IRS - Anyone deal with you owe us more tax letter?

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wfrobinette
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IRS - Anyone deal with you owe us more tax letter?

Post by wfrobinette » Mon Oct 22, 2018 4:07 pm

To keep it short. I received a letter back in July stating I owed more tax(2016) due to a 1099 for they received from a brokerage house from some RSUs I cashed in. Income was reported via w2 and I had no record of that 1099. Also tried to ding me for a Roth roll over.

I responded to letter with supporting documents before deadline they gave (8/15). We are here at the end of October and I have not heard back whether or not they accepted my explanation. Should I follow up or is the ball in their court?

nyclon
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Re: IRS - Anyone deal with you owe us more tax letter?

Post by nyclon » Mon Oct 22, 2018 4:15 pm

wfrobinette wrote:
Mon Oct 22, 2018 4:07 pm
To keep it short. I received a letter back in July stating I owed more tax(2016) due to a 1099 for they received from a brokerage house from some RSUs I cashed in. Income was reported via w2 and I had no record of that 1099. Also tried to ding me for a Roth roll over.

I responded to letter with supporting documents before deadline they gave (8/15). We are here at the end of October and I have not heard back whether or not they accepted my explanation. Should I follow up or is the ball in their court?
Call the phone number on the letter they sent you and ask for status.

Boglegrappler
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Re: IRS - Anyone deal with you owe us more tax letter?

Post by Boglegrappler » Mon Oct 22, 2018 4:16 pm

It varies, but it can take them as much as 6-8 weeks to get around to responding.

fabdog
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Re: IRS - Anyone deal with you owe us more tax letter?

Post by fabdog » Mon Oct 22, 2018 4:31 pm

As noted, can take while to get back to you, I got a letter after a month saying they had my response but needed more time, and two months later a letter saying they agreed with my submission and no extra tax due

On your RSU issue specifically, there are two parts of cashing in RSU's

Part 1, the RSU's vest, and likely have some RSU's sold to cover taxes. This income is in your W2, along with the taxes they withheld

Part 2, when you sell the RSU's (which it sounds like you did) you get a 1099 that shows the short term or long term (if held more than a year after vesting) capital gain. Even if you sold the same day they landed in your account, there was likely a slightly different price from what they vested at, driving a short term gain or loss. Since they want more money from you, the 1099 from the brokerage likely showed a gain.

You should go to the website or call the company that handles your companies RSU's and ask for the 1099 for the year in question. They sent the info to IRS, so you should have a 1099.

If you owe tax, the clock keeps running on interest. so even if you have responded, and they haven't gotten back to you, when they do, and they disagree and say you still owe, the interest clock will have kept running. So if you can source the 1099 and decide you do owe that piece, go ahead and pay as soon as possible

Mike

SpideyIndexer
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Re: IRS - Anyone deal with you owe us more tax letter?

Post by SpideyIndexer » Mon Oct 22, 2018 4:47 pm

Do a search for "CP2000" and you'll find lots of threads. These are usually triggered automatically by the IRS computer system.

The hold time is a PITA but I recommend telephoning rather than sending letters. Much easier get a quick exchange of details. I did one by mail for which my initial response was lost so was escalated to the next level. I called in, was advised to resend the info after which the issue was resolved. It took a bit longer than the rep estimated, as did getting the writted confirmation.

I received another one for a different tax year, so phoned in about it. It was resolved immediately, and I received the written confirmation about a two months later (again longer than advised.)

Just be polite over the phone.

MarkNYC
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Re: IRS - Anyone deal with you owe us more tax letter?

Post by MarkNYC » Mon Oct 22, 2018 6:17 pm

wfrobinette wrote:
Mon Oct 22, 2018 4:07 pm
I received a letter back in July stating I owed more tax(2016) due to a 1099 for they received from a brokerage house from some RSUs I cashed in. Income was reported via w2 and I had no record of that 1099. Also tried to ding me for a Roth roll over.

I responded to letter with supporting documents before deadline they gave (8/15). .. Should I follow up or is the ball in their court?
I'll leave aside the issue of Roth rollover, and comment on the RSU issue. When you "cashed in" the RSUs, it sounds like you sold the vested shares, a 1099-B was issued to the IRS (and you) for the sale, and you did not report the sale on your tax return, resulting in the IRS notice of additional tax due. You probably need to wait for the IRS response. It's possible the IRS will read your explanation and understand what happened and close the account. I think it's more likely the IRS will find your explanation unsatisfactory because of the failure to report the sale of securities on your tax return.

