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Meanwhile, on July 24, 2003, petitioners filed a Form 1040
for 2001. The return reported adjusted gross income of $190,054,
taxable income of $104,746, total tax of $38,175, total payments
of $6,000, and an amount owed (after a $1,511 Form 2210 addition)
of $33,686. No payment was made with the return. Amounts due,
with further additions to tax and interest, were assessed on
September 8, 2003, at which time a notice of balance due was
sent.
The scheduled telephone conference for 1999 and 2000 was
conducted on August 12, 2003. The participants discussed the
changing nature of petitioners’ business and their financial
circumstances. To wit, Mr. Cox’s consulting endeavors had
previously focused on the telecommunications industry, where work
had since “dried up” due to the economic downturn. He was at
that time soliciting a more diversified clientele, but contracts
were smaller and income reduced. It was agreed that petitioners
would provide Forms 433 by the end of August for the
consideration of collection alternatives, and options discussed
included an offer-in-compromise or currently not collectible
status.
On August 28, 2003, Mr. Merriam telephoned Mr. Skidmore to
request 3 more weeks to submit financial information and to
communicate that petitioners’ 2002 Form 1040 had been mailed.
The return for 2002 was timely filed, pursuant to extensions,
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