One of my clients received an IRS CP2000 notice today alleging he did not include $1000 of ordinary dividend income. And the IRS was correct: She forgot to provide me the 1099-DIV. Yet the IRS, in the same notice, states that the client included $1000 in qualified dividends on the same stock.
This may sound familiar, and it should; back in March a client had a similar experience.
I will repeat what I said then: It’s impossible to have qualified dividends without having ordinary dividends. The IRS notice my client received today is wrong. Given I’ve seen two such notices it appears there is a systemic issue; I’ve reported it to the Taxpayer Advocate’s systemic issue hotline. If any other practitioners see similar incorrect notices, I urge you to do the same.
If you’re a taxpayer and receive an IRS notice, do not blindly assume it is correct. Show the notice to your tax professional. Your tax professional can look at your return and see if it is correct or not. IRS statistics show that two-thirds of IRS notices are wrong in whole or in part. The IRS has publicly stated that they know they send out incorrect notices, but it’s a profit center so they’ll keep sending them out.
As for my client, the IRS alleged my client owed a bit over $300. In truth, my client owes a touch over $100. A reply to the IRS notice has been sent and in about ten weeks we’ll hear back that we’re correct. My client has already paid what we believe the balance to be.
Tags: AUR