IRS transcripts... we should follow

[Pacun]

I have noticed that the IRS doesn't use cents on their reports. So when we file returns, they don't match most of the time because we round up after .5. I guess the IRS ignores any mismatch less than $5, I would say.  I always wanted to ask this question but I always forget. NOW DC is enforcing the dropping of pennies.

My people are panicking when they receive a letter with two columns with a lot of lines like this:

Reported           our records

20,230               20,230            Income
1,000                 1,000              Tax liability
1200                  1,199              Withheld on W-2
200                      199               Refund.

A few people got that letter and the first one called when we were really busy and may assistant told him that it was only one dollar less, so not big deal. The rest of the family (4 other clients) didn't come back this year.  Later a client came with the later and the check asking why he was getting the letter and her reduced refund ($1). I read the letter and from now on, I don't round up on W-2 line 17 if the state is DC.

I always say that DC had better computer system than the IRS but people don't know who to use and this proofs that DC is on top of fraudulent returns. They are on the spot matching the payroll records reported to them. Two people were asked to bring their W-2s to the office, so I guess those employers didn't report the W-2s to DC yet.

 

[JohnH]

I think I'd tell client that the people who program the DC computers have absolutely no common sense.

[Pacun]

18 minutes ago, JohnH said:

I think I'd tell client that the people who program the DC computers have absolutely no common sense.

The IRS computers are that way also. When you request your W-2 from the IRS they drop all pennies. Except that the IRS doesn't generate a letter for $5 or less discrepancy.

[JohnH]

That was exactly my point.  The people who program the IRS computers have some common sense when it comes to minor discrepancies - the people who program the DC computers apparently have none. 

Rounding to the nearest $5 (or maybe the nearest $10), should be the norm.  Anyone who doesn't understand this simple principle shouldn't be allowed to design a tax checking program for any government agency.

[Pacun]

You are right, but isn't amazing that the IRS computers don't match on the spot? With all the horse power that the IRS computers have, we have to wait until December to be told that we left one w-2 out. DC does it on the spot and I guarantee you that that's is a good deterrent for people from India filing fraudulent returns.

[Lion EA]

As much as the IRS insists we round off to the nearest dollar, in their own instructions to forms, for instance, they themselves truncate.

It leads to some silly letters like you mention from DC.

And, clients have brought in letters saying they were missing interest from ABC, as an example, for sometimes large amounts like $123,456, when we reported $123,457 from ABC; the IRS is reporting a second amount from ABC was missing instead of just a mismatch of $1 on the one and only ABC interest.  Time consuming.

I even had a client bring in a letter stating they owed $0.00.  It was obviously a less than 50 cents rounding difference that showed as $0.00 on that computer generated letter.  I told her to ignore it, that the computer or a real person would catch it next month.  Nope.  At least one more letter asking for $0.00.  So, I told her to write a check for $0.00 to mail in with the payment voucher from the letter.  That did the trick!

[ILLMAS]

One of my associates that is a CPA, has a CPA friend that wrote the IRS a letter because his refund was short a dollar.