Issue: IRS wants to bill client for debt already cancelled
$$ at stake: nearly $10,000
A client recently approached us with an alarming IRS bill totaling nearly $10,000. Curious about the circumstances leading to this hefty sum, we inquired further. It emerged that the IRS had assessed a cancellation of debt amounting to $30,000, which had been included in the client’s taxable income. The client had operated under the assumption that since the debt had been canceled, it wouldn’t be considered as income. Fortunately, the client sought our assistance promptly, enabling us to respond to the IRS within the stipulated timeframe.
First IRS letter proposing almost $10,000. Note that the key word is “proposing,” which means that this letter is not a bill. The IRS is giving an opportunity to the taxpayer to explain or defend their position. If the IRS agrees, the amount might be reduced or removed entirely. Thus, it is important for taxpayers to act quickly upon receiving an IRS letter.
Over the course of several months, we diligently worked on the case, marshaling our expertise to defend the client’s position. Our efforts bore fruit when the IRS ultimately conceded, agreeing to remove the cancellation of debt from the client’s taxable income calculation. As a result, the client achieved the best possible outcome: no adjustments to their tax return. This victory was not only a relief but also a significant triumph for our client, sparing them from a substantial financial burden.
Zero is the best number in this case. This outcome was the best possible result for the client, as it meant no changes to their tax return. It was a significant win and a huge relief for our client. We are glad to have been able to help our client successfully.