CP Notices

[JoshinNC]

You really make it hard on the rest of us

During the rest of the year that's pretty much all I do. In 2011 I have had four CP Notices and all were on returns I did not write and in all cases part of the price paid by the client has been a handshake that I will write their next filed return. Nearly all keep their word.

some of us actually believe that the years of education, training and work experience we have are worth something and feel like we should be compensated by clients when we provide services for them. Unfortunately some will look at us, straight in the face, and say "but Erchess down in Whiteville will write letters to the IRS and make phone calls to the IRS and never bill me, why do you want to rip me off? It'll only take you a minute, right?"

I'm not trying to be an a** (okay, maybe I am) but this really irks me. Only when we start acting like other professionals in the face of our clients will we be able to bill accordingly.

Off my soap box now.

[taxea]

If it is an error on the part of the IRS I think we should bring it to the attention of the advocate office.
I have one where the IRS is asking for tax due on a 1099R that clearly shows the gross amount and the taxable amount. The IRS notice shows the gross amount as the amount reported, the taxable amount as the amount the TP reported and is asking for tax on the difference!!!

Somebody didn't program their computer correctly and it is spitting out error letters.

The thing that urks me is the client thinks we are making the mistakes....Lordy, Lordy the IRS sure would make a mistake!!!

[Black Bart]

Two for me, so far.

CP14 demanding mucho moolah (one arm-one leg) as 1040 pen/int for a mere five-year filing delay. Oh well, clients agreed that, after all, "We're a little late on this." Armed with a super excuse ("We forgot to file.") they inquired about "a tax specialist;" told 'em a Super-CPer couldn't break the lock on this one.

CP2000 claiming my favorite fast-fooder understated income. She said (and I quote) "It's all a mistake -- I'll check my records and get back to you." I'm consulting/hand-holding for hamburgers (Bees did recently mention we work too cheap) and everything's fermenting nicely. I figure at least two more months' jumbo double-cheese w/bacon before the axe ("We Intend to Levy!") falls.

[taxea]

If you want a list of individual and business CP notices...search box IRS.gov for CP business filer notices and CP individual filer notices.

[Gary2]

If it is an error on the part of the IRS I think we should bring it to the attention of the advocate office.
I have one where the IRS is asking for tax due on a 1099R that clearly shows the gross amount and the taxable amount. The IRS notice shows the gross amount as the amount reported, the taxable amount as the amount the TP reported and is asking for tax on the difference!!!

Somebody didn't program their computer correctly and it is spitting out error letters.

The thing that urks me is the client thinks we are making the mistakes....Lordy, Lordy the IRS sure would make a mistake!!!

I vaguely recall seeing a CP2000 for excess withholding - we had to fax in the SSA-1099 showing the withholding. Do we blame the IRS programmers or the SSA programmers?

However, there are times when you really have to study the CP2000 carefully to understand the mismatch. For example, if you get the 16a amount wrong, even though the 16b amount is correct, it could trigger a letter like this. Or there could be a missing 1099R, they somehow matched your entry to the missing one and they think the one you did report is the missing one.

I'm not saying that they're right and you're wrong, but the matching problem isn't always easy. Often an error may seem intuitively obvious to us, but that's the catch - computers don't have our intuition. (I will, however, say that CP2000s at times are unreasonably difficult to decipher.)

[Gary2]

CP2000 claiming my favorite fast-fooder understated income. She said (and I quote) "It's all a mistake -- I'll check my records and get back to you." I'm consulting/hand-holding for hamburgers (Bees did recently mention we work too cheap) and everything's fermenting nicely. I figure at least two more months' jumbo double-cheese w/bacon before the axe ("We Intend to Levy!") falls.

A CP2000 for general understated income? I thought CP2000s were strictly for matching taxpayer returns against information returns (W-2s, 1099s, etc.). I didn't think there were at the point of matching against, for example, state sales tax payments. While the IRS computers might flag a cash business for audit due to low income based on various metrics, I'd expect some other type of notice for that.

Or did you mean someone who flips burgers and forgot a W-2?

[S T]

White Oleander - I have no issue with them tracking the "DIY's" there are probably a lot of issues there,

But come - on - in your case not tracking withholding on W-2 forms or SSA 1099's, is a bit over the top.

For me - In 2009 - I just had a few clients that totally "spaced" the reporting, one said he never received, another just didn't give me a 1099R Distribution, another was a combination of 1099R distribution and an HSA account. All 3 of those owe some taxes, and the IRS is correct in issuing the CP 2000 notices. None of these clients have ever received notices, but it was clearly "their" omission.

This last notice is clearly not right, unless I did my calculations wrong on the SSA "LSE" and is well noted, So the CP 2000 Unit is NOT Reading the return, seems like ONLY Matching numbers in the Income Field - so much for my years of attaching detailed statements

Are we now suppose to do our "job" and the IRS "job"

Sorry I am really frustrated right now - so am probably venting - but with all of the delay in new regulations and having us jump through "hoops" for PTIN, EA Renewal, etc - I feel like (well I just don't what I feel like) except frustrated!

