IRS Letter 1
States Department of the Treasury
Internal Revenue Service
Austin, TX 73301
Re: Taxpayer’s Name
(Both if Joint Return)
Form Number (Usually 1040) and Tax Year End Date
Attached Notice of Proposed Changes (the “Notice”)
The taxpayers captioned above have always
filed and paid their federal taxes in a timely manner.
The year in question is no exception. In the captioned
notice (Exhibit 1), the IRS is proposing several sweeping
changes to the taxpayer’s return. We agree with the change
to the adoption credit, but strongly disagree with the others.
We have amended the return to correspond with the adoption
credit change and have included a copy of the amendment as Exhibit 2.
The changes we disagree with are discussed below.
We hereby respectfully request, for the
reasons set out
below, that the accuracy penalty be waved, abated, removed
and/or otherwise eliminated.
maintain that their original deduction of $xx,xxx.xx is correct.
This amount of mortgage interest was paid to more than one mortgage holder.
The amount was arrived at as follows:
Deducted on Schedule:
Sch. A, Line 10
XYZ Mortgage Company xxxx Sch. E, Prop. A, Ln. 12
Wee, Chettem, & Howe Mortgage xxxx Sch. E, Prop. B, Ln. 12
Pay Ten Times Mortgage xxxx Sch. E, Prop. C, Ln. 12
OverCharge Mortgage xxxx Sch. E, Prop. C, Ln. 12
All interest deductions listed above are supported by either
a form 1098 or, in the case of OverCharge Mortgage, an amortization schedule
in Exhibit 3. All mortgage interest deducted in the return as originally filed was correct.
In passing we note that the IRS itself, in it’s
Notice of Proposed Changes,
states that the amount of mortgage interest deducted in the return is only $xyz.
In reality, the amount of mortgage interest deducted in the return was $abc.
Apparently, the IRS itself is guilty of inaccuracy.
preparation of the tax return, due to computer software
failure and human oversight, the adoption credit was claimed even
though the taxpayer’s adjusted gross income exceeded the applicable limit.
As per the attached amendment, we have eliminated the credit
for 19yy and will carry it forward to tax years ending in 19zz and beyond.
We note that no
human effort is perfect. In spite
of the prevailing
notion that the human race can achieve whatever it aspires to, no human
effort has ever reached the level of perfection. Not withstanding the surest
safeguards, from time to time, all human effort will fail. It is simply the
nature of our existence.
is true for private citizens and, as demonstrated
above, government agencies as well!
oversight occurs for a taxpayer, the IRS is at
liberty to impose serious penalties. However, when employees of
the IRS are at fault, taxpayers do not have a similar privilege.
This is not fair.
Congress recognized this inequity and abuse potential
when it gave the IRS the ability to abate penalties.
In the instant
case, we DID deduct the CORRECT amount
of mortgage interest and the adoption credit has been corrected.
Indeed, an adjusted gross income limitation is obvious from the face
of the return. We surely had no delusion that we could somehow trick
the IRS into granting an adoption credit where none was due.
There was absolutely no intent to provide misleading information.
The credit was mistakenly claimed because the tax preparation
software failed to impose the AGI limitation. There was no intent to
misstate the amount of tax due or even to delay the payment of that tax.
Indeed the adoption credit issue is merely one of
since the credit can be carried forward. Accordingly, the return
as filed was accurate except for the timing of the adoption credit.
Thus, no penalty should be imposed.
SENSE OF FAIR PLAY
Is it too much to
expect our government’s treatment of
its citizens to be fair and equitable? The complexity of our tax
code has now exceeded the point where even competent tax
professional feel inadequate to practice in all areas of the code.
This has led to increasing amounts of specialization and other problems
The IRS, as late as 1990, candidly stated that,
try to create forms and instructions
that are accurate and can be easily understood.
Often this is difficult to do because some
of the tax laws enacted by Congress are
very complex (emphasis supplied).”
How then can the average American be expected to know
the inner workings of the code when even the IRS admits that it
is so complex, they can’t even design the forms so as to be easily
understood! As the complexity of the code increases, honest
Americans who have always paid their fair share of tax will inevitably
be ensnared by the system.
Surely the IRS intends otherwise.
If a taxpayer who is attempting to do what’s
caught in the system, shouldn’t the IRS attempt to help
the taxpayer? Here, instead, the service attempts to
penalize him. This is unconscionable.
Indeed, the IRS mission statement is to, “Provide
taxpayers top quality service by helping them understand and meet
their tax responsibilities and by applying the tax law with integrity
and fairness to all (emphasis supplied).”
The IRS fails to achieve fairness to any much
less “fairness to all” when if plays upon the complexity of the code
to justify unjust penalties.
Such is the case here.
Most taxpayers aren’t even aware
of something termed “Adjusted Gross Income”. Thus, it is quite
reasonable that a credit limitation based on such an obscure concept
may be overlooked.
To penalize for such a reasonable oversight would
nothing more than a penalty on the humanness of taxpayers. In light
of the IRS mission statement, “fairness to all” cannot be achieved by such a penalty.
Simply, the penalty must be waived.
The Taxpayers have always paid their fair share of
a timely manner. There was absolutely no attempt to avoid or even
delay the payment of tax for the tax year in question. A very human
error occurred and has now been corrected.
The Taxpayers have suffered much at the heavy hand
IRS collection process. It is now time to lay these matters to rest in
a fair and equitable manner.
We trust that the service will act quickly to make
this account, wave the penalty, and show the account paid in full with the
filing of the attached amendments.
Joe and Jane American
John S. La Tour
Certified Public Accountant
August 9, 2000
112 Center Street, Suite 560
Fayetteville, AR 72701
undersigned, under penalties of perjury declare the
above to be a true and accurate representation to the best of our
knowledge and belief.
Joe American Date
Jane American Date
 See, IRS 1990 1040 Forms and Instruction, p.4 under the section titled, “The Time it Takes to Prepare Your Return”.