IRS CP2000 and CP3219A hassles

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SpideyIndexer
Posts: 258
Joined: Thu Apr 02, 2015 10:13 pm

IRS CP2000 and CP3219A hassles

Post by SpideyIndexer » Thu Oct 05, 2017 2:18 pm

I received a CP2000 this past June. There were two issues they flagged. One was a SEP contribution made in early CY2015 for TY2014. The IRS mistakenly wants to give me the deduction for TY2015. The other was a problem with a form 1099-K for a decedent's estate. The form mistakenly listed payments to my spouse's personal SSN rather than the estate's TIN. My spouse was the executor and didn't notice the issue.

I mailed the response to the IRS within the time limit. Much to my annoyance, we received corrected 1099-K's from the credit card company in the mail on the day that I mailed the CP2000 response. These corrected forms 1099-K now show zero income for my spouse and shows the income for the estate TIN.

Today I received two identical CP3219A mailings which show the identical tax liability as the original tax liability, with no comments responding to my counter of the CP2000. Is this normal? Or does that mean my response was lost in the mail?

Apparently I can do one of several things: call the IRS and explain, send additional information to the IRS "immediately", specifically the corrected forms 1099-K, or file a petition to the tax court within 90 days. What would you advise? From past experience, it takes a long, long time for the IRS to answer the phone, but perhaps this is the quickest way to get the matter resolved.

It is comical that for the SEP IRA thing, the way the IRS wants give me an additional deduction is in my favor for TY2015, but if I agree with that it would invalidate the deduction I claimed for TY 2014. So I would rather this be done correctly.

SpideyIndexer
Posts: 258
Joined: Thu Apr 02, 2015 10:13 pm

Re: IRS CP2000 and CP3219A hassles

Post by SpideyIndexer » Fri Oct 06, 2017 10:23 am

It seems the best bet is to call the IRS first. With a CP3219A the clock is ticking as the deadline for the court hearing cannot be extended. I was advised to hire legal representation if it does go to court.

Both our probate lawyer and tax accountant had advised that this sort of error happens all the time (estate income mistakenly attributed to executor) and is easy to fix, but so far that's not been my experience!

Jackbnimble
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Re: IRS CP2000 and CP3219A hassles

Post by Jackbnimble » Fri Oct 06, 2017 11:10 am

I would do both. I used to work in a CPA firm that every letter we wrote to the IRS ended with a statement that said something like this "if you don't agree with our position we would like to either take it to your supervisor or appeal these findings to the appeals division". We got pretty good results from that.

There is also the Taxpayer Advocate system. Designed to help taxpayers when the normal system doesn't work. I don't know the requirements to get them involved, but it's worth a shot.

https://www.irs.gov/taxpayer-advocate

Good luck.

SpideyIndexer
Posts: 258
Joined: Thu Apr 02, 2015 10:13 pm

Re: IRS CP2000 and CP3219A hassles

Post by SpideyIndexer » Fri Oct 06, 2017 6:17 pm

Spoke to the IRS after about a 1 hr hold. The rep was polite and easy to talk with.

1. They quickly corrected the erroneous income issue related to the estate.

2. I was mistaken about the meaning of "SEP contribution" on the "correction" to my tax form that the IRS is trying to make. In fact, I made no SEP contribution for 2015 but both my spouse and I made individual 401(k) contributions. It appears the IRS was denying most of the contributions. The IRS is requesting that I send in my contribution worksheet. I maxed out my contribution using TT and also verified it by hand calculations.

The IRS mentioned I may want to send in documentation of my i401(k) for TY 2015, as having it could expedite closing the case.

Has anyone else had the IRS attempt to disallow i401(k) contributions? In my case it was a large amount. Their "correction" is approximately 20% of our total contribution. I will check the records of our institution.

SpideyIndexer
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Re: IRS CP2000 and CP3219A hassles

Post by SpideyIndexer » Fri Oct 06, 2017 7:38 pm

I forgot to mention, the IRS found no record of my response to the CP2000 which I sent late July by first class mail. So...I suggest that all correspondence to the IRS be sent either certified mail, or better, by fax. Fax goes directly to their office rather than to the mail room.

SpideyIndexer
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Re: IRS CP2000 and CP3219A hassles

Post by SpideyIndexer » Fri Oct 06, 2017 11:27 pm

Actually, the original CP2000 under the explanation of the "SEP contribution" issue calls out a form 5498 which was actually for a 2014 SEP contribution. I no longer contributed to the SEP IRA for TY 2015 and rolled it over into the SE401(k).

