From: Minneapolis MN
Dear TaxMama:
Thanks for giving us advice and suggestions.
Recently, I received a CP-2000 notice from IRS stating that I had underreported
my year 2002 taxes.
The mail says, my earnings from other sources that reported to IRS are $1,255.00
more than what I claimed.
The only source of income for me during that year is through a W2 from my
employer (ex-now). It clearly shows the same figures that I reported.
Also the CP-2000 says that I payed $608.00 less income tax. But when I verified
my W2 for 2002, the amounts I claimed are correct.
I have a copy of the W2 as a proof.
What should I do now?
Should I go ahead and pay IRS the amount that they say I underpayed (nearly
$800)?
Is is possible that my employer(ex now) reported wrong earnings and taxes
to IRS for 2002?
Please advice me on how I should proceed.
Regards,
Nancy
Dear Nancy,
If IRS sent you a CP-2000, there is something else on that report you're
not mentioning.
Look more closely.
If your wages, as reported on your tax return, match up with the wages IRS
is showing on their printout, there is something else also on there.
It could be another job. It could be some freelance work? It could be a
prize. It could be dividends or interest. It could even be cancellation of
debt, or money drawn from an IRA. Did you collect unemployment? Or if you
itemized, did you forget to report your state refund as income?
Read the pages that came with the CP-2000 carefully.
Odds are, it is something you've already reported on your tax return, but
on the wrong line and IRS's computers can't find it where it's supposed to
be.
If you're not sure or can't figure it out - take it to a tax professional
and pay them a few dollars to clarify what IRS is reporting.
Or take time off and go to the nearest IRS office to get help, so you can
show them the letter and the W-2.
OR. better yet, call IRS at the phone number on the notice and ask them
what the notice wants.
But, never just pay it when you think you're right.
Once you find out what the extra income they show is from, if it's correct,
fine. Pay it.
If it's wrong - explain to them why they are wrong. Attach any documentation
to prove why you are right.
When you respond and explain, IRS usually accepts your information and clears
the additional charges.
Don't worry if you get another letter or two before the balance goes away.
Sometimes IRS computers just automatically generate letters.
Just send another copy of your first response until you hear from a live
person.
On the other hand, if the only thing shown on the IRS notice is the wages
- and the amounts reported as income and withholding are different from the
W-2 you have...that is totally odd. I do hope you still have the envelope
the W-2 came in. Attach a copy of both the W-2 and the envelope to your cover
letter, explaining that this is the W-2 you received - and you know know nothing
about the odd numbers IRS has from your ex employer.
If you happen to have a copy of the last paystub, and it matches your W-2,
attach that, too. It will strengthen your position. (And may result in the
employer getting audited. That is too odd!)
Incidentally, if you do end up owing money to IRS, odds are that you will
also owe it to your state. So, either file an amended return with your state
- or wait a few months and you'll get their assessment letter.
Best Wishes,
Eva Rosenberg, MBA, EA
