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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 3755
Experience:  Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
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for lane only need help with my amendment filing and response

Customer Question

for lane only
need help with my amendment filing and response to letter cp2000
Submitted: 10 months ago.
Category: Tax
Expert:  Lane replied 10 months ago.

Lane :

HI there!

Lane :

Hi Miguel We're in chat here now...

Customer:

this is better

Lane :

Great

Customer:

ok lets talk first about the procedure...

Lane :

It is a little less... DISjointed

Lane :

k

Customer:

i will response to the letter i received marking that i do not agreed, i will send my letter explaining and the amendment to the return with the new 982

Lane :

yes, ALL in the same package

Customer:

ok that will be also the filing of the amendment to my 2011 income tax

Lane :

That's right ... if you use from 1040X that is the amended return form ... and you will need new 982 that matches up with that

Customer:

so answering and including the 1040x with the 982 will be the response to the notice and the filing of my amendment at same time....i dont need to send nothing else

Lane :

That's right, you will have not only answered but given them the reason why ... the BEST answer


Lane :

I would, again send the vcover lett with that, that explains that you dd not get the 1099 originally

Customer:

and i will send all using fedex/ups to be cover...

Customer:

ok now creating the 1040x

Lane :

Was the street address on the CP2000 a P.O Box or did they give you an actual stree address?

Customer:

address is: AUR CORR 5-E08-113

Customer:

PHILADELPHIA PANNN-NN-NNNN/p>

Customer:

I Can use USPS Priority mail to avoid the po box problem right? certified and with return receipt

Lane :

OK.. Let me call FedEx and see if they can send to that ... it sounds like a mail drop ... just a sec

Lane :

there ya go

Lane :

Yes

Customer:

ok i will use usps is with all options and done...

Lane :

Sounds like you're there

Lane :

on that

Customer:

ok let do now the 1040x form part

Lane :

SUre

Customer:

i used same software i used to created the original income tax return 2011

Customer:

taxact 2011

Customer:

is that ok, right?

Lane :

That should make it easy .. Idn't know tax act that bwell but if it's like turbotax or the prof pkg I use with clients, the first thin will be sich form to use and that should giver you your existing datd so you can just change the needed lines/inputs

Lane :

yes

Lane :

sorry, it should give you the option to choose 1040X

Lane :

and already have your information there

Customer:

yes it has

Lane :

yes, great

Customer:

there 1040x has numbers from 1 to 21

Customer:

evrething from 1 to 14 stay the same

Lane :

Yes ... note the descriptions .. I think line 1 is Adjusted gross income?

Customer:

ok but i did not change 1

Lane :

good

Customer:

it stay the same

Lane :

It's be in the tax liability area

Customer:

the problem is that as the 1099-c were not affecting the incomes and deductions

Customer:

i dont see any changes

Customer:

a. original amount=c.correct amount

Lane :

OK, Tax liability is the amount owed

Customer:

b. net change 0

Customer:

is that ok...?

Lane :

that's right

Lane :

DO you have your original return printed out and handy?

Customer:

yes

Customer:

columna A and Column C in the 1040x are the same value

Lane :

OK what you really should do is fill out the full 1040 again (with the corrected amounts) so you can match it up to the 1040 X

Customer:

but the problem is that 1040 will stay the same

Customer:

theres nothing to add or substract

Customer:

is just the 982

Customer:

that needs to be changed

Lane :

But wasn't there some 1099 income that you didn't report the first time?

Customer:

i reported the two, 1099 c the first time...., one i never received it...

Customer:

but that is not reported in the income if you report the 982

Lane :

RIght ... but THEY DID get their copy ... and this new return needs to match what they receieved... that's what's causing the probelem

Customer:

correct...

Customer:

you told me and confirmed that i dont need to add in the income the 1099-c if i will include the 982

Customer:

remember

Lane :

Let me look at the 982 for a minute ... are you saying that the 982 direts you NOT to report? or simply that the tax due is forgiven

Lane :

Let me look really quickly

Customer:

when you add the form 982 to taxact

Lane :

So sorry, it does say EXCLUDED

Lane :

Now I understand the confustion

Customer:

it does not put the 1099-c

Customer:

when you add the form 982 to taxact

Customer:

it does not put the 1099-c

Lane :

again, my apologies.... when income is EXCLUDED, you don't actually report it and waive it... they're saying that you don't NMEED t report it

Lane :

Now I understnad your queston

Customer:

then first time i report two, 1099-c

Lane :

Aga, sorry, I understand the law around this but have not had to actually do a tax prep on one

Lane :

AHH

Lane :

SO yes

Customer:

but i never received the 3er

Customer:

i dont know why at least they dont waive 2 of the 1099-c in the original declaration

Lane :

Because again, that [art I can tell you from experience ... if everything doesn't match up the system goes back to a number that refects as if you didn't do the 982 at all

Customer:

ok back to 1040x

Lane :

you can get the amounts correct on the new 982 right?

