IRS CP2000 notice -- Any advice?

[labrat]

I received a CP2000 notice from the IRS stating that their brilliant computers found an error with my 2012 return.  Why they just decided to let me know about it is beyond me, other than the fact that they can charge extra penalty interest.   

They claim I cannot claim the lifetime learning credit, but I triple-checked my forms, financial documentation and the instructions and am confident that the IRS is in error.  This should be pretty easy for them to figure out once I send the forms in, but we are talking about a gov't entity so several questions.....

• Have any of you successfully disputed a CP2000 notice? 
• How did you word your letter?
• Did you include all of the worksheets/forms and relevant financial documentation (income statements, etc.), or just those in question? (for me it would be the 1040 and 8863 forms, 8863 worksheet, plus the 1098T)
• How long did the IRS take to respond to your letter/dispute?
• Did they drop the matter or try to pursue it further?

 

Many thanks!

[dragoncar]

This may not be very helpful.

I got some BS notice from the IRS a while ago too (not sure which form it was).  They didn't like my backdoor ROTH and thought I'd need to declare distribution income or something.  I didn't do any research, I just wrote them a letter back explaining the situation.  Probably should have researched proper wording/form letter/whatever.  It worked out fine, though, got another notice saying never mind.  Yeah, for me it was a very delayed notice too.  Annoying, but I don't think it's anything to freak out about if you are sure you're right.

[labrat]

That's good to know - it's for a super-simple calculation so I'm hoping that it will be easy to resolve.

I also thought of another question: if you did have an error on your form, did you file a 1040X?

[kallinan]

Similar story as above.  I filed our taxes, and then my wife tells me she forgot to give me a W-2 from a small part time job early in the year.  Great.  I amend both Federal & Ohio taxes, and send in a small extra check to Ohio to make up the difference in refund.  But Ohio then claims we never paid the taxes from that job at all and wants a fair bit of extra money.  I wrote a letter explaining the situation, highlighting where their math was wrong, no - I really don't owe you any extra money.  They accepted the reasoning and it was dismissed.

[Threshkin]

I had a similar situation where the SSN was incorrect on one of my W2s.  I did not notice the error when filing but i did include the income in my tax return..I dent a detailed letter explaining what had happened and never heard back from them.

Several years later they disputed the basis I used on some stock options.  They claimed my basis was $0 and wanted back taxes and penalties.  This was a bit of a pain to figure out because the compant had been purchased and I had nothing but 4-6 year old records to reference.  I had to derive the basis through two separate company sales, one was for a mix of stock & cash.  As I said, it was a royal pain.  Ultimately I was able to work it out and document the source of the basis.  It turned out that I had under paid by about $200.00.  When I sent my response I included a check along with the documentation.  The took my money and did not charge any penalties.

[Trudie]

 I have received a similar notice before... they are common and I wouldn't fret.  The IRS makes mistakes ALL THE TIME!  I am a CPA and work for a business and see it often.

My advice, gather all your documentation then write a straightforward cover letter to support it.  At the very top of the letter reference the document number.

Follow this basic outline:

1.  In your letter to me dated XXXX, the IRS asserts that I improperly took the Lifetime Learning Credit.  (Then, don't get argumentative saying, "You are wrong because blah blah blah..."

2.  Move on quickly to cite the IRS rule applying to your situation in exact words:  "The IRS Code XXXX relating to the Lifetime Learning Credit imposes these eligibility requirements...."

3.  "I assert that I am entitled to the Lifetime Learning Credit because I meet the eligibility requirements of IRS RULE XXX as follows:"  Attach copies of your documentation, establishing each point.  If certain points require explanation -- such as the fact that the education need not be work related feel free to provide brief narrative.

4.  "Please review this information and respond at your earliest convenience" and then provide your contact information.

Make sure you're throwing their own rules back in their face... so reference the rules on the IRS website:
http://www.irs.gov/publications/p970/ch03.html#en_US_2013_publink1000178154

They will most likely go away.  If they don't and you're being harassed (highly unlikely) hire a CPA.


These letters are issued when something gets flagged in the computer system that raises a question.  At this point, there has been very little human judgment involved.  When a human gets involved it is likely to go away quickly.

