After you file your tax return the Internal Revenue Service (IRS) will match your return information with third parties who issued you W-2’s or 1099’s. If a discrepancy occurs the IRS will issue you a CP2000 notice assessing you additional tax on any unreported income. I always tell my tax clients to email or fax me any IRS correspondence they receive immediately, because the IRS typically gives you 30 days to respond.
However, if you ignore the notice, you receive a 90 day letter to petition the tax court. I always recommend petitioning that tax court to preserve your appeal rights. However in the event you fail to petition the tax court within the 90 days, you can still apply for audit reconsideration.
The first thing I do when a client calls me is to review the CP2000 notice and make sure it is accurate because the IRS sends lots of inaccurate notices to taxpayers. In addition I verify that is actually from the IRS and not from an identity thief. I typically will file an amended return if my client has additional expenses relating to the unreported income or has basis in securities sold that generated the CP2000 in the first place. If the IRS is disallowing a deduction I will send in the documentation to substantiate it. I always try to get the accuracy related penalty abated and am successful most of the time, especially if only one year is involved.
If you receive a notice from the IRS under-reporter unit do not panic. Just contact Gregory J. Spadea at 610-521-0604 from Spadea & Associates, LLC in Ridley Park.