Customer:

everything in that form shows no changes....

Customer:

correct

Lane :

no

Lane :

again sorry

Customer:

yes i corrected the 982

Lane :

If you send in (1) the 982, (2) copy of CP2000n with (3) amounts matching the total amount they received in their 1099 copies THAT gets you there

Customer:

with the value of the 3, 1099-c

Lane :

with the total value of all 1099s received in that yax year

Lane :

yes the three

Customer:

correct

Lane :

one things

Customer:

but i need to fill the 1040x

Lane :

on your 2011 return you DID show the income from the 2 1099s?

Lane :

yep... just got there myself

Customer:

nop

Lane :

ahhhh

Lane :

then the 982 will do it

Lane :

as you said ... the 1040 actually will not change

Lane :

NOW i get it

Customer:

i did not show income for the 2, 1099-c i had , but i included the 982

Lane :

again my apologies

Lane :

was thinking you had reported ... but you didn't because of the 982

Lane :

yep

Lane :

we're on the same page now

Customer:

everything appeared to be ok...

Lane :

in this case there no need to do an amended, the 982 will now show what their system is looking for

Customer:

i did not put the two 1099-c because i included the 982 waiving that amount

Lane :

a total income being waived that equals the 1099s THEY received

Lane :

yes

Lane :

so sorry ..

Lane :

somewhere along the way I was thinking you HAD actually reported something

Customer:

i found that was a dollar diference

Lane :

? really

Customer:

i reported $9382

Lane :

was that rounding or comething?

Lane :

oic

Customer:

and they 9381

Lane :

ok, but yes, as lon as that 9382 was there and that doesn't change...

Lane :

:)

Lane :

they never have a problem when it goes that way

Customer:

the problem is that one 1099-c was 4081.06

Customer:

and the other 5300.87

Customer:

i rounded the 5300.87 to 5301

Customer:

dont ask me why ?

Lane :

.... the tax act does that Listen there's no reason to rate again... you shouldn't have to pay for use getting on the same page here

Lane :

I know that turbotax and my intuit pro does that 500.51 becomes 501

Customer:

i dont worry about that i just want to be 100% clear and finish this today

Lane :

understand

Customer:

getting back the 1040x

Customer:

now i changed the 982 to the complete value of the the 3 1099-c

Lane :

If nothing changes ... on any line of the 1040 form... there's no 1040X

Customer:

so that part is super clear?

Customer:

but what i need to do with 1040x

Customer:

?

Lane :

Yep ... only line 2 of the 982 changes

Customer:

theres no changes in column B

Lane :

NOTHING

Lane :

again, so sorry

Customer:

everything stayed the same...

Lane :

if not one single line of your original tax form changes...

Lane :

right

Customer:

because i did not add income or deductions.

Lane :

I was thinking all along that you had done a return with some of that income on there

Lane :

right

Customer:

not i waive the first 2 1099-c with the 982

Customer:

so i dont need to include that in the income

Lane :

yes, and you got the notice, because the computer saw you waiving that amount and they showed a different total amount

Lane :

that's right

Customer:

they just send me the letter telling me that i did not report the income from the 3 1099-c

Customer:

is like they ignored the 982 i sent (for 2 , 1099-c)

Lane :

again, i really believe that this was system (computer thing) where it reverts to the total amount of income that ws reported to them if somethng does not match up (even if it was only the last 1099)

Lane :

that's right... I doubt if a human set of eyes even saw this

Customer:

ok not the solution

Customer:

ok now the solution

Customer:

i changed the 982 with the 3 1099-c

Customer:

but i think i need to send the 1040x even if the values are the same

Lane :

when the 982 amount PLUS the income already reported totals to the same total they have ....

Customer:

because is the amendment form

Lane :

more cannot hurt... NOT a terrible thought

Customer:

correct

Customer:

thats the diference

Lane :

that's a way of telling that you DO disagree ... that all of the income should have been excluded

Customer:

the 3 1099-c

Lane :

right

Lane :

then again, I would be sure to explain that in the letter if you do it that way

Customer:

ok in my first form i dont have one the 1099-c

Lane :

first 982 right?