The business I work for was just randomly audited.  They went away quickly and I have found that they often do if you just get your facts together and respond calmly and clearly.

[Cheddar Stacker]

I received a CP2000 notice from the IRS stating that their brilliant computers found an error with my 2012 return.  Why they just decided to let me know about it is beyond me, other than the fact that they can charge extra penalty interest.   

Just an FYI - the timing of this is very common. CP-2000 is a computer system that matches your SSN on all forms filed. They wait until all forms are filed by all parties, so for 2012 that would be 10/15/13. At that point everyone is busy making the next years tax laws, then it's filing season, so they wait until the summer (1.5 years) before sending these notices.

For the response, just include all your documentation and give a firm, but not rude response and you should come out fine. Make sure to include the notice as well, and refer to the notice in your letter.

Good luck!

[Numbers Man]

CP2000 letters are a pain in the ass because it takes away your valuable time to respond and document the item(s) in question. I wrote a one page letter stating that I disagreed with their findings and a paragraph for each item that referenced the documentation. They said I never contributed to my HSA. Hello IRS - Here's a copy of the form my bank sent to me, and by the way, they electronically filed it to you. I was told by the bank that the IRS's computers conveniently didn't recognize this transaction and is a bug in their system. They also were denying interest and dividends in my wife's IRA and saying it was unreported income.

I had to make copies of the appropriate brokerage statement while blocking out all the other transactions. To make a long story short they sent me a letter stating that I OWED ZERO and this matter was closed.

Pro Tip - Don't sign any of the paperwork that the IRS sends you. You only need to sign the letter that you write to them (both spouses must sign letter).

[labrat]

I received a CP2000 notice from the IRS stating that their brilliant computers found an error with my 2012 return.  Why they just decided to let me know about it is beyond me, other than the fact that they can charge extra penalty interest.   

Just an FYI - the timing of this is very common. CP-2000 is a computer system that matches your SSN on all forms filed. They wait until all forms are filed by all parties, so for 2012 that would be 10/15/13. At that point everyone is busy making the next years tax laws, then it's filing season, so they wait until the summer (1.5 years) before sending these notices.

For the response, just include all your documentation and give a firm, but not rude response and you should come out fine. Make sure to include the notice as well, and refer to the notice in your letter.

Good luck!

Good to know, but still a flimsy excuse to charge me interest IMO...  Now I'm curious - what forms can be turned in that late?

[chasesfish]

Yes to the nice letter sent with supporting docs.  Nothing more and wait.  Don't poke the bear


Sent from my iPad using Tapatalk

[Cheddar Stacker]

W-2's, 1099's etc all need to be filed by 1/31 or 2/15 or 2/28.

K-1's (owners portion of partnership/s-corp) are due 3/15 or 4/15 but can be extended until 9/15.

Your 1040 is due 4/15 but can be extended to 10/15.

All of that needs to be done before the matching system will work.

All payments from you are due 4/15 at the latest, so the interest is from 4/15 until the following summer. Not a rule I made so don't kill the messenger.

[COlady]

I'm a CPA and can help you get this resolved.  The IRS issues this specific notice regarding education credits usually not because "something is mathematically wrong" with you return but rather because many people abuse the American Opportunity Tax Credit and the Lifetime Learning Credit (they take it when they aren't eligible.).  They're hoping you'll simply pay the amount noted.  However, you should do that since it sounds like you are eligible for the credit.  Following is exactly what I would write to the IRS in response to the notice you received:

July 13, 2014


IRS
Street address as indicated on notice
city as indicated on notice, zip as indicated

RE:

Name:         Michael R. Jones
Form:

[COlady]

It cut me off sorry.  Let's try this again.

I'm a CPA and can help you get this resolved.  The IRS issues this specific notice regarding education credits usually not because "something is mathematically wrong" with you return but rather because many people abuse the American Opportunity Tax Credit and the Lifetime Learning Credit (they take it when they aren't eligible.).  They're hoping you'll simply pay the amount noted.  However, you shouldn't do that since it sounds like you are eligible for the credit.  Following is exactly what I would write to the IRS (changed for your situation of course) in response to the notice you received. Be sure to send certified return receipt requested!