I think the IRS has little visibility into SE401(k) contributions so was confused and didn't know that my spouse and I made SE401(k) contributions in 2015. So their program may be trying to disallow SEP contributions based on incorrect assumptions.

However, situation of having a SEP one year followed by a SE401(k) the next should not be uncommon as SE401(k) plans are becoming increasing popular.

SpideyIndexer
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Re: IRS CP2000 and CP3219A hassles

Post by SpideyIndexer » Tue Nov 28, 2017 3:26 pm

Latest, IRS does have my fax regarding calculation and contributions to the one-participant 4o1(k) plans. The examiner will respond within 60 days which may be after my deadline to petition the tax court.

So....is there any reason for me to petition the tax court if i don't know what the IRS determination will be? Seems like a Catch 22! Do I have any recourse if I don't agree with their determination after my deadline?

thangngo
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Re: IRS CP2000 and CP3219A hassles

Post by thangngo » Tue Nov 28, 2017 3:50 pm

Did you get the name and badge id of the IRS representative? Every representative has a supervisor. If you get an answer that you are not satisfied with, insist on getting with his/her supervisor.

Generally, if you respond (by call or in writing) within 30 days from the date on the notice, you preserve your rights to an appeals conference. This applies to CP2000 - Underreporter. If you want research further yourself, follow this link: https://www.irs.gov/individuals/underst ... 000-notice

Just in case you still have time, I'd order a transcript for TY 2015 and compare it with your 2015 tax return. Provide them all the documents supporting your SEP contribution. How much was it in 2015? As long as it's within IRS limit, I don't see why IRS case agent will dismiss your response to CP2000.

Also, how much is the deficit of tax due? If it's significant (>10k), it's a good idea to involve your CPA or hire one to help you resolve it.

SpideyIndexer
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Joined: Thu Apr 02, 2015 10:13 pm

Re: IRS CP2000 and CP3219A hassles

Post by SpideyIndexer » Tue Nov 28, 2017 11:51 pm

thangngo wrote:
Tue Nov 28, 2017 3:50 pm
Did you get the name and badge id of the IRS representative? Every representative has a supervisor. If you get an answer that you are not satisfied with, insist on getting with his/her supervisor.

I may call again and ask specifically about my recourse, and kick it upstairs if I the answer is a problem. I have called 4 times.

Generally, if you respond (by call or in writing) within 30 days from the date on the notice, you preserve your rights to an appeals conference. This applies to CP2000 - Underreporter. If you want research further yourself, follow this link: https://www.irs.gov/individuals/underst ... 000-notice

Does it also apply to a CP3219A? I had replied to the CP2000 but my response got lost either in the mail or by the IRS. So things were escalated to a CP3219A, to which I sent a fax having become scared of dealing with the USPS and the IRS mailroom. It still took several weeks before the IRS would acknowledge that the fax response was received and being processed in their system.

Just in case you still have time, I'd order a transcript for TY 2015 and compare it with your 2015 tax return. Provide them all the documents supporting your SEP contribution. How much was it in 2015? As long as it's within IRS limit, I don't see why IRS case agent will dismiss your response to CP2000.

Also, how much is the deficit of tax due? If it's significant (>10k), it's a good idea to involve your CPA or hire one to help you resolve it.
It is approximately 10K. I say approximately because the issue of estate income mistakenly being assigned to my spouse was resolved over the phone. However the IRS did not send me a recalculation with this correction made. As I mentioned it was not a SEP contribution but rather one-participant 401(k) contributions.

SpideyIndexer
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Joined: Thu Apr 02, 2015 10:13 pm

Re: IRS CP2000 and CP3219A hassles

Post by SpideyIndexer » Thu Nov 30, 2017 8:48 pm

During another telephone call, the IRS told me my case is closed and there is no tax due!!!!!

I can expect a letter to that effect within 45 days.

thangngo
Posts: 424
Joined: Sun Feb 26, 2017 2:08 pm

Re: IRS CP2000 and CP3219A hassles

Post by thangngo » Thu Nov 30, 2017 11:35 pm

SpideyIndexer wrote:
Thu Nov 30, 2017 8:48 pm
During another telephone call, the IRS told me my case is closed and there is no tax due!!!!!

I can expect a letter to that effect within 45 days.
I'm glad to hear! Good job being patient and go through all that to get it straighten out.

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