IRS cp2000 fun

Hi all, time for another of my posts laying out my screwups in front of the masses of FW. I trust and appreciate youse guys' advice and input even when it's simply 'pay your bills, deadbeat!'

Well, in the year of our Tax Overlords 2007, I screwed up on my taxes. My wife (the original JaeMarie whom I hijacked this account from) switched jobs mid year and when I was preparing our taxes - likely with a free copy of TurboTax courtesy Fatwallet - I neglected to include the second W2.

Fast forward to a few months ago when an official looking IRS packet came in the mail, a "CP2000 notice". It said that our taxes from 2007 were going to be increased because of the missing W2, and because of a large amount of $$ in interest income from my wife's bank account that was also unreported. This is BS because not only does my wife never keep much $$ in her account, it is a VERY low interest yielding account from a credit union. If there was ANY interest income (unlikely), it was less than a dollar, her rate is 0.something and that is contingent on a minimum balance. It said that due to the changes, we owed an additional *$4300*! If we paid it before 30 days, we would be treated to the super special low rate of $3997.

Having less than $1000 between us, I called the IRS and pleaded our case. They said that I could file a form 656-L, Offer in Compromise. This is basically a "settlement" offer - I give you this amount of $$ to go away. I sent the 656-L in with an offer of $1910 (half of $3997 minus the bogus bank account interest) along with a letter and CC'd in the IRS office that sent the Cp-2000 (different addresses)

Well, about a month later I get a response saying that because there are no IRS judgements against us, they cannot accept the offer.

I waited until I got an official "notice of deficiency" from the IRS (in the amount of $4284 now, 'early' 3997 bonus gone) to resend the documents to both IRS addresses. I redid some of the letter to make it more personal and detail our (lack of) finances and this time I upped the offer to $2150, MORE than half of what they're asking not even taking into the account the bogus bank account interest.

Today, I get ANOTHER letter that says (and I quote) "We cannot process and/or further investigate your offer for the following reasons: ...the potential liability you cited involves an ongoing or recent examination of your return and information you believe that may impact your examination should be provided to the examining officer. Please follow the instructions on your CP2000 notice."

Can anyone help direct me as to the best course of action here? I fully realize and submit that we owe some money, even a LOT of money for fudging our taxes, even if it was unintentional (We STILL don't have the second W2, we never received it. I tore the house apart looking for it) But there is no way we can just put 4 grand in an envelope and send it off because WE DO NOT HAVE IT. I have extended myself in every way I can think of, I've called and written and offered more than half of the insane amount of $$ I can't fathom ever having at one time, let alone sending off to the Department of the Treasury. Even if they accepted the offer, we'd be able to borrow the $$ from a relative at a 0% interest rate. While I hate to do that, it is a better solution than working for the rest of my life for the IRS, sending off (or having garnished) every single extra penny I make for the rest of my life to the IRS.

No offense, but you're being awfully melodramatic about ~$2000.

All you need to do is file an amended return with the additional W-2 added and it will clear this problem up.

This is really a situation where a professional CPA should have been engaged as soon as the first letter from the IRS is received. It is probably not too late for you to retain one to evaluate your case.

I received a CP2000 letter from the IRS earlier this year where they claimed that they had reviewed my 2007 return and determined that I owed a large 5 figure sum. I knew right away that their claim was in error, but I spent about $300 to engage a CPA immediately to be sure that my response letter to the IRS would be complete and accurate. The CPA was able to assist with a response strategy and language for the response letter to help ensure that the IRS would not come back with additional requests or claims. The IRS kept me hanging for their ruling on my case for nearly 4 months after my initial response. But at the end of the day, instead of me owing the IRS 5 figures, the Dept of Treasury ended up owing me about $1200, including interest.

You might want to start some kind of safety fund, I mean 2 adults with 2 kids and not $1,000 combined is VERY SCARY

Hunt down the missing W2 by calling the employer.
Look at the last paystub from that job (you will at least get approximate numbers).
The IRS should have received a copy of the W2; get it from them.

You certainly have missed reporting some bank interest. Figure out exactly what that is. Chances are you missed something big (e.g., CD maturing, Savings bond encashed etc.), just like you missed the W2.

Once you have that, figure out what your additional tax liability is for that year. See how that compares with the IRS figure.

The IRS offers payment plans. You can look into paying your taxes over time. I dont see why the IRS would simply accept 50% payment when it is YOU who are in default; actual amount might be in dispute but you need to calculate exactly what that is instead of pulling a figure out of thin air.

Finally, as has been said above, if you have two kids and have less than one grand between the two parents, you have bigger problems than the IRS.

What im curious about, why is the IRS claiming you owe so much? Since it was a w2 job, more than likely tax was withheld from it. Based on the income bracket you are in, I would think the w2 tax withheld would cover it.

Can you get a copy of the missing w2 form?

JaeMarie said: uutxs said:
You certainly have missed reporting some bank interest. Figure out exactly what that is. Chances are you missed something big (e.g., CD maturing, Savings bond encashed etc.), just like you missed the W2.

That's the thing - the interest figure comes directly from the bank to the IRS, and this is a federal credit union so you'd hope they have their stuff together.
That tells me that there IS something that we're missing. She's had student loans in her parent's name but no CD's, money market, etc accounts that I know of. Just the savings with $1 in it and the checking account she uses which never has any amount of $$ in it so there's no way it could accumulate nearly $200 of interest.
Did you file MFJ that year? If so, the interest could be from either of your accounts (or a joint account).

