Notice-Amended Return

[geekgirldany]

Clients prepared their 2011 1040 tax return on TT. They own S-Corp and did not properly enter the W-2 and Shareholder Health Insurance.

IRS caught this and made an adjustment to correct Line 7 Wages to what was shown on the W-2.

Now client is allowed to deduct the Shareholder Health Ins as an adjustment but I also found they incorrectly entered their HSA. They are allowed a deduction for their HSA contribution.

How should I handle this?

Amend return and send it with the notice? or Amend return, send it to the 1040X address, and just include a copy of it with the Notice?

Trying to figure out the best way to handle this. Not sure if the Amended return would get processed if I only include it in with the notice.

Thank you
Dany

[Gary2]

Clients prepared their 2011 1040 tax return on TT. They own S-Corp and did not properly enter the W-2 and Shareholder Health Insurance.

IRS caught this and made an adjustment to correct Line 7 Wages to what was shown on the W-2.

Now client is allowed to deduct the Shareholder Health Ins as an adjustment but I also found they incorrectly entered their HSA. They are allowed a deduction for their HSA contribution.

How should I handle this?

Amend return and send it with the notice? or Amend return, send it to the 1040X address, and just include a copy of it with the Notice?

Trying to figure out the best way to handle this. Not sure if the Amended return would get processed if I only include it in with the notice.

You didn't say what type of notice, but I'll guess CP2000.

Write a cover letter, explaining that you're disagreeing with the CP2000 because of additional indirectly-related changes and that you're including a pro-forma amendment to show the results. Do this in clear, plain English; save the terse statement of details for inside the 1040X. On the top of the 1040X, write "CP2000 Response" in big print, preferably. Send it to the address indicated in the notice, not the 1040X address.

[JohnH]

I'd do the same, but not on a 1040X because it might get accidentally processed in spite of your best efforts. I think it's better to use a 1040 with the changes highligted, and the wording entered prominently on both pages. Also reference the changes in the cover letter.

[geekgirldany]

Thank you for responding. Yes, CP2000 notice.

Well, I've finished the 1040x and with the HSA Contribution, the client is now owed a refund.

So I am thinking 1040X be sent to the regular address to be processed. 1040X Copy sent with notice marked as stated.

[JohnH]

Don't the CP2000 instructions specifically say NOT to file a 1040X?

[S T]

Dany - I agree with prior posts, do NOT submit 1040X trhough regular channels - The CP 2000 Dept and the 1040X dept are not necessarily the same. Use i1040X for your records only - I usually submit a corrected 1040, and any additional schedules needed --with "notations in response to CP2000"

I also always include a cover letter, as an outline stating the changes (reference to CP 2000 notice format) and let them know the additional schedules that I am providing.

Submit all to the CP2000 Dept that issued the notice either via certified mail or Fax (if fax # is provided).

Sandy

[Burke]

I agree with everyone else. NO 1040X. Attach all to CP2000 notice and return.

[Black Bart]

What address...

How should I handle this?

Amend return and send it with the notice? or Amend return, send it to the 1040X address, and just include a copy of it with the Notice?

Trying to figure out the best way to handle this. Not sure if the Amended return would get processed if I only include it in with the notice.

I think dany was just asking which address to use rather than whether or not to file a 1040X and like others here I generally use the CP-2000 notice address for anything (including 1040Xs) related to such notice.

But I also prefer not to file a 1040X if I can get by without doing so (believe they increase audit risk). Last year I put a cover letter (and some additional forms) on a CP-2000 to explain away increased tax charges, but also specifically asked if they would give us credit for an overlooked DPAD credit without filing an amended return -- they did so (had wondered if they'd proceed without one if you were trying to get a credit in addition to just killing off the increased tax).

Having said that, I think her 1040X will go through just fine (at either address) -- I've never had one disregarded no matter what IRS address used. I'm not really sure we can always know for sure where to send things that cover more than one sort of problem -- over the years various IRS agents have given me varying answers to the same question (call 3 agents right now and I'll bet you'd get at least two different answers to the address question above).

[joanmcq]

I've always just used a 1040 prominently marked 'worksheet' or 'proforma' to document the corrected tax calculation. The HSA correction should be able to be done through answering the CP2000 notice too. In other words, just answer the notice! If they cannot correct the HSA issue, then amend after the notice is resolved. NOTE: after the notice is resolved, the starting point for any amendments is the return after the notice changes are made.

[Nashville]

If No Amended Return

If no amended return, there is no "form" to document the changes. All there is would be a cover letter responding to the CP2000. And if IRS concurs with the letter, the taxpayers' records with the IRS are changed just as effectively as if a 1040X were filed.

The problem is, there is nothing in YOUR file to delineate the line items. All there would be is this letter, and you would have to reconstruct the taxpayer's data from that, and the letter would not necessary disclose whether IRS concurred with you, or in part.

No problem with not filing the 1040X if that is your belief. However, I believe at all times you should be able to look at a taxpayer's FINAL 1040 and see Income, Adjustments, Deductions, Tax, Credits, Other Taxes, and Payments. And you should have THIS in your file at all times.

After all, the taxpayer might have to have his return changed AGAIN! Gets messy, but it DOES happen.

[JohnH]

Ron: You're right, there should be documentation in the preparer's files. . That's why I use the 1040, corrected for any changes, and then highlight the changes, along with a prominent notation that it is for discussion purposes only. A cover letter explains where the new numbers came from. This also conforms to the instructions for a CP2000 which say not to file a 1040X. From the responses on this thread, it seems apparent that most anything works, provided a 1040X is not sent to the normal processing center by itself. That's probably because a CP2000 response (mailed to the address on the CP2000) always involves human intervention, and unless the processor doesn't know what they are doing, they use whatever documentation they receive in the response to sort it all out.

[Burke]

Whenever I am making a change which goes beyond the scope of the exact item covered in the CP2000, I also do a corrected 1040 and attach it along with an explanation, with the appropriate signatures of the TP either on the letter or the form. Has always worked.

[geekgirldany]

Wow! Thank you all for responding. It is greatly appreciated.

I use Form 1040 and mark as suggested.

I sure am having to deal with alot of notices this year. Trying to resolve a problem with State of Georgia. They will not take into consideration Georgia Withholding on a 1099R and as such is showing the taxpayer owes.
I hate dealing with the state government. Seems like it is even harder to get things resolved compared to the IRS.