July 13, 2014


IRS
Street address as indicated on notice
city as indicated on notice, zip as indicated

RE:

Name:           Michael R. Jones
Form:            1040
Tax Year:      2013 (or other year as indicated on notice)
SSN:             XXX-XX-XXXX
Notice Type: CP2000
Notice #:      As indicated on notice

To Whom It May Concern:

I received the enclosed notice dated July X, 2014 on July 13, 2014.  The notice disallows the Lifetime Learning Credit in the amount of $2,000 (whatever amount was actually claimed) claimed on my 2013 Form 1040.  Per review of IRS Publication 970, the following requirements must be met in order to claim the Lifetime Learning Credit:

- Enrollment in a course at an eligible educational institution. The course must be either part of a post-secondary degree program or taken by the student to acquire or improve job skills.

- The academic period for which you paid qualified education expenses began in 2013 or the first 3 months of 2014

I paid $12,523 to Florida State University for the 1st and 2nd semesters of 2013 as evidenced by the enclosed credit card statement/ cancelled check.  The $12,523 was for tuition and required fees as indicated on the attached bill from Florida State University.  Also enclosed is a copy of the 2013 Form 1098-T issued by Florida State University showing the amount paid of $12,523.  I am enrolled in Florida State University's Mechanical Engineering program.

I have enclosed the necessary documentation to support the $2,000 Lifetime Learning Credit claimed on my 2013 Form 1040.  I respectfully request that the adjustments made to my return be removed.

Sincerely,


XXXX

*I realize this may not be you exact situation. Let me know if your situation is different from the above and I can help walk you through it if needed.  Hope this was helpful.

[davisgang90]

Tell them your hard drive containing the 2012 info in question crashed.  Seems legit.

Sorry, joking aside, good luck!

[labrat]

W-2's, 1099's etc all need to be filed by 1/31 or 2/15 or 2/28.

K-1's (owners portion of partnership/s-corp) are due 3/15 or 4/15 but can be extended until 9/15.

Your 1040 is due 4/15 but can be extended to 10/15.

All of that needs to be done before the matching system will work.

All payments from you are due 4/15 at the latest, so the interest is from 4/15 until the following summer. Not a rule I made so don't kill the messenger.

Thanks for that info - I've never filed for extension since my tax situation has always been very simple, so I never thought about the timing of everything on the IRS's end.  I suppose it's more efficient for the gov't (don't laugh) to generate notices all at once rather than as returns trickle in.  I just have an issue with them charging me interest and not really having a deadline on their end!

[Numbers Man]

W-2's, 1099's etc all need to be filed by 1/31 or 2/15 or 2/28.

K-1's (owners portion of partnership/s-corp) are due 3/15 or 4/15 but can be extended until 9/15.

Your 1040 is due 4/15 but can be extended to 10/15.

All of that needs to be done before the matching system will work.

All payments from you are due 4/15 at the latest, so the interest is from 4/15 until the following summer. Not a rule I made so don't kill the messenger.

Thanks for that info - I've never filed for extension since my tax situation has always been very simple, so I never thought about the timing of everything on the IRS's end.  I suppose it's more efficient for the gov't (don't laugh) to generate notices all at once rather than as returns trickle in.  I just have an issue with them charging me interest and not really having a deadline on their end!

There's no interest charged if you prove that there is no further tax due.

[labrat]

thanks Trudie & COlady - super helpful!

[labrat]

There's no interest charged if you prove that there is no further tax due.

I would hope not ;)

[labrat]

UPDATE: In going over my return with a fine-tooth comb there was a discrepancy with the 1098T and actual tuition paid.  Sent the letter, along with tuition statements, an updated 8863, and 1040X.  The way it shook out was that we slightly underpaid on the taxes (doh!), so unfortunately owed a bit of interest.  They have cashed the check, so now all I'm waiting for is confirmation that everything is squared with Uncle Sam.

