Chris Klug
Chris is a trusted attorney with extensive experience in taxation, corporate planning, mergers and acquisitions, and estate planning. He guides clients through complex tax matters to deliver practical solutions.
Background
Basswood Counsel is proud to have provided pro bono services to a widow with a child of a soldier who was killed in active duty abroad. For some unknown reason, the Internal Revenue Service (“IRS”) audit process, which covered two years, was made difficult for her (“Taxpayer”) to navigate, with the IRS pushing hard to erroneously tax her, despite her dedication and continued assistance to families on U.S. bases abroad. It was our view that this Gold Star widow should have been honored for her dedication, not wrongly subjected to taxes which she did not owe as the IRS was determined to do in this case.
After her husband was killed in the line of duty, the Taxpayer stayed in the country where the husband was stationed, and the Taxpayer continued to work and volunteer to support the military members and their families. It would not be inconceivable that her husband would have expected his spouse to be treated fairly by the IRS, a government agency, given his military service and her dedication to continue her work at the military base, even after his death.
Audit Overview and IRS Position
For tax years 2018 and 2019, the IRS audited the Taxpayer’s tax returns, removing deductions for the foreign earned income exclusion and payments made to subcontractors. The total additional amount due for the two years was around $15,000, which was a significant amount based on the Taxpayer’s earnings. The audit issues for 2018 and 2019 were identical.
IRS Refusal and Pro Bono Representation
Without getting into technicalities of the position, the IRS refused on a number of occasions to reasonably review the supporting evidence provided by the Taxpayer for the deductions. Basswood Counsel stepped in to handle the representation pro bono as the Taxpayer was simply being treated unfairly. We pursued an administrative appeal with the IRS Appeals for 2019 as the IRS thought the statute of limitations for 2018 was too close to expiring to allow for the appeals process for that year. For tax year 2019, the IRS Appeals Office ruled in favor of the Taxpayer on all issues allowing the deductions.
Based on this, we requested an Audit Reconsideration for tax year 2018. The IRS Agent who handled the audit left a voice mail where he stated they did not have to follow the IRS Appeals Office determination for tax year 2019 and his comments made it obvious he was not properly considering the Taxpayer’s support for the deductions in 2018, this voice mail was truly obnoxious.
Commitment to Pro Bono and Escalation
As part of our values and culture, we handle pro bono cases with the same professionalism, commitment, and zeal as we do for paying clients. Before the final disposition of our representation of the Gold Star widow, we had accrued more than $75,000 in billable hours e on the matter. We were ready to take the matter to the Tax Court, if necessary as it was the right thing to do.
We then contacted the IRS Agent’s supervisor (“Supervisor”) and other top IRS officials about what had occurred to the Taxpayer. The following day, the Supervisor called our office and emailed us stating they would make the changes as the Taxpayer requested to allow the deductions and apologized for what occurred.
Final Thoughts
While it is not part of our customary practice to contact an IRS agent’s supervisor, we believe that, when the IRS Agent repeatedly refused to treat the Taxpayer with respect, it was important that appropriate IRS personnel were aware of such behavior, which made the difference and led to a positive outcome for our client. We are proud to have had the opportunity to help this Taxpayer, and given the circumstances, we were pleased she did not have to come out of pocket for taxes she did not owe, as she had already lost more than enough.