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Ok. My question is what documentation and forms exactly do I need to send back the the IRS? I received a second notice CP2000 for tax year 2015. They are stating I underpaid my taxes by $8918. The reason is I converted a traditional IRA to a Roth IRA at the end of 2015 but then I recharacterized ALL of back to my original traditional IRA in 2/2016. I did not report this recharacterization on my 2015 1040 tax return because instructions for Form 8606 clearly stated not to include this form if you recharacterize all. However....what should I now send them? a 2015 8606 AND a 2016 8606? I have a 2015 1099-R for $27,915.20 distribution code 2 and a 2016 1099 - R for $4,860.23 distribution code R. I replied to the CP2000 letter by sending the IRS a copy of both the 2015 and 2016 1099 R explaining that the difference in $$ amount was because of lost in value between in those few months before I recharacterized it all back..

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Yes this is the second notification I received stating I still owe it. Do they simply need a 1040X for 2015 and/or 2015 8606 and/or 2016 8606?

Submitted: 8 months ago.Category: Tax
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Answered in 19 minutes by:
9/14/2017
Tax Professional: Chad Schoch,
 replied 8 months ago
Chad Schoch
Category: Tax
Satisfied Customers: 20
Experience: CPA at Sheridan Healthcare
Verified

Good Afternoon - I have quite a bit experience dealing with the IRS when it comes to tax matters. I am reading your question again to make sure that I give you the appropriate response. I really appreciate you coming to JustAnswers and I look forward to developing a relationship.

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Customer reply replied 8 months ago
Hello Chad,
If you need clarification I'll be on line for a while.
Tax Professional: Chad Schoch,
 replied 8 months ago

Perfect - I wanted to ask a quick question to get started. And before I do, I must say, the IRS can be a bit of a pain....so hang tight

When they responded, did they mentioned that the information you provided did not support your claim that you don't owe taxes? Or did they simply send you another notice?

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Tax Professional: Chad Schoch,
 replied 8 months ago

Also, when you recharacterized in 2/2016, was that for the 2015 or 2016 tax year?

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Tax Professional: Chad Schoch,
 replied 8 months ago

Also, did you file a 1040X for 2015?

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Customer reply replied 8 months ago
When they responded, did they mentioned that the information you provided did not support your claim that you don't owe taxes? Or did they simply send you another notice? They stated: Thank you for your response to the previous notice we send you about your 2015 Form 1040. Based on your response, we've determined you owe $8918.Also, when you recharacterized in 2/2016, was that for the 2015 or 2016 tax year? the characterization was for the original amount I converted in 2015 but since I did the actual recharacterization in 2/216 I received the 2016 1099 R for 2016 later in 2016.
Customer reply replied 8 months ago
No I did not include a 1040 X or anything except a copy of the both 1099 -R's (2015 and 2016) plus a letter from Fidelity stating ALL the original amount was recharacterized
Tax Professional: Chad Schoch,
 replied 8 months ago

I must say, the information you provided was more than complete. I would have also provided the full 2015 and full 2016 tax return in what you included with the first submission. I would also include a very in-depth write-up stating the reason for the original trad-roth conversion and the timing of the re-characterization. A package of the full tax returns, the letter from fidelity and your write up should be sufficient.

My best guess is that you need to call the IRS directly to discuss this with them. A lot of times there are hour wait time to get through to them. If you do go the route of calling - when it asks if you would like to speak to a Spanish speaking agent, say YES. All Spanish speaking agents are bi-lingual and you will get through almost immediately.

Quick question on their most recent letter - did this include a calculation for the 8919?

