Letter Written by Tom Copeland Following the April 3, 2013 IRS Meeting

Jeannie and Robert Peoples
vs. IRS Commissioner

 

I sent the memo below to the IRS official immediately after our meeting to summarize what we had discussed and to make sure we remembered what we discussed. I think it’s important to take this initiative, rather than wait/hope that the IRS official will do the same. In my opinion, anything I can
do that will save the IRS time and make it easier for them to consider our position will help my case.

To: xxxxxxxxxxxxx

From: Tom Copeland

Re: Peoples Audit

Date: April 3, 2013

Mr. xxxxx – I appreciate the time you took with me today on the Peoples case. Here is a summary of what I understand we discussed:

Supplies – You identified some personal items in some of the receipts for one month. I suggested we compromise and allow 95% of what we are claiming. You said you would take this under consideration. Whatever the subtraction is agreed upon, we would multiply this lower number by the business use of home percentage.

Repairs – You gave me a printout of the repairs and identified some items that perhaps should be depreciated. I’m contacting Mrs. Peoples about these items to have her identify (if she can) what some of them are. It looks like some of the items should be depreciated as home improvements. I will get back to you on this asap. Whatever number we agree to for repairs will be multiplied by the business use of home percentage and some items will be depreciated.

Business use of the home percentage – We did present evidence that Mrs. Peoples worked 93% and 97% of the time caring for children. The Appeals officer did accept 93% for one year. In the spirit of compromise I proposed that the IRS accept 93% for both years and you indicated that this seemed reasonable.

Food – There is no document that shows exactly which meals and snacks each child ate on each day. Both the reports prepared by the IRS and by Mrs. Peoples assumes that each child ate the exact same number of meals and snacks each day for the year. I showed you some Food Program monthly claim
forms. These forms indicate that the meal pattern was not always the same. In some cases the IRS under reported meals/snacks and in other cases over reported them. The same was true for Mrs. Peoples’s report. I proposed that we split the difference between what Mrs. Peoples is claiming and what the IRS report allows. The total for 2008 and 2009 that we are claiming is $56,417. The total
that the IRS allows is $52,459. The difference is $3,958. If we round this off to $4,000 and split the difference, we should add $2,000 to the IRS number for a new combined total of $54,459 ($52,459 + $2,000) for 2008 and 2009.

Depreciation – We agreed to drop the $1,385 flat top trailer. You were going to look over the rest of the items, but seemed inclined to accept the rest.

House depreciation – You agreed to correct the mistake of the Appeals officer and use 2.564% as the correct depreciation percentage on the home.

Advertising – You accepted the $158 advertising sign.

Business liability insurance – I submitted bank statements showing that in 2009 $450 of the insurance expense on Form 8829 should be treated as a direct expense and you agreed. $700 should be the amount claimed for house insurance as an indirect expense.

Penalties – I argued that these penalties should be entirely abated because there was no intent to defraud by Mrs. Peoples. She quickly admitted when she made some mistakes and was able to back up her claims at the audit with receipts. I think we agreed that her case should have been settled at Appeals. I believe their unwillingness to look at her records gave Mrs. Peoples no choice but to go to Tax Court. As a result she will have to pay an additional two years of interest on issues that were never in dispute. In my opinion, the lack of reasonableness shown by Appeals means that Mrs. Peoples
has suffered enough of a penalty.



Categories: IRS and IRS Audits, Record Keeping & Taxes

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