CP3219A - This tax season just keeps getting better and better!

[kamckinley]

Wow... we are barely into February and this tax season has been one problem after another. So after I posted about the preparer error this morning (thank you so much for all your responses!), I got an email from another client who received a notice CP3219A. I've handled CP2000 notices before, of course, but never a CP3219A.

The client had unemployment income in 2012 from several resources. All were reported correctly on their tax return, but the CP3219A notice says they didn't report ANY of their unemployment income. I have no idea why they received this notice. I was getting ready to work on a response with a copy of their correctly prepared tax return and copies of all their 1099s for unemployment income. However, after further review, I discovered that this notice requires that you file a petition with the tax court. I've never had to do this before. Why is a tax court petition required instead of the normal written response?

Has anyone filed a petition with the tax court before? Is it much different that your typical CP2000 response? Anything I need to know before I get started?

Thanks so much for everyone's help today, you guys are a lifesaver.

Kristine
P.S. Is it too early to start drinking?

[DonB]

They have most likely ignored previous notices. Instructions for the CP3219A: What you need to do

Read the notice carefully – it explains the proposed increase or decrease in your tax. Note: The amounts shown as due on the notice may not match your previous notice because not all items can be challenged in tax court.
If you agree with the changes – sign the enclosed Form 5564, Notice of Deficiency - Waiver, and mail to the address shown on the notice.
If you don’t agree with the changes – you have the right to challenge the proposed changes by filing a petition with the U.S. Tax Court no later than the date listed on the notice. The Court can't consider your case if the petition is filed late.

Here's the important one--
If you don’t agree with the changes and have additional information – mail the information to the address listed on the notice. Our review won't extend the time you have to file a petition with the U.S. Tax Court.

[kamckinley]

Do I need to be licensed to respond to a CP3219A

Another colleague just mentioned that you must be licensed to practice in tax court in order to respond to a CP3219A. Do I need to refer this client to a tax attorney to handle this? CPAs can't file an appeal to a notice CP3219A? Thanks again.

[DonB]

Another colleague just mentioned that you must be licensed to practice in tax court in order to respond to a CP3219A. Do I need to refer this client to a tax attorney to handle this? CPAs can't file an appeal to a notice CP3219A? Thanks again.

Taxpayers can go to tax court pro se. You can explain to the TP how their correctly filed return shows the disputed income and they should be able to handle it. If it's a no brainer win for the TP it will most likely get resolved before court date. Here is a Tax Court Petition Kit that I successfully used. http://www.ustaxcourt.gov/forms/petition_kit.pdf. They accepted all of clients positions in a pre-trial letter.

[kamckinley]

Taxpayers can go to tax court pro se. You can explain to the TP how their correctly filed return shows the disputed income and they should be able to handle it. If it's a no brainer win for the TP it will most likely get resolved before court date. Here is a Tax Court Petition Kit that I successfully used. http://www.ustaxcourt.gov/forms/petition_kit.pdf. They accepted all of clients positions in a pre-trial letter.

Thank you!

[Koss]

Tax Court

Kristine--

I have also worked on cases in the US Tax Court. I have worked on cases where the taxpayer represented himself, and I have also worked on cases where the taxpayer was represented by an attorney.

The least you need to know is:

You cannot sign the petition. It must be signed by the taxpayer, or by an attorney, or by a non-attorney who has been admitted to practice before the Tax Court.

You will NOT get copies of notices from the Tax Court, even if you have a power of attorney on file with the IRS. The US Tax Court is NOT the Internal Revenue Service. (IRS = Executive Branch of Government; Tax Court = Judicial Branch) The Tax Court does not recognize Form 2848.

After the petition is filed, the Tax Court will probably refer the case to the IRS Appeals Office.

If you are an EA or a CPA, you can represent the taxpayer in the Appeals Office. Form 2848 is used for this purpose.

Even if you are not an EA or a CPA, you can still do a conference call with the taxpayer and the appeals officer. The appeals officer will probably be very glad to be able to talk with a knowledgeable tax professional. They may want you to fax them a Form 8821.