More correspondence might be needed, including a possible amended return to report the small gain or loss on the sale of the shares. (Your basis for the shares sold will be the cost of the RSUs, if any, plus the RSU income reported on the W-2).

Note: even if the shares sold were "covered", such that basis was reported on the 1099-B, I believe (without specific evidence) that the IRS will use zero basis in their calculation of additional tax due as shown on the CP2000 notice.

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Peter Foley
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Re: IRS - Anyone deal with you owe us more tax letter?

Post by Peter Foley » Mon Oct 22, 2018 7:51 pm

I have dealt with a few of them over the years. Sometimes I have received a response fairly quickly, sometime with a few months delay. The last time I received a letter it was regarding a savings bond owned by my mother with me as beneficiary. Upon the death of my mother I paid accrued interest from her account on the bond as of her date of death. The IRS claimed I owed all the interest on the bond. I produced my mother's last tax return showing interest had been paid at that time. Perhaps it was the fact that there were two returns involved but I did not hear from the IRS for a number of months, then finally a letter saying that I did not owe any additional tax for the year in question.

Pre Turbo tax one year I received a computer generated letter noting a math error. I owed less than $10 so I sent them a check. That time I heard back quickly. They were :happy to have it resolved I guess. Can the IRS be " :happy " ?

Topic Author
wfrobinette
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Re: IRS - Anyone deal with you owe us more tax letter?

Post by wfrobinette » Tue Oct 23, 2018 9:30 am

wfrobinette wrote:
Mon Oct 22, 2018 4:07 pm
To keep it short. I received a letter back in July stating I owed more tax(2016) due to a 1099 for they received from a brokerage house from some RSUs I cashed in. Income was reported via w2 and I had no record of that 1099. Also tried to ding me for a Roth roll over.

I responded to letter with supporting documents before deadline they gave (8/15). We are here at the end of October and I have not heard back whether or not they accepted my explanation. Should I follow up or is the ball in their court?
Got the response yesterday in the mail.

Nothing changed so I am responding again.

I did miss a ST gain. But they are trying to ding me on the full amount of of the sale.

I've got the documentation showing what I have.

euroswiss
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Re: IRS - Anyone deal with you owe us more tax letter?

Post by euroswiss » Tue Oct 23, 2018 12:18 pm

wfrobinette wrote:
Tue Oct 23, 2018 9:30 am
wfrobinette wrote:
Mon Oct 22, 2018 4:07 pm
To keep it short. I received a letter back in July stating I owed more tax(2016) due to a 1099 for they received from a brokerage house from some RSUs I cashed in. Income was reported via w2 and I had no record of that 1099. Also tried to ding me for a Roth roll over.

I responded to letter with supporting documents before deadline they gave (8/15). We are here at the end of October and I have not heard back whether or not they accepted my explanation. Should I follow up or is the ball in their court?
Got the response yesterday in the mail.

Nothing changed so I am responding again.

I did miss a ST gain. But they are trying to ding me on the full amount of of the sale.

I've got the documentation showing what I have.

I see that you finally got a response - I was going to tell you not to worry because I'm in a very similar situation and I had responded to the IRS in mid-July. I just heard back last week, so you are right in line. Interestingly, exactly the same situation you describe - they simply ignored my response and sent exactly the same notice again except this time they included a $9000 bill (!!!). I ended up calling them (85 minute wait time...) and, much to my surprise, the agent resolved the problem right then and there!
The one difference to your situation is that I did file a 1040X for 2016 that included the missing transaction (just like you, I had not received a 1099 and thus, I simply forgot that transaction when I prepared the tax return. So, the IRS was right, but somehow they just didn't look at my response/amended return and just basically re-sent their notice. Turns out I now actually owe $50 LESS than what I had calculated when I filed the 1040X - alas I have decided to call it "close enough" leave that one alone...

So, I think you just need to file a 1040X where you add that missing transaction and then you'll be ok. In the absence of that, the IRS will simply count the entire proceeds listed on the 1099 as income. It's up to you to show the transaction details (i.e. the cap gains).

Topic Author
wfrobinette
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Re: IRS - Anyone deal with you owe us more tax letter?

Post by wfrobinette » Tue Oct 23, 2018 1:03 pm

euroswiss wrote:
Tue Oct 23, 2018 12:18 pm
wfrobinette wrote:
Tue Oct 23, 2018 9:30 am
wfrobinette wrote:
Mon Oct 22, 2018 4:07 pm
To keep it short. I received a letter back in July stating I owed more tax(2016) due to a 1099 for they received from a brokerage house from some RSUs I cashed in. Income was reported via w2 and I had no record of that 1099. Also tried to ding me for a Roth roll over.

