no tax due, we strongly recommend that you file a Federal tax return for the 2000 tax year. To summarize, we recommend that you file a correct 1997 Federal return; that you amend the 1997 California return you have filed to comport with the corrected 1997 Federal return and that you file a 2000 Federal return. We would be happy to assist you with the preparation of these returns. If you have any questions regarding any aspect of this report, please contact me. Respectfully yours, Steven H. Kassel, EA Unfortunately, Mr. W wasn't happy with my letter as I had clearly caught him attempting to break the law. He responded with vicious attacks and by suing me in Small Claims Court in San Mateo County, California. Small Claims Courts are strange things and through his lies, he won there. However, I appealed and took the case to California Superior Court where I was able to put on a complete defense. I won a complete victory and the Judgment was filed on October 5, 2007. Mr. W is a very disturbed individual. Neither I nor anyone from my firm have had ANY contact with the California Franchise Tax Board or the Internal Revenue Service in nearly 27 months. PERIOD.