Greetings from the IRS
December 03, 2014
You’ve just picked up your mail and ... uh oh, there among the ads, bills and too numerous offerings for credit cards is that official looking letter from the Internal Revenue Service. A feeling of dread comes over you...but don’t panic or toss it, and please DO open it.
Usually, mail from the IRS is a notification that they need verification of documents or substantiation of an amount you have claimed on your tax return.
The most common notice is the “Automated Under Reporter (AUR)” notice, also known as CP 2000 notice. They come out year round and are quite common. They’re basically computer-generated mismatch notices, sent out if the information reported to the IRS by third parties doesn’t appear (to the IRS’ computers) to match the amounts shown on your return.
Take a look at your letter. In the upper right hand corner, there should be an AUR Control # and just below that in tiny type: “Notice: CP2000”. If that’s the case, at least you’re not dealing with a correspondence audit, aka an audit by mail, where the IRS asks for additional information about certain items such as business expenses, and it’s not an office audit or a field audit, examinations where the IRS goes into greater detail in person on a host of issues. Nevertheless, the CP 2000 is serious, and if you don’t respond, you’ll face additional penalties and interest and a real bill.
Deal with the notice immediately. The IRS gives you only 30 days from the date of the letter (not the date you receive it) to return your response (this does not mean putting it in the mail; it means getting it delivered to the IRS). You can fax your response, but that doesn’t speed up IRS processing. You can call, but expect long wait times.
Sure, in lots of cases the IRS will be correct. It’s common for taxpayers, especially folks who rush to file early in the year anticipating a refund, to inadvertently leave off income (a W-2 from a second job, a 1099 from a savings account) Another common mistake occurs with Schedule D if a taxpayer didn’t include stock transactions because he lost money and figured it wasn’t taxable (you still have to report it). But in some cases, it’s the IRS’s mistake. The IRS software isn’t sophisticated enough to pick up all the information on attached schedules.
If your IRS letter advises you that your return has been selected for audit, you would be wise to seek professional advice. If you used a tax professional to prepare your return, such as an enrolled agent (EA), CPA, attorney or registered tax return preparer, you should immediately contact that person for help with the audit. If you prepared your own return, you may wish to contact an enrolled agent immediately. Enrolled agents are authorized by the U.S. Treasury Department to represent taxpayers before all administrative levels of the IRS for audits, collections, and appeals.
If you need assistance addressing the requirements of these IRS notices, please contact your local Enrolled Agent.
Robert Cantu is your local Santa Paula Enrolled Agent-National Tax Practice Institute Fellow and member of the American Society Tax Problem Solvers, licensed by the US Department of the Treasury to represent taxpayers before the IRS in audits, collections and appeals. As a Director of the local chapter of the California Society of Enrolled Agents, he is actively involved in the tax profession at the local, state and national levels.