CP 2000 Question

[Kram BergGold]

My client reported the net W-2 income on her Schedule C. IRS sent her a CP2000 becasue there is a W-2 mismatch. However, when remove the net income from Schedule C and report the gross as wages she will have a refund. Do I attach a 1040X along with the response to the CP2000 or will they give her the refund without a 1040X? I am inclined to include a 1040X.

[jimmcg]

Cp2000

Probably get away away with not including the1040X but I would include it for additional clarity.

[Burke]

You do not do an amended 1040X when responding to a CP2000. I think that is even stated in the letter they send. You DO include any schedules which were not originally submitted and have been generated by the correction.

You said she included the "net W-2 income" on her Sche C. Do you mean she got a separate W-2 and showed it in her gross earnings on the Sche C? Did it affect any other items on her return (besides the SE tax) like a SEPP?

If investment income was a factor on the return, make sure the refund reflects the proper tax calculation using the QD & CG worksheet. I find that is a problem with the IRS on corrected returns via CP2000.

[JohnH]

I've submitted spreadsheets in response to a CP200 when there were several items to adjust. The spreadsheet layout essentially mimicked the layout of a 1040X, but it wasn't technically a 1040X because the instructions to say not to file a 1040X (as Burke has pointed out).

I have also heard of people submitting a 1040X, but marking it "for discussion purposes only". That's probably OK, but it's still a 1040X, which the instructions say not to submit. That's why I like the spreadsheet better.

[ATSMAN]

My client reported the net W-2 income on her Schedule C. IRS sent her a CP2000 becasue there is a W-2 mismatch. However, when remove the net income from Schedule C and report the gross as wages she will have a refund. Do I attach a 1040X along with the response to the CP2000 or will they give her the refund without a 1040X? I am inclined to include a 1040X.

Is the W2 marked statutory employee? If not why is any of the W2 income on Sch C?

[Burke]

Good point. Statutory employee W-2 would properly go on a Sche C, although if it was for a different job, it would be on a separate Sche C.

[BOB W]

If it has several issues, I would send an amended return. It is easier to clear up those issues. I would send it to the CP-2000 address. They can do with it as they wish.

[Gary2]

When I attended the IRS tax forums a couple of years ago, at one of the sessions the IRS said that if you choose to include a 1040X in the response, write "For CP2000" across the top, so that it doesn't accidentally get treated as a standalone amendment.

My take: Though the CP2000 instructions say it's not required, that doesn't mean it's prohibited. Depending on your tax software, creating an amendment may well be the best way you have to make sure your records match what is currently on file with the IRS. It seems silly to go to extra trouble beyond that just to give the IRS the same information that appears on the 1040X but on a different piece of paper, so when appropriate, I'll file the 1040X. But often, as previously said, only an updated form or schedule is needed.

In cases where we might agree with the CP2000 (e.g. the common case of a missing W-2G), I'll still create the amendment but in the "Explanation of Changes" section write something like "CP2000 due to additional W-2G which which we agree; only the state amendment was actually filed" (and obviously different wording on the state amendment).

[ChEAr$]

I just replied to a cp2000 with a letter outlining the changes plus a printed copy of a new 1040 marked for info only; do not process, plus she schedule d of course and informed IRS that client had sent their check to the kansas city address for $ xxx dollars.
The letter had come from Philadelphia, but the coupon to be used bore a Kansas city address.

[Kram BergGold]

Thanks, Especially Gary2

Thanks to everyone. I am going with Gary's suggestion of marking the top of the 1040X "for CP 2000".

[buzzardbreath]

Different Processing Centers

Amending the return only befuddles the processing for IRS. The address for the 1040-X is the same as for the 1040, but the CP2000 asks for a reply sent to a correspondence office (mine seem to be from Philadelphia). The IRS is so disjointed I'm not really sure whether each respective office is able (capable or authorized) to handle the business for the other office.

The CP2000 often unleashes other corrections in addition to those they propose. And what they propose is in error (in whole or in part) over 50% of the time.

I would send a 1040-X (if any changes are proper) to the appropriate address, and advise the correspondence address that the return is being changed by the taxpayer. If the CP2000 is wrong, and no changes are forthcoming, I would simply inform the correspondence office of the fact.

[Greenbriar]

1040X ok for CP2000

Just processed a CP2000 for a client and under "Next Steps" it says you can choose to file 1040X, just write CP2000 across the top and attach it to the CP2000. It's my preference for among other reasons, it accommodates the roll forward in ProSeries to next year.

[Gary2]

I would send a 1040-X (if any changes are proper) to the appropriate address, and advise the correspondence address that the return is being changed by the taxpayer.

My problem with this is that you have no control over how long it takes for the amendment to be processed, nor how much time the people handling the CP2000 plug into the computer for a hold. This increases the chance that the CP2000 computers will convert it into a NOD before the amendment has finished working its way through the system. While it will still get resolved eventually, who needs the headache of explaining the NOD to the client?

I'd rather have just one office responsible for the process.

[mastertaxguy]

W-2 on schedule c?

Thanks to everyone. I am going with Gary's suggestion of marking the top of the 1040X "for CP 2000".

Were you able to respond to the question about why W-2 income was on a Schedule C?

Statutory employee?

[David1980]

Were you able to respond to the question about why W-2 income was on a Schedule C?

Statutory employee?

I'm curious how a W-2 ended up on a Schedule C as well. Most of the DIY software does a good job guiding people correctly with basic W-2 income, makes you wonder if they did it intentionally. Did they deduct any expenses on Schedule C or was it income only? I've seen returns where a W-2 was reported on Schedule C as statutory employee in order to deduct expenses above the line. The preparer or taxpayer in the case felt that they qualified as a statutory employee and did it the way they wanted to regardless of what that silly W-2 was marked.