IRS CP2000 problem

[TAG]

New client came to me with an IRS CP2000 notice for TY 2011 in May 2013. The problem: On his Sch F his previous tax preparer reported taxpayer's grain sales on line 2. Now however, farm co-ops are putting sales through them (which these were) in box 3 "per-unit retain allocations" of the 1099PATRs-so the IRS thinks he is under reporting his income by $ 45,800. His guy is as honest as they come. With the increase in tax, "substantial tax underpayment penalty", interest he owes $ 21,000.

In May, when he first came in, I re-did his Sch F blanking-out the amounts on line 2 and increasing his 1099PATR on line 3a. I amended his return with a very good (I thought) explaination as to what had gone wrong. Today he receives another IRS notice and they are still locked in on the original problem-not the mistake.

Normally, I know it can be a PITA dealing with the IRS but it seems to me that they have gotten really, really horrible.

What suggustions can you offer me.

Thanks in advance.

Terry

[joanmcq]

If you didn't address the issue with the AUR unit, that's where your mistake was made. Did you send the amended return to the address on the cp2000 or as an amended return?

[TAG]

Joan, I sent the 1040X to both. What's the AUR unit?

And thanks for the response.

[joanmcq]

the AUR unit addresses the CP2000. I never send a 1040X, just send a response to the CP2000. Did you mail or fax? Faxing expedites the response. I've found mail gets lost. Give the number on the notice a call, if you have a POA and see if you can get it straightened out.

[TAG]

Thank you very much, Joan.

Terry

[jainen]

>>it seems to me that they have gotten really, really horrible<<

It seems to me that the IRS is VERY explicit about how you should respond to a CP2000. It goes on for pages, spelling out exactly what they think was originally filed, what they think is wrong and why, what the effect of the proposed change is, and what to do if you disagree in whole or in part. If you don't follow the instructions, then don't complain that something doesn't work.

[kcjenkins]

Jainen sounds a little harsh on this, but he's still right, Terry. They get more rule-bound every year, which can be frustrating, but that's just how it is with any large organization. We just have to work with it.

[joanmcq]

That's one of the reasons I cringe every time I see someone post that they've responded to a CP2000 with an amended return.

[Jack from Ohio]

We only reply with a 1040X when the CP2000 has ridiculous and inaccurate information and calculations. This happens about 1 out of 3 times.

In the last 2 weeks, we have received 10 CP2000 for couples MFS where the mortgage interest was split. IRS is disallowing which ever one's SS# was not on the 1098INT. I have a canned response letter that I use and just change names, dates and dollar amounts.

[jainen]

>>IRS is disallowing which ever one's SS# was not on the 1098INT<<

Do you mean home mortgage interest on Line 10 of Schedule A?

[Jack from Ohio]

>>IRS is disallowing which ever one's SS# was not on the 1098INT<<

Do you mean home mortgage interest on Line 10 of Schedule A?

yes

[jainen]

>>IRS is disallowing which ever one's SS# was not on the 1098INT<<

>>Do you mean home mortgage interest on Line 10 of Schedule A?<<

>>Yes.<<

Yeah, I figured. Another case of exposing clients to unnecessary audits, just because the preparer can't read and follow simple instructions. Like the Instructions for Schedule A line 10, which quite clearly and specifically say DON'T put your interest there if Form 1098 has somebody else's SSN.

I'll link to the 2011 version, assuming that's the year under examination. http://www.irs.gov/pub/irs-prior/i1040sca--2011.pdf

You know, I kind of miss Package X. I could sit back on a slow January afternoon and browse through everything--"Oh, we're doing such-and-such a bit differently this year!" But still, at least once in seven years you should read the instructions. They changed this one back in 2005. Before that, you had to read down to line 11. I guess a lot of people missed that, so now it's both places.

[Guest Taxed]

Excellent Observation Jainen

Perhaps Jack will now list those interest deduction on line #11 instead of line #10.

I have been doing that without any issues or CP2000.

[jainen]

>>I cringe every time I see someone post that they've responded to a CP2000 with an amended return<<

What do you do when you see someone post that they've responded to a CP2000 with TWO amended returns send to different IRS offices at the same time?

[Guest Taxed]

From the IRS instructions

Do I need to amend my return?

If the information displayed in the CP2000 notice is correct, you don't need to amend your return unless you have additional income, credits or expenses to report. If you agree with our notice, follow the instructions to sign the response page and return it to us in the envelope provided.

If you have additional income, credits or expenses to report, you may want to complete and submit a Form 1040-X, Amended U.S. Individual Income Tax Return. You can receive help at an IRS Taxpayer Assistance Center.

They are pretty explicit when they want you to submit a 1040X.

[joanmcq]

>>I cringe every time I see someone post that they've responded to a CP2000 with an amended return<<

What do you do when you see someone post that they've responded to a CP2000 with TWO amended returns send to different IRS offices at the same time?

Take a Xanax

Try not to type, "can't you frikkin read a damn notice!" in my answer.

I've gotten unrelated items fixed along with the issues addressed by the CP2000 sometimes. It depends on what it is and whether it's something the AUR unit has the authority to fix.