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What Should The Tax Payer Do?

Gsouls
Level 3

A client used to prepare her own taxes using turbotax. For 2018 tax year, she decided to split her income by filing two separate taxes upon the advise of a trusted friend. Taxpayer did the same thing in 2019, but failed to submit the second returns. I was shocked to even hear that Turbotax permitted a payer to e-file two separate taxes with the same SSN.

It turns out that employers data submitted to IRS did not match the tax payers income declared on the returns for both 2018 and 2019. Not sure if IRS noticed that she filed two returns by spliting the income for the 2018 tax year. 

Tax payer has since received two IRS notices CP2000 for 2019 and CP 3219A (Notice of defiency) for 2018 tax years. If tax payer agrees to IRS changes, tax payer will need to pay IRS almost $19K for both tax years.

Is there any remedy for tax payer to lower her tax penalty /liability? Your expert advise would be greatly appreciated.

Thank you fir your help as always.

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1 Solution

Accepted Solutions
TaxGuyBill
Level 15

If the tax returns were filed correctly, would the amount of tax due match what is on the IRS notice?  If not, respond with an amendment that will properly show the correct amount of tax.

I suspect the penalties may be difficult to waive, but the taxpayer can plead with the IRS to waive them.

The IRS system would not have allowed two e-filed return for the same year.  One must have been paper-filed.  The second one was likely either rejected, or was considered as a superseding return that replaced the first one.

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4 Replies 4
TaxGuyBill
Level 15

If the tax returns were filed correctly, would the amount of tax due match what is on the IRS notice?  If not, respond with an amendment that will properly show the correct amount of tax.

I suspect the penalties may be difficult to waive, but the taxpayer can plead with the IRS to waive them.

The IRS system would not have allowed two e-filed return for the same year.  One must have been paper-filed.  The second one was likely either rejected, or was considered as a superseding return that replaced the first one.

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Gsouls
Level 3

Thank you all so much for your thoughtful answers to my question. Much appreciated. Will keep you posted.

Thank you once again for always sharing your expertise and knowledge with the community. Keep it up!!

BobKamman
Level 15

Has it been more than 90 days since the Notice of Deficiency was issued?  If not, file a Tax Court petition first and ask questions (or ask for penalty relief) afterwards.  IRS used to lose a lot of these cases for failure to follow the "supervisory approval" requirements for the 20% "understatement of tax" penalty on assessment of more than $5,000 but lately they have figured out how to beat most of those. 

This used to happen a lot back in the Dark Ages, before Service Centers and the Martinsburg "master file" computer.  File one return in Virginia, another in Maryland, and the two were never matched up.  I think even when two returns were filed in the same district, it wasn't always caught.  But you're not getting the whole story here.  She might have filed two returns, but only one refund would have been issued.  She just forgot about not receiving the second one?  And the 3219 wouldn't have been issued until after they had sent her a CP-2000 for that year also.  

If there's state income tax involved, she'll be hearing from them too, when IRS passes along the information.  

JJK
Level 3

My understanding as a long time experienced TurboTax (TT) users -  it is not possible to file a second return with a SAME TT log in account.   TT only allows one return being file within one log in account.     It is possible that a person could file his/her second return with a different TT account even with a same ss number.   However, IRS should reject this second filing if IRS already had 1st return registered in their system.   Just a thought.