I know of no requirement that a corrected 1099-R must be
submitted. The documentation you submitted should be
sufficient. The IRS person that is requiring this info is
either poorly trained, doesn't know any better, is one of
many petty IRS employees that get on a power trip just
because they can, or more likely all of the above.

Your best recourse is to contact the Taxpayer Advocate's
(TA) office either by phone (1-877-777-4778) or by
submitting a Form 911 via mail or by fax to the local TA
office for your state
(http://www.irs.gov/advocate/content/...150972,00.html).
They should be able to have the case reassigned to them and
process the amended return. When they contact you or your
client, be sure to have the name(s) of your congressional
representatives in case you neet to hint to the TA that you
plan on contacting them for help as you can't believe that
the IRS won't help a dying woman even though she has
provided documentation proving her illness and justifying
the amended tax return.

As for the other suggestions:

1. A TAM must be requested using the formal procedures
contained in Rev. Proc. 2006-2 but they are intended to
establish the proper interpretation and application of the
Internal Revenue laws to the facts of a specific case on the
grounds that a lack of uniformity exists regarding an issue,
or that the issue is so unusual or complex that is warrants
consideration by IRS Headquarters so a TAM would not be
appropriate for your client's situation.

2. You would not be able to file a petition in Tax Court
since that is only applicable when the IRS has issued a
Notice of Deficiency, also called a 90 Day Letter.

3. You could have the IRS issUe a disallowance letter to
deny your claim (typically Letter 916) and then would have I
believe 2 years from the date of the letter to file suit in
federal district court. However, the expense would be much
greater than the tax decrease involved so I wouldn't
recommend it.

Rudy
www.LizcanoTaxServicesLLC.com

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DORFMONT[at]aol.com (Linda Dorfmont) wrote:

- quote -

The IRS is WAY out of line on this one!

Request an appeal of their decision immediately. If that
doesn't work, write the national office ask for a TAM
(Taxpayer Advice Memorandum). This is binding on the service
but NOT on the client.

While I have never used it, I believe there is a procedure
where you can ask for the IRS to immediately reject your
request then you can bring suit in court. I'm not sure if
you can get into tax court, but you should be able to get
into District court since they have the money.

Good luck and please keep us posted.
Gene E. Utterback, EA, RFC

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DORFMONT[at]aol.com (Linda Dorfmont) wrote:

- quote -

There is no requirement to obtain a "corrected" 1099-R. The
issuer is obligated to use the code based on all information
available at the time of distribution. If no known
exception exists to the early withdrawal penalty, then Code
1 is applicable. The taxpayer merely needs to complete the
5329, select the applicable exception code and attach the
necessary documentation. Per IRS Pub 590, here is the
definition of disabled:

You are considered disabled if you can furnish proof that
you cannot do any substantial gainful activity because of
your physical or mental condition. A physician must
determine that your condition can be expected to result in
death or to be of long, continued, and indefinite duration.

If the IRS is going to require a revised 1099-R every time a
taxpayer disagreed with the code in Box 7 of the 1099-R, why
do they have the 5329 and its exception codes?

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(Linda Dorfmont)" <DORFMONT[at]aol.com> wrote:

- quote -

I have always understood the rule to be that 1099s were
presumptive evidence, not dispositive. For years, IRS would
accept evidence that was counter to a 1099, if such evidence
was credible.

However, I am currently working a case where IRS refuses to
follow this rule. Depite an employment letter that clearly
defines an employer/employee relationship, the IRS is
refusing to admit the taxpayer is not an independent
contractor because the company incorrectly issued him a
1099, not a W-2.

I believe that I would insist the IRS accept the doctor's
statement and, if they refuse, go to appeals. If the amount
is sufficient, I would also consider engaging a tax attorney
to prepare to go to court, if necessary.

In my case, I am considering asking the attorney to ask for
court costs on the grounds the IRS position is not
sustained. You might consider this, as well.

Lanny K. Williams, CPA
Nawarat, Williams & Co., Ltd.
Income Tax Services for Expatriate Americans

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<DORFMONT[at]aol.com> wrote:

- quote -

No. Ask the IRS minion who's telling you this to confirm
that (s)he's never seen an incorrectly coded 1099. If that
doesn't work, move up the IRS food chain. If you don't get
prompt resolution, hit 'em with the Congressional assistance
request.

--
Phil Marti
Clarksburg, MD

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My client has fourth stage multi-organ cancer and is totally
disabled. Her gentleman friend brought me her paperwork
since she is bedridden and undergoing chemotherapy and
repeated surgeries. In 2004 she took out all the money from
her IRA and an annuity to pay medical bills. She hasn't
worked in several years. The issuers coded the withdrawals
with a 1 since she is only 47 years old. She filed a
physician's statement that she is totally and permanently
disabled. Her original preparer taxed her on the
distributions and also assessed the 10% penalty. She meets
the requirements for code 3 (disability). I amended the
return with the physician's statement. The IRS is now
requiring that the 1099R form be changed by the issuers.
America Express has refused to correct the form. The life
insurance company I haven't heard yet.

Does the form have to have this code? She obviously meets
the requirements of exception 3 although she didn't tell the
issuers about her disability. Both she and her gentleman
friend are in denial about the seriousness of her disease.

Linda Dorfmont E.A., CFP, CSA

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