CP-2000 NOTICE

[B. Jani]

One of my new client received CP-2000 for 2006 tax year. I did not prepare that return.

There are 3 items IRS is saying not reported on original return.

- Dividend of $445

-Cancellation of debt $2342 (reported by Discover Card)

-Cancellation of debt $1132 (reported by FIA Card Services)

The dividend part is true that they never got 1099 hence acceptable.

About cancellation of debt, client mentioned that they always paid their credit card in full

and do not recall about any debt. The social security number is the client's number on the CP notice.

How do I get the information about the cancellation of debt which IRS have and my client do not have it?

Any suggestions or ideas are most welcome.

Thanks,

B Jani

[JohnH]

It could be that the client isn't leveling with you, or it could be a clerical error with the credit card issuers & the IRS, or it could be a very serious matter of identity theft. If I were the client I'd immnediately contact the credit card issuers for specifics on the chargeoff. I'd also pull my credit reports from all 3 agencies and review them carefully. This will cost some money, but this isn't a time to be pinching pennies.

Where the client goes from there will depend upon what they learn. This could warrant some serious attention far more significant than the tax issue.

[jainen]

>>cancellation of debt which IRS have and my client do not have <<

In my opinion, the most likely scenario is that the client is not telling the whole truth. The credit cards probably gave up serious collection efforts several years earlier before finally writing it off in '06. The client hoped it had just gone away and the same personal or financial problems that caused them to get behind also caused them to miss or ignore the notices.

Of course, I'm just guessing, but I say it because usually the IRS is right about this kind of thing and for a few thousand dollars it's often best for the taxpayer to pony up and move on in life.

If they want a little more information, you can probably do that for a few hundred dollars (paid up front). That's only to GET the information; challenging it would cost far more. Using a power of attorney, obtain the 1099 transcripts from the IRS. Then help the client with online requests for free credit reports, and contact the credit cards and other delinquent accounts for their records. (Use your own business address for this purpose.) Don't forget that if the client would like to repay the debts, it will help their credit rating and they can take a miscellaneous deduction for the previously taxed income.

[indyscott]

I had a very similar occurance last week. Older couple, always pay their bills on time, never any problems.. they got a 1099-C from Chase Bank. We called Chase from my office, which was funny, because the taxpayer spouse, whose name was on the 1099 is as deaf as a fence post... anyway at one point in the conversation the name of their son, who lives in Arizona came up.. We asked Chase for a full transcript of the account for them to review. They're going to send it. My guess is that sonny opened an account in Mom's name and got a card for himself without telling her.

Identity theft, like murder, often involves someone you know.

[JohnH]

I was on the verge of asking the original poster if there were any known drug addicts in the client's immediate family, but I didn't want to come across as being crass or insensitive.

[Booger]

indyscott, if the son did that, do you think the parents will press charges?

"Tough-Love" Booger

[joanmcq]

ID theft is definitely possible. If they haven't pulled credit reports this year, you can get them all at annualcreditreport.com for free. Its the law that you have to be able to get one copy free each year to review.