Customer:

first 982 has 2 1099-c and was ignored

Customer:

i will tell that

Customer:

and i did not received the 3er one...that now im including in the new 982

Customer:

i will explain that in the letter

Lane :

perfect

Lane :

and you're sure of the amount?

Customer:

yes the sum of the 3 1099-c

Lane :

ok

Customer:

they ignore everything the first time

Customer:

so ...

Customer:

i will explain in the letter

Customer:

then i need to send the new 982 and the 1040x

Lane :

I'm still not so sure about the 1040x

Customer:

i need to amend the return

Customer:

or just send the new 982

Lane :

yes, that can be your reasoning for sending in the 1040x

Lane :

I think just the 982

Customer:

could you find out that for me?

Customer:

or theres no way

Lane :

really, if NOT ONE line item changes,it might confuse the issue

Customer:

to know

Customer:

you are righ

Customer:

right

Lane :

It all comes down to .....

Customer:

the 1040x is nothign

Customer:

everything the same

Customer:

i will include just the new 982 in the form with the explanation letter

Customer:

what do you think?

Lane :

yes, you are not amending... it all comes down to the fact that the 982 EXCLUDES the income ... meaning .. no need to report at all

Lane :

yes, you are not amending... it all comes down to the fact that the 982 EXCLUDES the income ... meaning .. no need to report at all ... so no you are not really amending THAT form

Lane :

amedning meaning changing

Lane :

her... there's no change

Lane :

Sorry for confusing the issue ... I was thinking that you HAD reported some of the income

Customer:

so i will include the 982 in the letter and done...correct?

Customer:

just the 982

Lane :

yep

Lane :

just make sure the numbers ad up

Customer:

i will

Lane :

yes, copy of cp2000, letter explaining, and 982

Customer:

do i need to explain in the letter that first time they ignore the waiving of the first 2 1099-c

Lane :

I would definitely touch on that... this will address the issue and not just leave it unspoken

Lane :

I wouldn't questions it, so much say something like ....

Lane :

I am assuming that you are asking for the total amount because the numers did not match up...

Customer:

i got it...

Customer:

I am assuming that you are asking for the total amount because the numers did not match up in the first 982

Customer:

because of the missing 1099-c

Lane :

very nice, yes

Customer:

ok after i send everything what i need to confirm in the future..?

Customer:

how will i know they eliminate the debt with interest they had on me...

Lane :

Now, this is art more than science (no way to really now, because you will be in the mode where you are waiting for them (as you WILL have replied to the notice)... ball's in their court, so to speak ... but once you have your reciept... you might want to call the number on YOUR copy of the cp2000 and confirm that they got it (citing your deliver preef) ... and ask if there's anything else they need from you

Lane :

delivery proof

Lane :

One thought?

Lane :

If you just hear NOTHING ... and can't get through to them ... there is a way to go online and ask for a transcript of your tax account

Customer:

oh there i will see the balance

Customer:

if still exist

Lane :

yep .. see from here: http://www.irs.gov/uac/Tax-Return-Transcripts We can also provide a tax account transcript. The tax account transcript, which is also free, shows basic data from your return, including marital status, type of return filed, adjusted gross income and taxable income. It also includes any adjustments you or we made after you filed your return. Like the tax return transcript, the tax account transcript is generally available for the current and past three years.

Lane :

To do this online you go here: http://www.irs.gov/Individuals/Order-a-Transcript

Customer:

ok i will do all you recommend me..

Customer:

and finger cross

Lane :

You will be fine .. you have thought this through well

Lane :

Do be sure to let me know

Lane :

not as a separate questions (so you won't be charged... just come back to THIS thread)

Customer:

excellent

Customer:

i think now im completly clear..

Lane :

... glad I could at least help you "flush it out" ... work through it

Lane :

Thanks much my friend

Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 3755
Experience: Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
Lane and other Tax Specialists are ready to help you
Customer: replied 10 months ago.

for lane only,

hi there,

i don't have to explain or send documents to prove the insolvency

right? just the plain 982

thanks

Expert:  Lane replied 10 months ago.

You don't have to.

You certainly do not have to send in documentation like credit card statements, etc.

But since you are sending this in AFTER the CP200, (as a response), it IS considered a best practice to send in a simple listing of assets and liabilities (which can be done by using the the insolvency worksheet foound about halfway down the website page here: http://www.irs.gov/publications/p4681/index.html.

