Cp 2000

[Sudhir]

Hi

I have a client who received CP 2000 for inadvertently omitting qualified dividends and was assessed additional taxes and a substantial underpayment penalty. While I agree with the omission and additional taxes assessed, I do not agree with the amount of additional taxes assessed by the IRS as there is no calculation showing how they arrived at the additional tax amount after adding the omitted dividends to taxable income. According to my my calculation the underpayment is less than that reported in the CP 2000. I realize, I have to obtain a POA from the client to correspond with the IRS. I have two questions:

1. What is the procedure to submit the POA to the IRS (this is my first experience)
2. Is there a standard CP 2000 form to respond to CP 2000 and what supporting documents should I send to show that my tax calculation is different from that shown on the CP 2000.

Thank you for any helpful assistance in this matter.

[TAXNJ]

Follow instruction

1- https://www.irs.gov/pub/irs-pdf/i2848.pdf


2- https://www.irs.gov/Individuals/Unde...-CP2000-Notice

[Sudhir]

Thank you for your timely response.

[Grace]

The IRS taxed them all as

"ordinary" dividends and did not take into consideration that some or all were "qualified."

If you haven't already done so, get the 1099-DIV tax document to which the IRS is referring to.

If the dividends were left off the tax return, you could respond by agreeing to the fact that they were left off, but pointing out that some or all were "qualified" dividends and therefore taxed at a lower rate. You can use the 1099-DIV tax document to point this out.

[taxea]

I usually do a 1040X to compare against the IRS figures (which almost always are wrong) then with the POA I fax the 1040X attached to the CP2000 letter to the fax # on the letter. If there is no fax # call the # on the letter and tell them you want to fax the POA, 1040X and copy of the letter to them

[Sudhir]

Cp 2000

Thank you Grace and Taxea. That is exactly what happened. All of the dividends were taxed as ordinary income. I had a chance to review the 1099 Div. 100% of it was qualified accounting for difference in the tax calculation. I have one other question. I have drafted a letter agreeing to the omission of the dividends in the original return and showing the recalculated taxes that is different from the IRS proposed amount along with supporting documents. Should I enclose a check from the client along with my letter for the recalculated amount or wait until I hear back from them accepting my explanation? I don't want my client to incur additional interest charges. Thank you again for your time in replying to my queries.

[Burke]

I would wait for their adjusted bill/letter as the interest will be recalculated, since your post suggests he still does owe something.

[Grace]

I agree with Burke

I would wait for their adjusted bill/letter as the interest will be recalculated, since your post suggests he still does owe something.

I would respond and let them reply with revised CP2000 to make sure your calculations and theirs agree. I'd be afraid they would take the money, disregard your response and bill the TP for the difference.

[Sudhir]

Cp 2000

Thank you Burke and Grace. I will do exactly that send a reply to the CP 2000 without any payments enclosed. Your time in responding to my queries is much appreciated.