Responding to a CP2000 Notice

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Topic Author
veeceeone
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Re: Responding to a CP2000 Notice

Post by veeceeone » Sat Aug 24, 2019 2:27 pm

jebmke wrote:
Sat Aug 24, 2019 1:32 pm
veeceeone wrote:
Sat Aug 24, 2019 1:20 pm
In their CP-2000, they are completely ignoring the basis
This is because the basis that is reported to the IRS isn't necessarily the correct basis. On form 8949 there is a column for the taxpayer to enter adjustments to basis. It would be wrong for them to simply assume that there are no adjustments.
They are assuming that the basis is zero. This is wrong too.

Also, the way the CP-2000 sounds is fear inducing. They can say, "The tax you actually owe may be different than the one you came up with in your tax return" instead of calculating a tax based on a basis of zero and ask you to pay a huge tax bill in three or so weeks.

Topic Author
veeceeone
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Re: Responding to a CP2000 Notice

Post by veeceeone » Sat Aug 24, 2019 2:32 pm

J G Bankerton wrote:
Sat Aug 24, 2019 1:56 pm
veeceeone wrote:
Sat Aug 24, 2019 1:20 pm

2. I wish that their mails don't look like junk mails. My CP-2501 just fell through the cracks.
They do that so the letter doesn't attract attention. Mail thieves look for letters that may have personal information. Whenever I get a credit card in the mail it comes in one of those generic type envelopes. I now open junk mail to have a quick look before shredding.
I didn't shred mine but put it at the bottom of the Unimportant pile and never got to it. A Certified mail with the cost of mailing charged to me would have worked better for me. I lost several months by not opening the CP-2501.

I also forgot to say a (3) in my list above.

3. There must be a way to upload documents electronically, in this day and age.

jebmke
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Re: Responding to a CP2000 Notice

Post by jebmke » Sat Aug 24, 2019 2:42 pm

veeceeone wrote:
Sat Aug 24, 2019 2:27 pm
They are assuming that the basis is zero. This is wrong too.
Yes, but the burden is always on the taxpayer to declare values - the entire tax return is a self-declaration. They only assess on what they think they know is factual. They get the facts wrong sometimes but the principle is the same - the burden of proof is always on the taxpayer. It is the reverse of normal legal principle. In this case, the only thing they think they know for sure is the proceeds.
When you discover that you are riding a dead horse, the best strategy is to dismount.

Topic Author
veeceeone
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Re: Responding to a CP2000 Notice

Post by veeceeone » Sat Aug 24, 2019 3:03 pm

The brokerage firm says that something was bought for $100,000 and sold for $90,000 with a loss of $10,000. The IRS trusts the $90,000 but not the $100,000? And calculates taxes on the $90,000 gains and claims it without allowing the possibility that there can be some basis?

And in the next step, the taxpayer claims a basis of $100,000 and everything goes away.

jebmke
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Re: Responding to a CP2000 Notice

Post by jebmke » Sat Aug 24, 2019 3:27 pm

veeceeone wrote:
Sat Aug 24, 2019 3:03 pm
The brokerage firm says that something was bought for $100,000 and sold for $90,000 with a loss of $10,000. The IRS trusts the $90,000 but not the $100,000? And calculates taxes on the $90,000 gains and claims it without allowing the possibility that there can be some basis?

And in the next step, the taxpayer claims a basis of $100,000 and everything goes away.
Well, if the item is reported with the return and the basis reported on the 8949, you normally don't hear from them. If it is an item you fail to report, your description is essentially correct for brokerage items. They kick out a letter assessing a tax and penalty on the $90K then you send a letter with the details and documentation and it should go away.
When you discover that you are riding a dead horse, the best strategy is to dismount.

Silk McCue
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Re: Responding to a CP2000 Notice

Post by Silk McCue » Wed Sep 04, 2019 4:10 pm

Silk McCue wrote:
Sat Aug 24, 2019 11:16 am
I received a CP2000 notice date June 17, 2019 stating I owed $30k for taxes, interest and penalties for under reporting of income on my 2017 return. This was due to an error on my part when I filed my taxes regarding and indirect transfer between John Hancock and Vanguard when I chose to pull the plug on an old tax deferred Variable annuity a year into my Boglehead journey.

I pulled my records, identified the key documents to show when the funds left JH via check, and when they arrived at Vanguard after I received the check and forwarded it on directly. I wrote a letter that detailed what occurred on a day by day basis and referenced the annotated documents in the following pages. I faxed this to them on July 11 using MyFax website and printed the confirmation sheet in case a problem occurred later. You can sign up for MyFax and cancel after one month.

The IRS mailed me a form letter on August 12 telling me they had received my response and would review and provide a complete response within 60 days.

I'll let you know when they respond back.

Cheers
As promised here is my update: I just received from CP2005 dated 9/3/2019 stating "Your 2017 Form 1040 inquiry is closed" Amount due $0.00. Rock n roll.

Recap - Rcvd form CP2000 dated 6/17, filed response via fax 7/11, received acknowledgment letter 8/12, and case closed as of yesterday.

Cheers

Topic Author
veeceeone
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Re: Responding to a CP2000 Notice

Post by veeceeone » Wed Sep 04, 2019 4:24 pm

Thanks for the update, Silk. It looks like they took about 3 weeks from the time you got the acknowledgement. The lady I talked to, on the day I got my acknowledgment, told me that I should feel free to check after 2 weeks.

Celebrate, however you do it. If you cannot think of a way, listen to this song:

https://www.youtube.com/watch?v=MUXPL4rZL_E

:happy

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J G Bankerton
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Re: Responding to a CP2000 Notice

Post by J G Bankerton » Wed Oct 09, 2019 11:54 am

It truly is a happy day when the IRS says "we are good". They are almost as tough as Tony Soprano when it comes to collecting a debt.

Topic Author
veeceeone
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Re: Responding to a CP2000 Notice

Post by veeceeone » Wed Oct 09, 2019 2:26 pm

I am glad.

I am still waiting for my "you are free" notification. It has been 50 days since I heard anything from them.

Topic Author
veeceeone
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Re: Responding to a CP2000 Notice

Post by veeceeone » Thu Oct 17, 2019 5:13 pm

My issue got resolved today.

I ended up owing 1/1000th of what was proposed to me in the CP-2000 (which completely ignored my cost basis). I was also charged $12 in interest. I went ahead and paid it by Direct Pay.

I am really glad that this is over. I panicked only during the first couple of days. After that, I was sure that this would work out alright.
---------------------------------------
What the IRS Could Do Better

I made two mistakes: (a) Sent a wrong year's 1099 to my accountant when he prepared my taxes (he didn't catch the error either) (b) Missed acting on the first notice that I got (which was a CP-2501)

1. When they sent me a C-2501, they could have sent me an email also, asking me to verify my identity and get a confidential message which would be the same as the contents of the CP-2501. (I realize that there are problems with emails. They can show me the sensitive information only after I verify my identity. When I went to pay by Direct Pay, they were able to verify my identity based on my answers to questions.)

2. In the CP-2000, they ignored the cost basis. This scared me.

3. It took about 90 days from the time I responded to them, for the matter to be resolved. I wish that there are electronic ways of sending them stuff.

4. I called them two or three times. Each time it took me about 1 1/2 to connect. However, once some one came on, she was polite and helpful.

I won't make this mistake again.

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Stinky
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Re: Responding to a CP2000 Notice

Post by Stinky » Thu Oct 17, 2019 5:24 pm

veeceeone wrote:
Sat Aug 24, 2019 12:05 pm
Like the OP the amount they wanted was shocking and worrisome
I will disclose the amount once this is all settled.
If you'll share -

How much were they asking for? And how much did you settle for?

Congratulations on finally getting this closed out.
It's a GREAT day to be alive - Travis Tritt

Topic Author
veeceeone
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Re: Responding to a CP2000 Notice

Post by veeceeone » Thu Oct 17, 2019 5:33 pm

I am still reluctant to disclose the amount but since I had promised [ as you are pointing out :-) ]I will do so :-) That amount was total nonsense any way. (It ignored the cost basis.)

The original proposed amount was $129,000. (This is what scared me for two days.) Once the cost basis was applied, I ended up owing $135 in taxes and $12 in interest.

If only all my "negotiations" and appeals turn out to be this good :-)

By the way, this forum is great. Thanks guys.

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J G Bankerton
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Re: Responding to a CP2000 Notice

Post by J G Bankerton » Thu Oct 17, 2019 10:45 pm

veeceeone wrote:
Thu Oct 17, 2019 5:13 pm
Sent a wrong year's 1099 to my accountant when he prepared my taxes
I don't use an accountant but did the same thing, I used the numbers from the 1099 a year before. :oops:
I wonder if I over paid would they catch the error and send me a refund with interest.

Topic Author
veeceeone
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Re: Responding to a CP2000 Notice

Post by veeceeone » Thu Oct 17, 2019 10:56 pm

J G Bankerton wrote:
Thu Oct 17, 2019 10:45 pm
I
wonder if I over paid would they catch the error and send me a refund with interest.
I am only guessing. I think that they would send you a CP-2501 pointing out the discrepancy.
J G Bankerton wrote:
Thu Oct 17, 2019 10:45 pm
I used the numbers from the 1099 a year before
I did the same thing. The 1099 filename form my broker is named with random string of characters (like h02va6824c6f2017u3lkyzgo9i754jldagkrvv0uvjs9.doc), with the tax year buried somewhere. (It probably was not as bad as in my example.) The first thing that I am going to do when I download the file next year is to rename it as 2019.doc so that I won't make that mistake again.

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Stinky
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Re: Responding to a CP2000 Notice

Post by Stinky » Fri Oct 18, 2019 7:35 am

veeceeone wrote:
Thu Oct 17, 2019 5:33 pm

The original proposed amount was $129,000. (This is what scared me for two days.)
That would scare anybody!
It's a GREAT day to be alive - Travis Tritt

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J G Bankerton
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Re: Responding to a CP2000 Notice

Post by J G Bankerton » Fri Oct 18, 2019 8:06 am

veeceeone wrote:
Thu Oct 17, 2019 10:56 pm
J G Bankerton wrote:
Thu Oct 17, 2019 10:45 pm
I used the numbers from the 1099 a year before
I did the same thing. … The first thing that I am going to do when I download the file next year is to rename it as 2019.doc so that I won't make that mistake again.
I still use paper as much as possible. I was comparing the previous year's 1099 with the current year's. Having both out I made the mistake of putting the numbers from the previous year's 1099 on the current year's tax return.

I snail mailed the IRS the correct 1099 with my return though; it was explained to me that they can't possibly read all the forms they receive. I asked then why do I have to mail them; I didn't get an answer.

I too know the joy of finally getting the letter from the IRS, after paying 1/1000 of the original amount they wanted, saying case closed.
:sharebeer

Topic Author
veeceeone
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Re: Responding to a CP2000 Notice

Post by veeceeone » Fri Oct 18, 2019 8:41 am

I am :sharebeer too.

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RickBoglehead
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Re: Responding to a CP2000 Notice

Post by RickBoglehead » Fri Oct 18, 2019 8:53 am

Got my notice on 5/22 for 2017 tax year.
Sent response 6/11. Disagreed with all their findings but one, which was a mistake on my part.
Received notice from them 7/5 they were reviewing my response.
Received their response 9/5, they agreed with my findings.
Mailed check and paperwork 9/23. Check hit my account 10/17.
Avid user of forums on variety of interests-financial, home brewing, F-150, PHEV, home repair, etc. Enjoy learning & passing on knowledge. It's PRINCIPAL, not PRINCIPLE. I ADVISE you to seek ADVICE.

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