JaeMarie said: It said that our taxes from 2007 were going to be increased because of the missing W2, and because of a large amount of $$ in interest income from my wife's bank account that was also unreported. This is BS because not only does my wife never keep much $$ in her account, it is a VERY low interest yielding account from a credit union. If there was ANY interest income (unlikely), it was less than a dollar, her rate is 0.something and that is contingent on a minimum balance.
Is it possible DW is keeping a secret stash somewhere?

Well that's kind of the point - $23K in "forgotten" income and $200 in "forgotten" bank interest is damn near impossible. I know I owe SOMETHING. No kidding. It was no accident - I, as the tax preparer, KNEW that we were missing a W2. Did I think it would be a $4K mistake? Hah.

I never painted myself to be any type of financial planning genius. My father was kind enough to send me a simple budget balancing .XLS file and I couldn't make sense of it. I want to sit down with him again with all the bills and do it proper - should be a little easier now that the starting balance is nudging closer to $0.

And on top of not being able to financially take care of 2 kids, we just adopted a dog! <---MELODRAMATIC

JaeMarie said: Well that's kind of the point - $23K in "forgotten" income and $200 in "forgotten" bank interest is damn near impossible. I know I owe SOMETHING. No kidding. It was no accident - I, as the tax preparer, KNEW that we were missing a W2. Did I think it would be a $4K mistake? Hah.

I never painted myself to be any type of financial planning genius. My father was kind enough to send me a simple budget balancing .XLS file and I couldn't make sense of it. I want to sit down with him again with all the bills and do it proper - should be a little easier now that the starting balance is nudging closer to $0.

And on top of not being able to financially take care of 2 kids, we just adopted a dog! <---MELODRAMATIC

Well, melodramatic was towards your acting like $2000 is the end of the world and would bring your kids down. That's just acting silly.

This situation has NOTHING to do with your financial aptitude. It really has to do with your perjury. You knowingly filed a false tax return. As it says on the 1040 you undoubtedly signed:

Under penalties of perjury, I declare that I have examined this return and accompanying schedules and statements, and to the best of my knowledge and
belief, they are true, correct, and complete. Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge.

So, I'm curious, if you knew you were missing $23,000 in stated income, how did you sign to that statement?

JaeMarie said: Well that's kind of the point - $23K in "forgotten" income and $200 in "forgotten" bank interest is damn near impossible. I know I owe SOMETHING. No kidding. It was no accident - I, as the tax preparer, KNEW that we were missing a W2. Did I think it would be a $4K mistake? Hah.
You KNEW you are missing a W2. You KNEW you are missing some interest income.
The IRS claims the un/underreported amounts are 23k and 182. All you have to say is the amounts IRS claims are "damn near impossible" but have no proof of what exactly they are. You will have to do better than that.

BTW, did you look at the SS statement of your wife. You should have the income subject to SS reported there; must be pretty close to IRS taxable income since you dont seem to be anywhere close to SS limits.

uutxs said: You KNEW you are missing a W2.

yep

uutxs said: You KNEW you are missing some interest income.

nope

uutxs said:
BTW, did you look at the SS statement of your wife. You should have the income subject to SS reported there; must be pretty close to IRS taxable income since you dont seem to be anywhere close to SS limits.

It hasn't come yet. Believe me, I'm eager to take a look at that. Won't it be skewed, though, for 2007, if there REALLY is 23K in unreported income? Where does Social Security pull its numbers from?

Pay your taxes, deadbeat.

JaeMarie said: largeeyes said:
Under penalties of perjury, I declare that I have examined this return and accompanying schedules and statements, and to the best of my knowledge and
belief, they are true, correct, and complete. Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge.

So, I'm curious, if you knew you were missing $23,000 in stated income, how did you sign to that statement?

Same way our Secretary of the Treasury (who I would send the $$ to) Tim Geithner, who failed to pay $34,000 in taxes. Not report $34K. PAY. So the way I look at it, I'm qualified to be Secretary of the Treasury eight and a half times over.

Of course JaeMarie, whatever you have to say to get up each morning... Yes, you are just like Tim Geithner and I'm sure your taxes are just as complex as his...

It's all fun and games until the IRS puts liens on all of your assets/garnish your wages and freeze your accounts for screwing around with them. Hire a CPA/tax attorney ASAP.

third child. I've been meaning to get snipped. Till then, it's free rubbers from Fatwallet. It's not like it's a huge risk with the frequency of procreation opportunities lately.
Unemployment and escalating bills does wonders for your sex life.

You need to wait 90 days after you get the statutory notice of deficiency to be able to submit an offer in compromise. The 90 days is the period of time you have to petition the tax court.

You are unlikely to get a Offer in Compromise accepted because you have discretionary income. Even if you don't have the money now, with a $30k salary the IRS can garnish over several years and get all their money. If you lose your jobs and have no assets, then an Offer is more likely to be accepted.

The best thing to do is to now is to establish an installment agreement using Form 9465 or online at irs.gov.

You're an idiot to think the IRS would even consider settling for pennies on the dollar on this fresh tax debt. You're 100% screwed and I suggest you fix this at the Appeals level after Chief Counsel files the answer in your Tax Court case. The most you can do insofar as "help" from the IRS goes is sign up for a payment plan. That's it. We're not going to negotiate with you in any other respect unless you are highly unlikely to earn money we can take down the road or you don't have any assets at the moment.

Reading the OP responses, I hope the IRS punishes you to the fullest.

Heck 4k taxes on 23k income isn't that bad.

I mean you have 1k in your family name and you adopting a dog? How the heck does that happen?

Green for giving us update

Now the question - where $182 interest came from? mind to share?

Asking only because you claimed that you did not have any money and those little that you had have been earning % close to nothing.
$182 actually is about 5% on $3.5k