It is possible that the IRS may waive the penalties; the
interest they generally cannot do anything about. However,
given that your mother is in apparently irreversible failing
health, it may be possible to get a compromise agreement
with the IRS under which your mother pays until it makes her
squeak, but no permanent harm is done, and any remaining
balance may be foregone in the interests of fair tax
administration.

Please don't get me wrong, it will not be easy to get the
IRS to settle for less than the full amount owed, plus
interest. As I said above, there is a better chance that
the penalties will be waived, depending on the degree to
which you can prove through objective evidence (think lots
of Dr.'s examinations and reports) that she was sufficiently
mentally impaired that she could not reasonably be expected
to accurately comply with her tax reporting obligations.

Unless you are a tax attorney, or a CPA with experience
negotiating with the IRS, I would strongly suggest that you
retain someone who is.

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"AlPastor" <pjtall...[at]sbcglobal.net> wrote:

- quote -

I think you have a reasonable chance of getting penalties
abated but not very likely to get interest abated.

<< ================================================== ===== > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

"AlPastor" <pjtallman[at]sbcglobal.net> wrote:

- quote -

First, I would strongly suggest that you seek professional
help with this. I suspect that there is more to this than
you have told -- possibly more than you know!

Underreporting income to the extent you indicate cannot
escape IRS matching procedures. IRS would have detected the
difference between the amounts reported by Fidelity and
others and the income on your mother's return. As a result,
they almost certainly have been sending notices to her. At
first, these notices would say they proposed to assess
additional tax, for the underreported income. Later, they
would actually assess this tax and the notices would become
demands for payment. You need to find out what IRS has done
in this regard.

IRS has authority to waive penalties but not interest. The
code actually says that penalties apply to late payment of
taxes "without reasonable cause." After all penalties have
been assessed (IRS can't abate unassessed penalties) a
concise statement of your mother's condition, supported by a
doctor's statement, should get some action from IRS.
Although I highly recommend professional help, my
experience, over many years, has been that a personal
statement may be more effective than one written by a tax
professional.

Getting the information on IRS actions is vital. When you
file your amended returns, you want to be sure that the data
you use corresponds to the IRS files. It may be easier to
have a professional represent you in this process.
Frequently, the professional can accomplish the results more
efficiently (because he/she knows the rules, etc.) without
the emotions of dealing with IRS yourself.

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

<< ================================================== ===== > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

"AlPastor" <pjtall...[at]sbcglobal.net> wrote:

- quote -

It is very possible that the IRS will abate the penalties,
but they will not abate any interest. Just file the 1040Xs
for the former years and wait for a letter stating the
penalties and interest. Then write a letter and send it to
the address on the form along with a copy of the form (keep
one for yourself) stating your mother's condition and when
it started and that you are trying to straighten things out.
Don't forget about the state if your state has income tax.
Keep a copy of all corrospondence with any tax agency, along
with dates received and replied.

Don't forget to take the federal excise tax credit (thanks
Harlan) on line 71 of the form 1040 for 2006.

Missy Doyle

<< ================================================== ===== > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

My mother was diagnosed with dementia two years ago and I
hold Power of Attorney for her. Last tax year was the first
year my family realized she was incapable of handling her
own finances including taxes. So, the best I could, I
gathered all her documentation and took it to the tax person
she'd started using a year prior. I was very unimpressed
with this person and so decided that beginning with tax year
2006 I would prepare her taxes (using TurboTax which I've
used for my own taxes for 10+ years). Also, for all of last
year I had my mother put any and all mail in a box which I
went through every week, saving all tax related items. The
result being that I believe I have all tax documents this
year.

I did my mom's taxes and discovered that she underpaid her
2006 estimated taxes by approx. $1700. This cause me to
research why this occurred and I discovered that she did not
report income from one of her accounts (Fidelity) which
caused the 2006 estimate to be wrong. Further number
crunching determined that she did not report the Fidelity
income for 2005 and under reported her income for 2005 by $6
- 7K (I still need to review 2004 and prior but my mom
doesn't remember where she put her tax records so it will
take time).

I am filing her 2006 taxes, paying the $1700 and penalty. I
am calculating her 2007 estimated taxes correctly. My
question is what to do about the prior year(s) returns that
under reported her income? I know I need to file amended
returns but I am very worried about the interest and
penalties that the IRS is going to impose. My mother is not
wealthy and has just enough to live on with her current
assets. Is it possible the IRS will waive the penalties and
interest and just allow my mother to pay the amount she owes
due to her condition (it has been determined that she
actually was suffering from dementia since 2003 but hiding
it before my family realized there was a serious problem).
No attempt was made to purposely under report the income and
I want to correct any errors.

Thank you to all who can offer advice.

Cheers,
Pat

<< ================================================== ===== > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >