I recently saw a client who had received a CP 2000 reporting a deficiency relating to under-reporting retirement income. This was the second case in one week and it showed the same misinformation.
Both taxpayers received retirement income in 2015 and reported the income on their Form 1040. However, according to IRS, the taxpayers both failed to account for the retirement income (or the taxes withheld) and were charged with under-reporting their income and failure to pay the Treasury department.
Of course, they were also charged with penalty and interest for under-reporting the reported income.
Both sets of clients had electronically filed their 2015 returns on time. One client used a tax professional and filed using professional software. The other client used Turbo Tax to file the family return. Both were charged similarly: neglect to file the retirement income.
This is an IRS issue. Either the IRS software is experiencing a problem or the IRS examiner cannot read. But you as the taxpayer should not take this issue lightly if you receive an IRS CP 2000.
What to do:
Make a copy of your 2015 Form 1040. Circle in a bright color the information on lines 15 and 16, showing that you reported all retirement income.
Attach any worksheets (copies, and you keep one) that were prepared showing the information reported.
Put this together along with a polite letter to IRS disputing their claim and attach the appropriate pages from the CP 2000. Send it registered mail with a return receipt to the address shown on the CP 2000.
Keep a separate file copy of everything that was sent, including the post office receipt. Retain the records for three years. If you are not satisfied with the results, contact your Congressional representative.
He or she has a staffer whose function is to liaison with the IRS.
IRS also maintains an office to help taxpayers.
An alternate source of help is the Tax Payer Advocate if you are unsuccessful elsewhere.
The Tax Payer Advocate is a function of the IRS that allows taxpayers an opportunity to try to resolve problems in a friendlier mode.
For information on the Tax Payer Advocate, visit www.IRS.gov.
Virginia Moryadas is a tax preparation professional in Bluffton.