Sandy

[Gary2]

I should have added: While having the IRS miss withholding on an SSA-1099 is clearly government error (though not necessarily IRS), missing withholding on a W-2 may or may not be. Employers doing their own payroll or using small payroll/bookkeeping companies make mistakes, especially in the time period between mailing the W-2 to employees and submitting the W-3 package to the SSA. Or not submitting it at all.

There are also the subtle typos that get past many otherwise competent tax pros, such as SSNs being incorrect on the W-2.

[joanmcq]

The CP programming seems to have a problem matching withholding from non W-2 or 1099-R sources. I've seen them quite often on for w/h from 1099-SSAs, 1099-Bs, and 1099-DIV. It might just be that withholding is actually quite rare from these forms, so the computer match doesn't catch them. But they are quite easy to correct as well. And then you look like a hero to your client.

I had a client that yearly got a CP for overstating his mortgage interest (he was second on the mortgage) and understating his dividends (after two years; one year I didn't prepare and the first year I did prepare his returns. After that, I knew to ask for the very small 1099), but the notice never dealt with the even more miniscule amount of withholding on the 1099-DIV. we laughed about that one when I wrote the letters.

BUT....if a notice is due to an error I made, the correction is free. Sometimes (like with the mortgage interest), I built the price of writing the letter I knew was coming into the price of the return (and not much since I essentially have a template for that one..change the dates and amounts and it's good to go). But, for example, I just did a response to a CP notice for a new client and charged for an hour of my time. The DIY return had the gain from the stock sales reported on line 21, not on Sch D. So there was no change in tax, but I had to create a Sch D to attach to the letter. Don't underprice your services. It doesn't do any of us any good.

[Gary2]

Sometimes (like with the mortgage interest), I built the price of writing the letter I knew was coming into the price of the return (and not much since I essentially have a template for that one..change the dates and amounts and it's good to go).

If you knew the letter was coming because you recognized that the 1098 was in another person's SSN while you're preparing the return, then you're probably putting the mortgage interest on the wrong line. If the 1098 doesn't have the taxpayer's SSN (or spouse's on a joint return), then the mortgage interest goes on line 11 of Sch. A, not line 10. It's not obvious from the wording on the schedule, but it's quite clear in the Sch. A instructions.

[erchess]

I said part of the price josh not all

some of us actually believe that the years of education, training and work experience we have are worth something and feel like we should be compensated by clients when we provide services for them. Unfortunately some will look at us, straight in the face, and say "but Erchess down in Whiteville will write letters to the IRS and make phone calls to the IRS and never bill me, why do you want to rip me off? It'll only take you a minute, right?"

I'm not trying to be an a** (okay, maybe I am) but this really irks me. Only when we start acting like other professionals in the face of our clients will we be able to bill accordingly.

Off my soap box now.

I'm sorry if I was unclear. I definitely do charge a cash fee for representation work. Much of my representation work is for people outside my area and I don't insist that they become preparation clients although some do. I do insist that someone in my area who starts as a representation client agree to become a preparation client or I won't usually take their case. My fees for preparation are in line with surveys of what is typical in the Southeast. I don't have access to similar information on what people charge for Representation. If any would like to share what they charge I would be interested but I'm not sure if that is ok here.

[gboykin]

About a month ago, while on vacation in Disney, a client emailed me that I made a mistake on their return. They got a CP2000, and said that I didn't include the wife's W-2, 1099, or W2G that she received. Not having access to the information while on vacation, I told them that I didn't think that I could have possibly left off ALL of that information if they brought it in to me. He emailed back that he had the copies that I gave him back, with my personalized stamp that I use to document when a client brings in a form. I emailed him back not to panic until I got back to look at the notice.

When he brought the notice in, all information was on the return. IRS had doubled ALL of her income (not withholding amounts however), and charged her tax on the additional income to the tune of about 10k in additional tax. This was on an e-filed return, so there was no human interaction on the part of IRS. I called PPS, and was transferred twice to supervisors. The final supervisor agreed that the income was indeed doubled, and was able to correct the account while we were on the phone. A letter followed about 2 weeks later to the effect that the return was accepted as filed and to disregard the prior notices. The IRS rep apologized on behalf of IRS over and over.

Still don't know how this could have happened, except for computer errors.

What a way to ruin a perfectly good vacation, with the prospects of returning home to a penalty notice over 2k.

[Lion]

Form 1098-T

A new client gave me her CP2000 re Form 1098-T for a prior year prepped by another preparer. We all know how accurate those Forms 1098-T are! However, in this case the IRS was correct. She had less than $800 in tuition. Her old preparer had entered $1200 for her and $2700 for her husband who did not attend college.

Now I'm worried about CP2000s arriving for all those Forms 1098-T that did not tell the whole story, where we got our amounts from the students' transcripts from the bursers' offices, from parents' records, etc.

[taxmom34]

could it be that IRS questioned this because there was no 1098T for husband?

[Lion]

Cp

The computer-generated letter did not refer to the separate spouses or to a Form in one SSN or the other. It did refer to the totals of Forms 1098-T reported to the IRS adding up to less than $800 and the education credits As Corrected by IRS of $442 vs. Shown on Return of $2,340.

In this case it was the old preparer (or someone) making up numbers. But with these forms, it's usually us preparers pulling the information out of our clients/their children; the actual tuition paid during the tax year is often not the tuition billed reported by the college.