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Determine The Correct Balance Due

By January 31, 2022No Comments

You might be shocked to learn that the IRS sometimes makes mistakes and the amount they are attempting to collect is incorrect.  That’s right you read it here.  The IRS sometimes makes mistakes.  Notices go out to taxpayers every day that are incorrect.

One of the more common notices that are incorrect in many cases is a Notice CP-2000.  This is a notice sent when they match the income reported on your tax return with income reported by third party payers and send a balance due notice.  These notices could be wrong because the third party submitted incorrect information to the IRS or it could be wrong because you didn’t properly complete your tax return.  Investment brokers are required to report the sales of securities to the IRS.  If you don’t report these sales you will get a bill requesting that you pay tax on the whole sale amount as if it was all profit.  We find that many people that come to us with a notice like this have a loss on the sale of these securities and are actually entitled to a refund.  They think that if they lost money it’s no big deal and don’t report the sales.

With any notice for a balance due there is almost always an amount added for penalty and interest.  You need to determine if the dates they have as the return being filed are correct so that you aren’t being overbilled for the penalty.  Check to see if the payments posted match what you paid.  Occasionally a payment gets misapplied.  When that happens, you need to send a copy of the front and back of the cancelled check to them.  They need both sides because there are codes on the back which helps them track down where the payment was posted.  If a check is sent in without a payment voucher and no Social Security number on it, they have no way of knowing where to post the payment.  It gets posted to a suspense account waiting to be found.  

There is computer software available to recalculate the penalties to determine if they are correct.

Don’t just accept every notice as correct.  If it says you have unreported income check your records to see if you omitted something.  If it says a return was filed late, check when you filed the return.  If it says you paid your taxes late go to your checkbook to see when you paid the tax.  See when the check cleared your account.  If you get an unusually high electric bill you question it.  An IRS notice is no different.