CP24 EST penalty

[Gretel]

I am somewhat confused about this notice (I also have to admit that this is the first time I am looking at one). This is for 2011, the first year that client's income increase quite a bit. He owed but paid with his extension and tax return shows a refund. 2010 tax liability was paid in 2011 through withholding. First of all I believe he should not be subject to this penalty at all but what really confuses me are the time periods listed. They start at 6/30/11 and go through 4/15/12. Since the notice is for the 2011 tax return shouldn't the periods go from 1/1/11 through 12/31/11.

Any help is appreciated.

[Roland Slugg]

Hmmm ... I have not seen a CP24 letter either, but it might not be quite what you think. Try going to this IRS web site and reading more about that particular notice/letter.

http://www.irs.gov/Individuals/Understanding-Your-IRS-Notice-or-Letter

[Gretel]

Thanks, Roland, I followed the link but the explanations stop right were my problems begin. I am sure someone on this board has experience with this. What I should add is that the 2012 tax return was also filed and that I expect to get this notice for 2012. However, I cannot see that they would roll years together. There is something I miss and before calling them I would like to understand this notice a little better. I feel like a fool to often already.

[Gretel]

2210 by default

Finally was able to resolve this issue with IRS and thought I let you all know. Second person, who understood IRS's exception rule for penalties adjusted account and no penalty applies. Client's tax liability was $900 in 2010 and $20,000 in 2011 of which over $10,000 was paid through withholding. Since at least $900 was paid in no penalty was due. What became clear to me in the first fruitless call is they IRS actually only looked at EST made, not at the withholding amount. I never got a letter in a situation like this before but also, never had such an increase in tax liability.

I am wondering if some of you send in the 2210 with the tax return in a situation like this? This was one sticking point with the first representative insisting of getting form 2210.