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How to Resolve IRS CP2000 Letters

The most common form of IRS audit is a CP2000 notice which is generated when your tax return doesn't match with the transcripts reported to the IRS. When you receive the notice, you can either accept their findings and make arrangements to pay the liability OR you and/or your representative can dispute the findings.

In no certain order, here are the most common tax liabilities created from CP2000S and the fix you and/or your pro can make:

1. Sold your home. You sold your home, but you didn't report the transaction on your return to take advantage of the capital gains exclusion whereas you can omit $250,000 in home profits if you are single and $500,000 if you are married (two years plus required of residency).

2. Roth IRA distribution (or other IRA's/401k). Roth distributions are unique because they aren't taxable if it's a return of your original contribution (or if five years have passed and you take out earnings). Very simply, you need to show the IRS that it was a return of contribution using form 8606.

3. Stock RSU's/Stock options. If you work for Amazon or a big company who pays Stock options, you have to remember that these Stock options are usually included on your W2, but you also have to remember to report it on the Schedule D as a stock sale so you don't get "double" taxed. The solution will be providing a Schedule D or a brokerage statement showing that there was "basis" on the Stock sale.

4. Unreported stock sales, dividends, W2s, etc. There's usually no response to these UNLESS you had a stock sale (in which you can provide basis). The IRS shows the omitted income, the tax is clearly stated and you make arrangements to pay.

Is 2024 the year to solve your tax issue? WATAX is ready to assist you now. Please call us at 1-888-282-4697 or email us a description of your tax issue and we'll contact you promptly.

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