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Merlo, Accountant
Category: Tax
Satisfied Customers: 9783
Experience:  25+ years tax consulting. Specializing in returns for US citizens living abroad
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i received a letter from the irs for underreporting income

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i received a letter from the irs for underreporting income i responded and i sent in the money and info regarding the transactions.they replied by stating that they needed an additional 60 days to let me know what action they are taking. in addition,they have frozen my unemployment. the amount involved was $744 that i owed. they initially wanted $2900. i reviewed and documented that i owed only $744 which i sent with documentation. what is going on ? why do they need an additional 60 days and why did they freeze my unemployment / WHAT SHOULD I DO
Submitted: 8 years ago.
Category: Tax
Expert:  Merlo replied 8 years ago.

If the IRS originally sent you a notice saying that you owe $2,900, and you ended up only paying $744, then they need time to review the documentation that you sent in to see if they agree with your calculations. It is likely that the $2,900 they first billed you for included some penalties and interest, and that will all now have to be recalculated. It may not take the entire 60 days to process, but they can allow themselves that much time, as they have other tax issues to deal with from other taxpayers as well.

As far as your unemployment benefits, I think you need to check with your state and find out the exact reason your benefits have been stopped. The IRS excludes unemployment benefits from levy for tax reasons, so they would not have been the ones who placed this levy on your benefits.

Section 6334 of the Internal Revenue Code lists the types of emuneration which are exempt from levy. It includes:
Any amount payable to an individual with respect to his unemployment (including any portion thereof payable with respect to dependents) under an unemployment compensation law of the United States, of any State, or of the District of Columbia or of the Commonwealth of Puerto Rico.

So if your unemployment benefits have been stopped, it is likely for another reason not related to your IRS tax issue.

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Thank youCustomer and let me know if you have more questions. I am happy to help you with whatever I can here.

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