Ghosts and goblins and things that go bump in the night. Unseen critters scampering in piles of leaves on moonlit evenings. In-laws calling to say they’re coming to Thanksgiving dinner. There’s no denying that fall can be a pretty scary time. For taxpayers receiving IRS notices, this time of year can be even scarier than usual.
The IRS says it mails out millions of notices to taxpayers each year. While there are many reasons the IRS might need to send a notice to a taxpayer (and this is a good time to remind our readers that the IRS does not call; they always make the initial contact through the mail), in our experience two types of notices are most common.
The first common notice is a Letter 0012C. This goes to taxpayers who were enrolled in Marketplace Insurance but who did not include a correct Form 8962 with their return. This form is used to figure the taxpayer’s correct Premium Tax Credit (PTC) and to reconcile this figure with any Advance PTC received during the year. In order to complete this form, the taxpayer will need Form 1095-A, which should have been sent from the Marketplace at the end of January. If you receive a 12C letter, don’t panic; some taxpayers actually get an additional refund once Form 8962 is filed. Carefully read the IRS notice and follow all instructions. It is usually not necessary to amend the original return; faxing the signed notice along with a correctly prepared Form 8962 is all that is required. Of course, we will be happy to assist with this.
The second common notice is a CP2000. This notice is sent when the income reported on the taxpayer’s return does not match income that has been reported to the IRS by employers, banks, stock brokers, etc. The notice will detail the discrepancy and the steps the taxpayer should take to fix the situation. Again, it is important not to panic if you receive a CP2000. After reading the notice, if you agree with the IRS’s analysis, you can sign and return the form and include a check for any balance due. However, we have found that many taxpayers do not owe the full amount stated on the notice. Often the IRS does not have sufficient information to determine the taxpayer’s basis in investments that are sold, or it does not know which deductions or credits the taxpayer can claim to help offset additional wages. Obviously, we would be happy to analyze the taxpayer’s situation to determine the best response to the notice.
It's fun to get a little spooked when indulging in fall activities, but don’t let an IRS notice scare you. Carefully read the notice and follow the steps outlined, respond in a timely manner, and don’t forget that we are here to help!
