The IRS has refigured my father's 2001 return and determined he
underreported income. The documents received with the letter from the
IRS indicate that people operating my father's former business are
still using both his EIN and SS# to collect revenue. I am looking for
suggestions on approaching the IRS and/or proving that my father is no
longer conected with that organization in any way. Unfortunately,
everything is complicated by my father's age, physical and mental
health, and his unerring ability to screw himself over!
The background has been very difficult to come by; my father claims
not to remember most of the details, will lie to avoid facing his own
negligence, and some of the information has been contradictory, but
here goes...
My father is a retired optometrist in California. Sometime in the
early 90's, he opened a practice in So. Cal. Presumably, it was a
sole proprietorship, as the woman who has done my father's taxes for
30+ years (EA) was filing Schedule C with his returns through 1997.
My dad is in his 70's, he had a number of major surgeries during the
90's, my mom developed dementia and had to be institutionalized, he
couldn't sell their house...eventually he filed for bankruptcy, at
which time he lost his refracting equipment. The people that worked
for (with?) him were able to get more equipment, but I was unable to
get a clear answer from my dad about whether or not he continued to
work after his bankruptcy. I also haven't dug out those papers yet,
to determine the exact date he filed.
My dad knows he stopped working when he had his last surgery; he
called his doctor and found out that his surgery was done in March
1999. He, and my mom, moved to No. Cal. the first week of July 1999,
so we know his connection with his business did not extend beyond
then, for sure. However, EA told me that she filed a Schedule C with
his 1997 return, but not his 1998 return.
In an attempt to pinpoint when he left the business, I asked my dad if
he had been the sole signatory on his business checking account and if
he had closed the account when he left the business. He told me that
he had closed it and was the sole owner of the account. When we
called the bank to request copies of his bank statements, to prove the
date he closed the account and to obtain information about payroll
taxes, he was told the account was still active and could not be given
any information regarding the account, even though the account is
using his EIN.
My dad just walked away from this business, sometime between filing
bankruptcy and March 1999. At least that's how he describes it...he
just walked away. If there was any kind of discussion about changing
ownership, there is no documentation. If there was any kind of formal
transfer, my dad doesn't remember, or claims not to, and he doesn't
have anything in writing. However, due to the nature of California
laws or regulations, there must have been something my dad doesn't
remember or doesn't want to admit to. EA remembers him telling her at
the time, that "they" were giving him papers to sign that he didn't
understand or didn't bother to read. I haven't been able to find
anything.
In California, an optometrist can only be employed by another
optometrist or doctor, or a medical group or LLC, I guess.
Essentially, what it comes to is that an optician cannot hire an
optometrist, yet the likelihood of an optical shop surviving is
minimal without an on-site or right next-door optometrist.
So, there was enough negotiation for my father to agree to keep his
licence active and allow them to "use" it for the purpose of hiring
another optometrist in his place. In exchange, they took
responsibility for an IRS Offer-In-Compromise, agreed to by the IRS,
for back payroll taxes, making the payments and filing all required
forms and schedules.
I did find a 1099 issued by the business to my dad for the purchase of
business equipment, I believe in early 1999, a year for which he did
not file a Schedule C with his 1040. I hope that might prove
something, even if I'm not sure what!
Toward the end of 2000, my father's licence was due for renewal and
the people in So Cal contacted my dad. Via e-mail, he agreed to renew
his licence and they agreed to pay the Offer-In-Compromise agreement,
reached at the same time as the one for payroll taxes, for his
personal taxes owed in the amount of $6500. He didn't save the
e-mails that were exchanged.
They never paid my dad's tax bill so my dad hired one of those
tax-assistance companies to negotiate an OIC. The IRS returned the
OIC with a list of returns that had not been filed - 940 and 941 - for
several periods, both before and after he left So Cal. Then they came
up with more years for which he may or may not owe. Then the IRS
claimed he failed to report income in 1999, citing several 1099 that
had been issued to his EIN and SS#. Then they levied his bank
accounts, ultimately taking the almost $8000 in the accounts. That
left my father with no savings and only $2300/month in pension and
social security payments.
Right now, we are waiting for a response to their recalculation of his
2001 return. It was quite obvious that the people running my dad's
former business are using his federal EIN and SS# to collect revenue.
We disagreed with the findings, our reason being someone's use of
Dad's ID.
I should point out that both my dad and EA, his preparer are very
honest and will report all income and use legal means to reduce tax
liability. There have been at least two occassions when the IRS has
questioned deductions taken; both times my father and his tax preparer
prevailed. They would not under-report income to avoid taxes.
I live with my dad and have since the end of 2000. I would know if he
had any financial connection with his old business.
I don't know if we should go ahead and report the suspected fraud or
just wait until the IRS comes back to us. I don't know how seriously
the IRS takes an accusation like this or how much proof is required.
We have a little bit of supporting evidence. There is a letter that
the bookkeeper sent with my dad's OIC and licence renewal in which she
admits responsibility for the payroll taxes have been assumed by them.
But, it's just a typed sheet of paper I don't recall her having
signed or initialed. My dad did save the last e-mail received by his
former business manager, who I presume is now the owner of the
business.
We haven't heard anything from the state so they've most likely been
paying taxes or even filed for a state EIN of their own. At least,
that's what I was told by a tax attorney I consulted. He said the
state was faster and more aggressive in pursuing tax evaders. I don't
want to attract attention to my dad by asking the state if his EIN is
still active. Plus, I don't think they would tell me or my dad.
I'm at a loss at what to do next. I don't know if he actually does
owe some of the additional tax the IRS claims or if he only owed the
$6500. I don't know if a verbal contract, legal in CA, can legally
transfer a tax liability. The IRS web site was extremely helpful and
I know a lot of general stuff about EIN and OIC, but I couldn't find
anything helpful in this situation. All IRS references to EINs say
you MUST get a new EIN in specific situations - at least 2 are
directly applicable to my dad - but I can't find anything that says
what happens if you don't get a new EIN when it's required. |
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