I responded to letter with supporting documents before deadline they gave (8/15). We are here at the end of October and I have not heard back whether or not they accepted my explanation. Should I follow up or is the ball in their court?
Got the response yesterday in the mail.

Nothing changed so I am responding again.

I did miss a ST gain. But they are trying to ding me on the full amount of of the sale.

I've got the documentation showing what I have.

I see that you finally got a response - I was going to tell you not to worry because I'm in a very similar situation and I had responded to the IRS in mid-July. I just heard back last week, so you are right in line. Interestingly, exactly the same situation you describe - they simply ignored my response and sent exactly the same notice again except this time they included a $9000 bill (!!!). I ended up calling them (85 minute wait time...) and, much to my surprise, the agent resolved the problem right then and there!
The one difference to your situation is that I did file a 1040X for 2016 that included the missing transaction (just like you, I had not received a 1099 and thus, I simply forgot that transaction when I prepared the tax return. So, the IRS was right, but somehow they just didn't look at my response/amended return and just basically re-sent their notice. Turns out I now actually owe $50 LESS than what I had calculated when I filed the 1040X - alas I have decided to call it "close enough" leave that one alone...

So, I think you just need to file a 1040X where you add that missing transaction and then you'll be ok. In the absence of that, the IRS will simply count the entire proceeds listed on the 1099 as income. It's up to you to show the transaction details (i.e. the cap gains).
I sent the documentation the first time.I faxed it(probably the wrong thing to do as I have no proff the fax actually made it to a person. Just have the ok transmission). It explicitly shows the initial possession of the RSU at $X and the tax collected and the balance of shares which gives my cost basis. The 2nd supporting doc shows the exact sale they have on the 1099. Because I hit AMT, the 3.7% investment tax and had deductions reduced I can't easily calculate what I owe.

'm a bit surprised with their letter as no interest has accrued since the initial letter and they say I still owe the same amount. I would have expected a explanation saying my documents were not sufficient and they have determined that I owe anyway.

I called today and waited for 70 minutes but had to drop off for a meeting. The message said I should not file a 1040x as this can be taken care of with my letter.

Now to throw a monkey wrench into the whole thing. I was in the process of moving and had filed a COA before the letter arrived. MY response included an address change. The new letter arrived to my new address with my new address.

I know the IRS uses the NCOA so I guess it's possible there system recognized I moved and just resent the letter.

I'll resend my response certified with return receipt this time to know without a doubt it was received.

SpideyIndexer
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Re: IRS - Anyone deal with you owe us more tax letter?

Post by SpideyIndexer » Tue Oct 23, 2018 5:30 pm

Regarding my first issue for which my mailed response was never received by the correct department, an agent recommended that additional data are best sent by fax. It is quicker, not just the USPS part but because sending a fax avoids the slow routing of the IRS mail system. The fax number is on the CP2000 is specific for the correct IRS department.

Topic Author
wfrobinette
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Re: IRS - Anyone deal with you owe us more tax letter?

Post by wfrobinette » Wed Oct 24, 2018 11:41 am

SpideyIndexer wrote:
Tue Oct 23, 2018 5:30 pm
Regarding my first issue for which my mailed response was never received by the correct department, an agent recommended that additional data are best sent by fax. It is quicker, not just the USPS part but because sending a fax avoids the slow routing of the IRS mail system. The fax number is on the CP2000 is specific for the correct IRS department.
I faxed my response the first time and it appears it was ignored since I got the exact same mailing.

wolf359
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Re: IRS - Anyone deal with you owe us more tax letter?

Post by wolf359 » Wed Oct 24, 2018 11:44 am

fabdog wrote:
Mon Oct 22, 2018 4:31 pm
As noted, can take while to get back to you, I got a letter after a month saying they had my response but needed more time, and two months later a letter saying they agreed with my submission and no extra tax due
This was my experience as well.

SpideyIndexer
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Re: IRS - Anyone deal with you owe us more tax letter?

Post by SpideyIndexer » Wed Oct 24, 2018 2:24 pm

Yes, dealing with the IRS can frustrating. In my cover letter I requested the IRS telephone me to confirm receipt of the fax, which didn't happen. I called the following week and the agent did confirm receipt of my fax.

The IRS does say the sending duplicate responses can further delay them, so you may want to call first to check if your fax was received.

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