IRS Audit of my 72t Distributions

L1: IRS Audit of my 72t DistributionsJoy of joy my 2005 tax return is being audited and I am quickly learning just how unimformed IRS employees are about the tax code.
I started 72t distributions on one of my IRAs in July2005 and I used the Dec. 31, 2004 balance, the 120% mid term interest rate for May 2005, and my attained age for 2005 of 53 to make the calculation. Ihave been recalculating the distributions for 2006 and 2007using the Dec.interest rate and the Dec. 31st IRA balance. The company that has my IRA sent me a 1099 for 2005 with a code of 1 which is probably the reason for an audit. I submitted a Form 5329 with my tax return. The other IRA distribution I deducted on my 5329 and I did not pay a 10% penatly was from another IRA and was the amount of medical expenses claimed on my Schedule A that exceeds the 7.5% AGI.
I have been pulling together my medical receipts and all the information I used for my 72t calculation. In the meantime I called the IRS and waited about 25 minutes to talk to a person and they told me I had to go back to the company that has my IRA used for the 72t and get them to send me a corrected 1099 with a code of 2. During the call I also had to explain to this person about the medical deductions that were allowed by the tax law.
My questions are:
1. Should I wait and try to get my 1099 changed or just go ahead and submit the documentation I used for the calculation?
2. Should I tell them now that I have used an anual recalculation or just wait and see if I am audited again?
3. Is there any intelligent life at the IRS?
I don”t mind paying my fair share of taxes but I do mind a federal agency that has employees that are not infomed about ther job and send out letters implying that I am guilty of tax fraud and demanding I send them back taxes and penalties before they even review my documentation.
Thank you for an extremely informative website and all the help you have provided me in the past.
Regards,
Fred2007-08-09 12:28, By: FredB, IP: [68.52.104.70]

L2: IRS Audit of my 72t DistributionsHello FredB:
The answers are: NO, MAYBE, YES, but hard to find.
I suspect you have received a computer produced deficiency notice (From Cincinatti???). In short, I strongly suspect that the IRS computer is all confused because you had SEPP distributions coming from one IRA and rxcess medical distributions coming out of another IRA.
If this is true you are not the 1st and certainly will not be the last.
I strongly suggest that you:(a) DO NOT call the IRS — why on earth would you expect to get a correct answer; (b) hire a competent professional to prepare your reply / dispute with the deficiency notice. And, please do so within 30 days of receiving the notice.
TheBadger
wjstecker@wispertel.net
P.S. If you find someone locally with whom you are comfortable, great; otherwise, call me and will give you a hand.
2007-08-09 17:11, By: TheBadger, IP: [72.42.66.61]

L2: IRS Audit of my 72t DistributionsThanks for the advice Badger. I sent you an email and will try calling you in the morning.
The letter was from Austin, TX.
I was out of town when the IRS notice was sentand just received it the other day. The response is due by the 15th so time is short. What would I have done if I was not home for a couple of months like I do on occasions? Not all retired people sit at home waiting on the IRS to send them a letter!
Fred2007-08-09 20:03, By: FredB, IP: [68.52.104.70]

L2: IRS Audit of my 72t DistributionsI prepare form 2848 IRS POWER OF ATTORNEY forms for all of my clients, and file them with the IRS about 2-4 weeks after filing their tax returns. That way the IRS is REQUIRED to send ME a copy of all notices that they send my clients. I give priority to any IRS notices I receive, and usually have it RESOLVED by phone before the client even opens their mail. If you have a tax preparer, I suggest you ask him to prepare this form for you to sign, and then return it to him to sign and file with the IRS. I started this procedure over 20 years ago, and the IRS Commissioner in Phila tells practitioners publically that they should follow my lead.2007-08-09 20:11, By: dlzallestaxes, IP: [141.152.252.246]