Since the end of tax season, I have seen at least 2 Tax Notices a day come into the office. Oklahoma is asking for proof of withholding under the guise of identity theft protection and the IRS has started sending out CP2000s for 2016 tax returns. The result is another post on tax notices.
The Oklahoma notices are simple since all they want is proof of Oklahoma withholding. But I did get a kick out of the client who called the number on the notice to make sure it was legitimate and not an identity theft attempt. The OK customer service representative was not amused.
The CP2000 from the IRS is another matter. I call it the “oops” notice. It comes from the IRS matching what is on your return to what they have received from payers and it takes about a year to come out. If you and the IRS match or you are reporting more than they have, you don’t get a notice. You do get a notice if the IRS has more income reported for you than you have on your return. Oops! The CP2000 is very important since it’s the notice that will give you the information you need to double check the IRS. If you ignore the CP2000, you will get more letters but they won’t have as much detail (and they will have more interest and penalties.)
It can be easy to miss adding income to the return. W-2G for gambling are given at the time of the win and can get forgotten when taxes are prepared. Many times a 1099-S for a property sale is issued at the time of the sale and forgotten. Then there are the surprises like the 1099-MISC from a casino combining all your prize and tournament wins for the year and the 1099-C for debt cancellation that no one mentions when your credit card debt is forgiven. Bottom line, you think you have everything you need but you file your return before everything is mailed.
Some late W-2s and 1099s can be prevented by making sure employers and other payers have your current address. It’s also a good idea to have “tax file” to put W-2Gs and other early forms. Also, ask if you will be getting some kind of 1099 you do something financial. If you filed your tax return before you received everything, you need to file an amended return. And don’t forget to file amended state returns too. Do not, I repeat, DO NOT hold on to it and add it to next year’s return. Keep it with the correct year.
People make mistakes. It’s easy to miss a tax form you don’t know you are getting or forgot about. Oops! However, the IRS (or any state agency) will not let you off the hook that easily. So check what the notice says and if it’s correct pay the tax. If you don’t agree with all or part of the notice –tell them why and document your arguments.
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