BMK

[Roland Slugg]

A CP3219A letter is a far more serious matter than a CP2000 letter. Its issuance starts the clock ticking on the T/P's right to file an appeal with the Tax Court. The IRS will, however, consider new information provided by the T/P, but while the IRS considers that information, the Tax Court time clock will keep ticking.

You wrote that the T/P received unemployment from several "resources" in 2012 and that it was all correctly reported. If this is true, then it should be a simple matter to point this out to the IRS and get the notice of deficiency reversed. However, I strongly suggest that you or the client carefully review the prior notices the IRS sent and see what income the IRS says was not reported on the 2012 return. There is a good chance that the IRS is correct, and that the T/P does, indeed, owe some additional tax.

[kamckinley]

Thanks Roland. The CP3219A is the first notice the client received. Is that normal? Several people have suggested that they should have received prior notices, but the client says they have not received anything before this. This client is pretty on top of things, so I believe they would have contacted me if they had received anything prior to this.

Also, I compared the notice to their tax return, line by line, and everything was reported correctly. I honestly can't see why they sent the notice. The only thing that was unusual was that they repaid some of the unemployment benefits to the state, but that also matches the IRS' record. I'm a bit stumped by this one, just hoping that by providing copies of all the 1099s and a quick response that we can get this resolved quickly.

[New York Enrolled Agent]

Thanks Roland. The CP3219A is the first notice the client received. Is that normal? Several people have suggested that they should have received prior notices, but the client says they have not received anything before this. This client is pretty on top of things, so I believe they would have contacted me if they had received anything prior to this.

Also, I compared the notice to their tax return, line by line, and everything was reported correctly. I honestly can't see why they sent the notice. The only thing that was unusual was that they repaid some of the unemployment benefits to the state, but that also matches the IRS' record. I'm a bit stumped by this one, just hoping that by providing copies of all the 1099s and a quick response that we can get this resolved quickly.

Was the repayment to the state for a different tax year? If so, you cannot net the current year unemployment with the repayment. That could possibly be the source of your problem. Repayments (depending on the amount) are reported on Schedule A or with a §1341 credit.

[kamckinley]

I believe the repayment was for 2011 benefits, but it was repaid in 2012 and reported as an adjustment on the 2012 1099-G. I reported it on the tax return according to the 1099-G.

[New York Enrolled Agent]

I believe the repayment was for 2011 benefits, but it was repaid in 2012 and reported as an adjustment on the 2012 1099-G. I reported it on the tax return according to the 1099-G.

Did you put the amount in box 1 on line 19 of Form 1040? Where was the adjustment - in box 2 or elsewhere?

[kamckinley]

The adjustment showed up in box 2 on Form 1099-G. Box 1 showed unemployment compensation of $1,526, box 2 showed adjustments of $4,968.50. On the tax return, line 19 shows unemployment income of $1,526 and also shows "Repaid 4969" on the same line. Is this the correct way to report it? I was using ATX that year, and entered the 1099-G exactly as it showed on the input screen; this is how it flowed through to the tax return.

[kamckinley]

Was the repayment to the state for a different tax year? If so, you cannot net the current year unemployment with the repayment. That could possibly be the source of your problem. Repayments (depending on the amount) are reported on Schedule A or with a §1341 credit.

And after researching this, you are correct, since this was a repayment from the previous year I should have reported it on Schedule A instead of netting the amount on line 19. Thus the CP3219A notice. Crap...

It appears that I need a new profession. This is the second mistake that I've had come back and bite me this year and it's only Feb 5th. My confidence is shaken pretty badly right now...

[kamckinley]

So knowing what the problem is, what is the best way to correct it? Do I prepare an amended return and send it in to the IRS before the final petition date? Do I refer the client to an attorney to file a petition? Since this is a CP3219A instead of a CP2000 notice, I'm still not sure of the best way to fix this for the client.

Grrrr... the repayment gets reported on line 23 of Sch A, so very little benefit. That stinks!

Thanks again for all the help. This forum has been a lifesaver for me this year...