Hello,
I finally made a tax mistake in 2016 return and forgot to add one of 1099s. Opening too many brokerage accounts has its downside. So, I got IRS CP2000 form asking to pay the difference, but the amount they "propose" to charge is $5xx while my own calculations via TaxAct suggest $2xx. Talking to them is impossible. What should I do? Details below:
The form says:
Changes to your 2016 tax return:
Securities: $ xx
Taxable dividends $9xx
Income net difference $9xx
Change to taxable income $13xx
Tax you owe $5xx (plus interest)
The main differences between their calculations and mine are:
1) We both agree on income net difference of $9xx. But they somehow move that number up to $13xx and call it "change to taxable income" with no explanation. Why?
2) They charge my qualified dividends at a higher rate. They admit that "you may be eligible for a lower tax rate since the dividends are qualified. Please respond and tell us of any needed changes..."
I've never communicated with IRS before. I am happy to send them back my calculations but trying to do it right first time to avoid further complications.
What am I missing? Why did they go up from $9xx "Net income difference" to $13xx "Change to taxable income"? What's the best way to proceed?
Thanks,
Alex356.