CP2000 IRS ignored HSA 5498SA contributions

[bgiez]

I received a CP2000 for my own 2012 tax return today, and even though I'm a tax pro, it still struck fear in my heart. At least until I calmed down, opened the envelope and read it. It seems that they ignored the contributions reported on our 5498-SA forms which they should have received, and they said I didn't claim the 2011 state refund received in 2012 as income, even though I claimed the sales tax deduction in 2011, not the state income tax deduction. Interestingly, they said the state income tax refund that I did not claim was $14, but what the state reported on the 1099 was $401.

Has anyone else been seeing these kind of issues on the CP2000? It takes me back almost 20 years the year they ignored schedule J and several of my farmer clients got CP2000 letters.

[David1980]

The worst ones I see are EIC when one spouse has SE income and one spouse has SE loss. The IRS on those letters includes the SE income but not the loss and miscalculates the EIC. The reason I view them so badly is I've seen them for years - you would think someone would fix their system by now.

With 5498SA at least I can understand why they might question a deduction. If the employer made the contribution or an employee made the contribution through their employer the amount would already be subtracted out on the W-2 so if they also deducted it on the 1040 you would have a double deduction. They could be assuming that the contribution was made through an employer. You would hope they would also rely upon the W-2 box 12 code W but perhaps they don't trust the W-2? I wonder if employers often screw it up and don't include the contribution in box 12?

The 2011 state refund received in 2012 is pretty inexcusable at any rate though. They have a check box on Schedule A for whether you're taking sales or income tax. Couldn't their system rely on it? Was the return e-filed or mailed in? If it was mailed in perhaps whoever processed the return didn't enter it correctly in the IRS computer. That's what I would hope happened, rather than them ignoring the check box all together but it wouldn't surprise me if they did.

[bgiez]

With 5498SA at least I can understand why they might question a deduction. If the employer made the contribution or an employee made the contribution through their employer the amount would already be subtracted out on the W-2 so if they also deducted it on the 1040 you would have a double deduction. They could be assuming that the contribution was made through an employer. You would hope they would also rely upon the W-2 box 12 code W but perhaps they don't trust the W-2? I wonder if employers often screw it up and don't include the contribution in box 12?

The 2011 state refund received in 2012 is pretty inexcusable at any rate though. They have a check box on Schedule A for whether you're taking sales or income tax. Couldn't their system rely on it? Was the return e-filed or mailed in? If it was mailed in perhaps whoever processed the return didn't enter it correctly in the IRS computer. That's what I would hope happened, rather than them ignoring the check box all together but it wouldn't surprise me if they did.

Well, it was my own return, so yeah, definitely e-filed so no manual input error on the sales tax deduction. The return also included my self-employed health insurance deduction so no employer involved. I faxed a response last night with a copy of my 2011 Sch A showing the sales tax check box checked and copies of the two 5498-SAs. If push comes to shove, I can give them copies of my bank statements showing the transfer of funds from my checking account to the HSA accounts.

[Burke]

Did you file Form 8889 for the HSA contributions with the return?

[Gary2]

Have you checked your W&I transcript, just to confirm the 5498-SAs? It's so quick and easy for your personal info that I would make that my first stop.

For the sales tax, I bet some programmer took that exception out when it appeared that the sales tax deduction wouldn't be extended, and then the development team forgot to put it back in.

[bgiez]

Did you file Form 8889 for the HSA contributions with the return?

Yep, one for my husband's HSA and one for mine.

The CP2000 had zero for the amount reported to them.

[bgiez]

Have you checked your W&I transcript, just to confirm the 5498-SAs? It's so quick and easy for your personal info that I would make that my first stop.

For the sales tax, I bet some programmer took that exception out when it appeared that the sales tax deduction wouldn't be extended, and then the development team forgot to put it back in.

W&I transcript??? Explain please.

[S T]

It is Wage and Income Statement that Gary2 is referring to

Now since we do not have the efile services available, you should be able to sign in to retrieve your own, as this relates to your own personal return

If you can provide the 8889 Tax form and a copy of the year end from the HSA account for contributions, you should be good.

I believe this to be an issue that is not programmed exactly into the CP 2000 program, but what else is new - I have about 3 issues on my desk right now - that the CP2000 unit can not obviously interpret correctly.

There are days that I wonder if anything is posted into the IRS system correctly.

Keep us posted

Sandy

[bgiez]

It is Wage and Income Statement that Gary2 is referring to

Now since we do not have the efile services available, you should be able to sign in to retrieve your own, as this relates to your own personal return

If you can provide the 8889 Tax form and a copy of the year end from the HSA account for contributions, you should be good.

I believe this to be an issue that is not programmed exactly into the CP 2000 program, but what else is new - I have about 3 issues on my desk right now - that the CP2000 unit can not obviously interpret correctly.

There are days that I wonder if anything is posted into the IRS system correctly.

Keep us posted

Sandy

I downloaded both the Wage & Income Transcript and the Tax Return Transcript for 2012. The W&I shows the 5498-SA and the Tax Return transcript shows the 8889. So the info is there. All they need to do is look at it.

[Gary2]

All they need to do is look at it.

Keep in mind that the CP2000 is computer generated. If it gets looked at by a human at all before approval for mailing, it's a very cursory look.

It's entirely possible there's a software bug triggering the CP2000 erroneously.