Notices: Tips From the IRS Automated Underreporter Program |
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NOTE: This headliner is current through the publication date. Since changes may have occurred, no guarantees are made concerning the technical accuracy after the publication date.
Headliner Volume 239
July 21, 2008
Nobody likes to get an IRS notice, but understanding the reason for the notice and how to respond can make the process a lot less unpleasant. Automated Underreporter cases are created when amounts reported on individual tax returns and amounts reported by third parties don’t match.
With few exceptions, every case selected to be worked in the AUR program is manually screened by a tax examiner in an attempt to reconcile the discrepancy. If the discrepancy cannot be resolved, a contact letter is generated – usually a CP 2000.
When preparing tax returns, the following tips can help your client avoid receiving an AUR notice:
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Don’t group income amounts
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Explain incorrect payer data or reported amounts that differ from the payer information
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Avoid netting
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Report income on the correct line of the tax return
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Identify reporting from joint accounts
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Include copies of relevant forms or schedules
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Maintain detailed records
If your client receives an AUR notice:
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Review the tax return and compare it to the issues raised on the notice.
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If you have any questions, call the toll-free number provided to speak with an AUR representative
Then, follow these final tips to conclude resolution:
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Agree with notice: check option 1 on the response page, sign (both spouses’ signatures are needed on married filing joint accounts) and return to the address listed on the notice with a check or money order made payable to the United States Treasury.
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Disagree or partially disagree with notice: check option 2 or 3 on the response page, respond in writing by the notice due date and do not sign the notice. Provide a signed statement explaining the disagreement. Also provide any supporting documents such as Form 1099, Form W-2c, or correspondence from payers explaining changes or corrections. This should include any unusual tax situations such as reporting income in a certain manner or reporting no income at all.
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Amended returns: AUR does not recommend filing a Form 1040X, amended return, when responding to a notice. In certain circumstances this might be the only way to fully explain a case discrepancy. If this is the case, please write “CP 2000” across the top of the original Form 1040X and attach it behind the CP 2000 Response Page.
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Respond using the provided envelope and address: doing so will ensure your response gets to the right place quickly.
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Need more time: call the toll-free number shown at the top of the notice. Generally a 30-day extension is granted beyond the 30-day timeframe originally granted to respond to a notice. In unusual circumstances additional time may be provided. Interest and penalties continue to accrue during the period of the extension if the tax increase is correct.
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Notice response not timely: the IRS assumes the proposed changes are correct and will continue processing the proposal.
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Assistance: Beginning July 21, 2008 calls made to Practitioner Priority Service will be the quickest method for obtaining assistance. Until then, calling the AUR unit referenced on the notice is the most direct method for resolving your case. Electronic Accounts Services are not available for CP-2000 issues.
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Page Last Reviewed or Updated: July 22, 2008