(a more usable, printable form can be found on page 8 of this document): Publication 4681

You can do this as an attachment to (page 2 of) of your explanation letter..

Say something to the effect of .. "The following was the value of my assets and liabilities at the time the debt was forgiven."




And certainly KEEP the copies of any and all documentation you can in the event of any audit.

You'll note that the form says "keep for your records," but I have seen this pre-empt a request for further documentation.

It cannot hurt.




Fianlly, if you simply send in the form with the notice and a letter of explanation you WILL be considered TAX COMPLIANT, by responding to their request for an answer in a timely fashion.

But again, Ihave seen other tax prose advise the client t send in the worksheet simply to provide a more thorough answer.

This one is really your call.

If it were me, I would send in the worksheet, in an effort to provide a more thorough response.




Lane

Customer: replied 10 months ago.

I will include a worksheet

but some values will be approximated

i cannot know exactly you know what i mean?

 

Do i need to put

 

values like 10,321.22 or just 10,000

exact is impossible

your thoughts?

Expert:  Lane replied 10 months ago.

Yes, the main thing is that you be what would be considered reasonable.

Be as accurate as you can, and use Fair Market Value.

For autos, use KBB.COM

You already know what the credit card debt is.

For other personal assets use what you really think they could be sold for ... maybe even survey some web sites, ebay, etc for what similar items are selling for.

Again, if you feel VERY uncertain about values, then sending in the response (and stating that you were insolvent on the date the debt was forgiven, as part of that response) along with the 982 form that matches what they have WILL BE tax compliant.

Customer: replied 10 months ago.

i will put values above what i think it is (generous values in assets) ...

and in liabilities i will put lower than i think was...

still i will be insolvent because of my mortgage loan that is around 200,000 and the market value were like 80,000

 

what do you think?

 

the dificult is to know exactly at 2/4/5 of 2011 the values exactly? you understand, but i think is better to put something, what do you think?

 

or i can just say that i was insolvent because my mortgage loan debts are more than 200,000.00 and the market value at that time was 70,000, and i dont have any valuable assets, considerable amount of cash or equity in our cars, so i was insolvent for more than 100,000

 

what do you think?

Expert:  Lane replied 10 months ago.

I think you have it, exactly.

Be conservative (erring on the high side for assets, low side for liabilities).

Showing a more thorough response by attempting to explain with as much detail as you can.

If there were an audit, you can't lose here.

It's what I would do.

Customer: replied 10 months ago.

finally according to your experience what are my percent chances of an audit, after this?


thanks lane

Expert:  Lane replied 10 months ago.


Chances of Audit?

Actually you've already been audited. The CP2000 is a form of what's called an information audit.

There's just not enough information here (inventories, business books vs tax books, gambling winnings, etc. etc.) to call for the "go over your books" kind of audit that people get so (irrationally) worked up about.

They're simply asking for some information because you reported something different from what they had.

I would say that there's a better than 50% chance this is the last you'll hear of it and, if they do ask form some sort of verification of the numbers, 100% chance that it'll be all over after that, if you're being truthful.

You're past the hardest part... (or almost there) ... simply complying with a request for more information.

It's only when people DON'T respond that things escalate.

You're doing the right thing.

And you WILL be fine.


Customer: replied 10 months ago.

Do we both me and my wife needs to sign the response document, or just me as head of the family is ok? im the one doing the taxes, she is not involved in the preparation.


let me know

Expert:  Lane replied 10 months ago.

If you file jointly, I would have her sign as well.

Might, again, keep it from coming back at you.

Lane



Expert:  Lane replied 10 months ago.

Miguel,

I was looking to see if there was any guidance on both, rather than one person signing.

I found this (not directly related to THAT question, but wanted you to see that you're not supposed to sign the notice itself.

From IRS: If you do not agree with any changes, or do not agree with some of the changes, in the notice, do not sign the notice. Instead, explain in a signed statement why you do not agree, attach the statement and supporting documentation for consideration to the response form, and submit the response form and attachment to the IRS. Include your phone number with area code and the best time of day to call.



Lane

P { margin-bottom: 0.08in; }A:link { }

...appreciate a feedback rating of 3 (OK) or better … That's the only way they will pay us here.

Customer: replied 10 months ago.

then we both sign just the letter we did explaining, right?

Expert:  Lane replied 10 months ago.

RIght

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