July 23, 2009

 

Richard Camp, CPA

6817 Southpoint Parkway # 2201

Jacksonville, FL  32216

 

RE:   Erica Woodward

         Docket No.  08-20-9-0030

         Individual Income Tax Protest

 

Dear Mr. Camp:

 

The review unit has reviewed the amended Iowa individual income tax returns you filed for your client for the years 2001 and 2003.  After reviewing these returns, the following adjustments were made.

 

For the year 2001, the amended Iowa return did not include the deduction for federal income tax withheld and also did not include the standard deduction.  The review unit included these amounts in its computations and determined that your client had overpaid the 2001 tax by $23.00.  However, the three-year statute of limitations provided for in Iowa Code §422.73(1) (2009) has lapsed for the year 2001.  Therefore, no refund for 2001 will be issued.  A copy of Iowa Code §422.73(1) is attached for your review.

 

For the year 2003, the amended Iowa return also did not include deductions for the federal income tax withheld and the standard deduction.  The review unit included these amounts in its computations.  The review unit also noted that for 2003, your client was changing the filing status from “Married filing a joint return” to “Married filing separately on this combined return”.  The review unit will not allow the change in filing status as there is no provision in the Iowa code which permits such a change.  The change in filing status issue was litigated in the case Clark v. Iowa Dep’t of Rev. & Fin., 644 N.W.2d 310, 317 (Iowa 2002).  In that case, the Iowa Supreme Court determined that the taxpayers could not file amended income tax returns to change their filing status from married filing jointly to married filing separately.

 

The review unit also adjusted the nonresident/part-year resident credit by including the unemployment compensation received from Iowa Workforce Development as Iowa-source income.  The unemployment benefits would be considered Iowa-source income as the payment is based upon your client’s and her spouse’s Iowa employment.

 

These adjustments result in an additional tax, penalty, and interest due in the amount of $1,070.36 as shown on the attached schedules.  The total now due, with interest computed through July 31, 2009, is $2,128.30, as shown on the attached schedules.

 

Please respond in writing by August 28, 2009, whether your client agrees with the review unit’s position.  If you client agrees, or chooses not to pursue the protest, then your letter and payment of the amount due, which is $2,128.30 will serve as authority for the review unit to request that the Director of Revenue close the protest.  Please note that interest accrues at the rate of $9.74 per month.

 

If your client disagrees with the review unit’s position, then the review unit requests that your client specifically identify those areas of disagreement and provide documentation to support their position.  Upon receipt of your letter of disagreement, the review unit will forward this matter to a member of the Attorney General’s staff for further review.

 

If you have any questions regarding this matter, please contact Dennis Schutt at (515) 281-7994 or by email at dennis.schutt@iowa.gov.

 

Sincerely,

 

Jim McNulty, Program Manager

Taxpayer Services and Policy Division

Audit Services Section