CP2000 now results in lower tax

[Bill Tubbs]

Taxpayer received a CP2000 notice for tax year 2004 because they had failed to report their sale of mutual funds. IRS was wanting to add $6367 to their income using a basis of $0, but after digging through the taxpayer's numbers, I show a capital loss of $1321.

Question is: if I submit a response to the CP2000 indicating this capital loss, will the IRS process it and send the client a refund? Or is there a different preferred procedure?

Thanks,
Bill

[veritas]

Interesting because the Cp2000 says not to submit an amended return.

[Jesse]

I think only if you agree w/ the changes you are not to submit an amended return.

Without researching, I would say complete the 1040X with schedule D attached and submit with the CP2000.

[jimmcg]

I have done this in the past. Where the taxpayer disagreed with the Service re the CP2000 numbers and had omitted some necessary cost basis info on the original return whch resulted in a refund I included the 1040X for the year in question with the documentation returned to the service center. Worked for me.

[veritas]

I have also.

[Bill Tubbs]

1040X, Sch D with CP2000

I like that approach! Thank you all!

Bill

[Acownt4it]

Another seminar I attended today at the Chicago IRS Forum.

Make sure you "FIRMLY ATTACH" (their words) the 1040X to the CP2000 letter and mail it to the center that sent you the CP2000. Otherwise you will have a mess. Also include any documents that will help clear up the situation, such as a new Schedule D.

They also said to make sure you check the box, highlight the sentence on the 1040X that says you are responding to an IRS notice.