Lessons learned:

1. Check my numbers carefully.  I do not want to get one of these notices again and be up against a deadline - especially not with a one month old baby to take care of 24/7 and do any sort of work that requires minimal brain function :)

2. I'll be TRIPLE checking those numbers next year.  The hubs should finish up the doctorate this fall and we will only need to claim this credit one more time :)

Thanks to everyone for the helpful advice - love the MMM forums!

[Cheddar Stacker]

Thanks for the update. Congrats on the baby. Now go get some sleep. Those little tax deductions can wear you out.

[Goldielocks]

This may not be very helpful.

I got some BS notice from the IRS a while ago too (not sure which form it was).  They didn't like my backdoor ROTH and thought I'd need to declare distribution income or something.  I didn't do any research, I just wrote them a letter back explaining the situation.  Probably should have researched proper wording/form letter/whatever.  It worked out fine, though, got another notice saying never mind.  Yeah, for me it was a very delayed notice too.  Annoying, but I don't think it's anything to freak out about if you are sure you're right.

I received a letter about my IRA rollover, for some reason they did not see it as a rollover, and thought we withdrew the money and ran back to Canada.

I just circled the appropriate lines on my originally submitted form, rewrote the word "rollover" next to one line and sent it in.  All OK.

From the Canadian side, I was audited for student tuition tax rebate deduction the year I worked full time and took full time courses too.  Same thing, just sent in a receipt with a simple note attached.

[COlady]

Glad to hear you got this resolved - sounds like you did just the right thing. Just so you're aware, the IRS grants a 30 day extension on these types of letters if you don't have time to pull the information together.  You can request a 30 day extension of time to respond by send a certified mail letter.  I've never had them deny a request.

[arebelspy]

Tell them your hard drive containing the 2012 info in question crashed.  Seems legit.

Sorry, joking aside, good luck!

Hah, I laughed.

Glad everything worked out smoothly, labrat.

And big props to those with such helpful advice (COlady and Trudie especially); you guys rock!

[rmike1991]

Sorry to revive this thread but I thought since it's already about CP2000 why open a new one.

Anyway. Couple of days ago I got one of my own ;) CP2000 notice from IRS for year 2012. It's a long list of securities that they think I didn't pay taxes on.
Here is an example: (all images are clickable to see full size)



By reading stuff online I understand that all this is computer generated and what does it understand? All the “Reported to IRS by others” and matching "Difference" numbers were mistakenly taken from the form 1099-B column “Box 2a” – Sales price less Commission and Option Premiums  instead of the last column in “Box 2b” – REALIZED GAIN / (LOSS)



On my 1040 I put all the numbers from 2012 Consolidated 1099 form



where I believe Total Capital Gain Distributions is the total of REALIZED GAIN / (LOSS) column.

My question is if someone can help me to write an official letter to IRS telling them that it's their mistake and I paid everything that I had to. I will also enclose some pages of 1099 and 1040 with that letter.

Thanks in advance

[COlady]

Hi Rmike,

Without looking at the notice and your return, I'm having a hard time understanding what the IRS is misinterpreting. Can you post entire PDFs of the notice and your tax return with your identifying information whited out? What I usually see is that the IRS is trying to match proceeds from the sale of stocks against your tax return and for some reason their computer is unable to do that.  IRS notices never consider the fact that you paid for the stock, they simply send you a notice assessing interest and penalties on the proceed amount rather than the actual gain.

Are we allowed to give out email addresses here? If so, I could help you directly that way.

[rmike1991]

COlady, thank you very much for your reply. I sent you PM with my email address.
Regards,
Mike

[labrat]

I know I'm reviving after a long time, but.........  Bad news. I received another letter from the IRS this week thanking me for my payment but I still owe them $$$ (original amount in the CP2000 notice) and need to send another signed statement explaining why their information is incorrect.  They did not acknowledge receipt of my first signed statement or 1040X or supporting documentation - only receipt of my payment. 

I'm a little peeved because it is clearly a form letter, and they took sooooo long to respond - only to say "f-u, you still owe us".  I realize there was an error (the incorrect amount was reported on the original 1098T), but it seems like a human needs to go over our return - not the IRS computers.

They did provide a toll-free number that I can call if I have questions, so I'm planning on calling Monday.  Any advice on how to handle this (without yelling at some poor staffer)?