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Customer reply replied 8 months ago
the CP2000 included the calculation for $8919 tax owed including payments adjustments and interest.I did include a full explanation cover letter with my original response to the IRS for the first CP2000 notification but I did not include a full copy of both my 2015 and 2016 1040 tax returns. They have that info....but I didn't include anything on either of those two tax returns about the 2015 conversion nor the 2016 recharacterization. So am I supposed to do a 1040x for both years?
Customer reply replied 8 months ago
FYI I filed electronically both years with TurboTax. I've been using turbo tax for 10 years now.
Customer reply replied 8 months ago
I already called the IRS and was literally disconnected twice before they answered this is why I am turning to a tax advisor for help (you) :)
Tax Professional: Chad Schoch,
 replied 8 months ago
I would not do a 1040x for either year. Did you do the recharacterization on the 2016 tax return? If you did, then yes, just send in both tax returns showing initial conversion in 2015 and the recharacterization. I believe the full tax returns along with the 8606s will be everything you need (I would still include everything you originally included). If you didn't do the recharacterization in 2016, then yes, you will need to do a 1040x for 2016, and, once accepted, submit that with the notice.
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Customer reply replied 8 months ago
Ok...so you are recommending I only do the 1040 x for 2016? not both years? I did not include any 1099 R info on either tax year simply because it was 100 % re characterized.
To be clear The CP 2000 is for 2015 tax year. But your saying if I clear it up on my 2016 1040 X and send documentation as I did before than I should be good to go? but your also saying I cant send that in until the 1040 X is "accepted?" what does accepted mean?
Customer reply replied 8 months ago
should i do that all through turbo tax or print it out and send it in paper form?
Tax Professional: Chad Schoch,
 replied 8 months ago

I apologize - I didn't realize you that you hadn't included that on either tax return. When you said you didn't file your recharacterization (Roth IRA To Trad IRA) on your 2015 return, I had assumed that you still reported your conversion (Trad IRA to Roth IRA) on your 2015 return. Knowing this, a 1040X (amended tax return) will need filed for both years. A paper copy will need filled out and sent like your normal tax return. See this link for very good information related to filing an amended return. https://www.efile.com/tax-amendment/tax-amendment/ Three steps - I would start by filling the 2015X and 2016X returns. Then, I would send the IRS auditors all of the original information, the 2015 and 2016 tax returns and then 2015X and 2016X returns. I would notify them that you have submitted amended returns and that they should reference those returns for the required information. Then I would call the IRS and explain the amended returns. Does this help?

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Customer reply replied 8 months ago
Ok. ...Since I used Turbotax for both 2015 and 2016 and originally submitted both electronically ....do you recommend I use Turbotax to do the 1040 x for both year?..... i.e. submit the 1040 X Turbo tax for both years electronically but also print them out (orginal plus amended) and mail all 4 of those documents with back up 1099 R forms plus a cover letter explaining what I did ...do I have this correct?
Also If I have questions as I am filling these out can I email you by opening this original email?
Tax Professional: Chad Schoch,
 replied 8 months ago

If turbotax has 1040X ability, then yes, I would file my return through them. They may also have the ability to file electronically which would save you some time. Yes, you have my recommendation correct. I think that would cover all the bases and get the IRS exactly what they needed.

The 1040X on turbo tax should be pretty easy to do as you are only changing one item. But yes, you can always open up a question you have asked in the past and ask a follow up question. Normally, I would say that filling out a tax return would be a new question since your first question was what you should send to the IRS, but, I love this stuff. I've always had a passion for taxes so I don't mind helping you out as you need help along the way.

I have enjoyed talking with you the past few hours. I really appreciate your business and I hope that I have earned your 5 star rating!

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Tax Professional: Chad Schoch,
 replied 8 months ago

Hold up - 1 second - only a 2015 1040X needs filed.

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Tax Professional: Chad Schoch,
 replied 8 months ago

Your next question was going to be for help on the filling of your amended tax return. Technically, only a 2015 1040X will be needed. You will reduce the taxable income on this return. An amended 2016 return will not be needed. I can help you when you get to this point though!

Again, I look forward to continuing this relationship. Thank you again and I would appreciate your support and a high rating!

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Customer reply replied 8 months ago
Ok so ONLY file a 2015 1040 X and send it electronically with Turbotax if it allows me to other wise print and mail it in.....but also to satisfy the CP2000 I should print it out and send it with a cover letter and the signed Response form that they sent me with my CP2000?
Tax Professional: Chad Schoch,
 replied 8 months ago

Yes - that is correct

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Customer reply replied 8 months ago
ok thanks Chad
Tax Professional: Chad Schoch,
 replied 8 months ago

Thank you for your business!

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Tax Professional: Chad Schoch,
 replied 8 months ago

Is there anything else that I can provide you to earn your review?

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Tax Professional: Chad Schoch,
 replied 8 months ago

Please let me know if you have any additional question. If you do not, please rate me as excellent if you have received a high quality answer. If not, please let me know what else I can do to earn your high rating.

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Tax Professional: Chad Schoch,
 replied 8 months ago

Please let me know what else I can do to earn your 5 star rating. Thank you!

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