Surprise from the IRS re:CP2000

Posted by ms on June 1, 2009, 4:19 pm

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There are several questions below:
Our 2007 1040 return was submitted to the IRS without incident. Being
retired, our 1040 is pretty basic, using the standard deduction, etc.

In April of this year, we got a CP2000 regarding the 2007 return. It
involved our qualified dividends. I then called the IRS, was referred to
the Dividend/Capital Gain section. They stated that dividend entry in my
return was incorrect. The amount shown in line 9B, Qualified Dividends,
should *also* be entered in line 9A, Ordinary Dividends. They stated that
the IRS rule is *all dividends are ordinary dividends*.

That definition is not AFAIK covered in the 1040 handbook/instructions,
and is certainly not common knowledge. Therefore, the correct way to
prepare the Dividend Income is based on verbal direction from the IRS.
That should have been clear in the IRS 1040 publications.

The IRS representative said existing IRS input processing procedure was
in error in not detecting my mistake at the first processing stage of the
2007 1040. When data exists in line 9B and there is no entry in line 9A,
the IRS is supposed to call this an error. The presence of this mistake
is supposed to stop processing the return and a error letter is then sent
within a month of first submitting the return. That never happened in
this case..

The IRS representative said his office sees this exact same issue
repeatedly.

Comment on the above?

We accepted the requested additional tax payment, but I appealed the
interest charge and the penalty charge, stating the reasons above,
enclosed an explanation. I made a total payment to stop the interest
clock.

A month later, we got a IRS check for the entire payment, tax + interest
+ penalty, and interest for the month they held my payment.

This was a surprise, very unusual?

Comment on this?

We just got a letter from the IRS: "regarding my correspondence of 4/27
(the above payment and explanation). We will contact you again within 60
days to let you know what action we are taking".

What to expect?
Does the IRS ever make a payment, and then ask for it to be returned?

BTW, the letter includes a 800 number in Fresno, and a contact, but that
800 number is totally voice mail, no way to contact a human there.

ms

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Posted by Arthur Kamlet on June 1, 2009, 4:42 pm

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>There are several questions below:

>Our 2007 1040 return was submitted to the IRS without incident. Being

>retired, our 1040 is pretty basic, using the standard deduction, etc.

>In April of this year, we got a CP2000 regarding the 2007 return. It

>involved our qualified dividends. I then called the IRS, was referred to

>the Dividend/Capital Gain section. They stated that dividend entry in my

>return was incorrect. The amount shown in line 9B, Qualified Dividends,

>should *also* be entered in line 9A, Ordinary Dividends. They stated that

>the IRS rule is *all dividends are ordinary dividends*.

>That definition is not AFAIK covered in the 1040 handbook/instructions,

If you chose to fill out your tax return without reading the instructions
that's your decision, but why blame your lack of knowledge on the IRS?

I am now looking at the 2008 Form 1040 Instruction booklet, a massive
volume that costs us taxpayers quite a bit, so that taxpayers can
read and understand how to fill out their tax returns.

I am looking at both the 2007 and the 1008 Form 1040 instructions,
as the following quotes are the same for each year.

On page 21 of the 2008 (page 19 of the 2007) instructions, for Form 1040
line 9a (ordinary dividends) it says

"Each payer should send you a Form 1099-DIV. Enter your
total ordinary dividends on Line 9a. This amount should
be shown in box 1a ofForm(s) 1099-DIV>"

On that same page of the instructions, it covers Line 9b, Qualified
Dividends:

"Enter your total qualified dividends on Line 9b....
Generally, these dividends are shown on box 1b of
Form(s) 1099-DIV."

It then explains that in some cases you do not report the qualified
dividends.

>and is certainly not common knowledge. Therefore, the correct way to

Common knowldge? I have yet to find a tax preparer who does
not know this. And anyone who took the time to just read those
few sentences would now know how to report both ordinary dividends
and also qualified dividends.

>prepare the Dividend Income is based on verbal direction from the IRS.

>That should have been clear in the IRS 1040 publications.

OK, which sentence posted above, taken directly from the
IRS instructions, did you find not to be clear?

>The IRS representative said existing IRS input processing procedure was

>in error in not detecting my mistake at the first processing stage of the

>2007 1040. When data exists in line 9B and there is no entry in line 9A,

>the IRS is supposed to call this an error. The presence of this mistake

>is supposed to stop processing the return and a error letter is then sent

>within a month of first submitting the return. That never happened in

>this case..

>The IRS representative said his office sees this exact same issue

>repeatedly.

>Comment on the above?

Yes. The Congress, not the IRS, created the notion of a Qualified
Dividend as well as an Ordinary Dividend. The IRS created the forms
for payers to report these to you, and for you to report these to
the IRS.

In my own opinion, the instructions shown above are pretty well
understood, but if you cannot understand the instructions, I
recommend you seek professional tax preparation help.

>We accepted the requested additional tax payment, but I appealed the

>interest charge and the penalty charge, stating the reasons above,

>enclosed an explanation. I made a total payment to stop the interest

>clock.

>A month later, we got a IRS check for the entire payment, tax + interest

>+ penalty, and interest for the month they held my payment.

>This was a surprise, very unusual?

>Comment on this?

>We just got a letter from the IRS: "regarding my correspondence of 4/27

>(the above payment and explanation). We will contact you again within 60

>days to let you know what action we are taking".

>What to expect?

>Does the IRS ever make a payment, and then ask for it to be returned?

>BTW, the letter includes a 800 number in Fresno, and a contact, but that

>800 number is totally voice mail, no way to contact a human there.

You should not have had your tax refunded unless your taxable income
even with ordinary income was zero.

Wait and see.
--

ArtKamlet at a o l dot c o m Columbus OH K2PZH

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>

Posted by ms on June 1, 2009, 11:41 pm

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kamlet@panix.com (Arthur Kamlet) wrote in

> wrote:

>>There are several questions below:

>>Our 2007 1040 return was submitted to the IRS without incident. Being

>>retired, our 1040 is pretty basic, using the standard deduction, etc.

>>In April of this year, we got a CP2000 regarding the 2007 return. It

>>involved our qualified dividends. I then called the IRS, was referred

>>to the Dividend/Capital Gain section. They stated that dividend entry

>>in my return was incorrect. The amount shown in line 9B, Qualified

>>Dividends, should *also* be entered in line 9A, Ordinary Dividends.

>>They stated that the IRS rule is *all dividends are ordinary

>>dividends*.

>>That definition is not AFAIK covered in the 1040

>>handbook/instructions,

> If you chose to fill out your tax return without reading the

> instructions that's your decision, but why blame your lack of

> knowledge on the IRS?

> I am now looking at the 2008 Form 1040 Instruction booklet, a massive

> volume that costs us taxpayers quite a bit, so that taxpayers can

> read and understand how to fill out their tax returns.

> I am looking at both the 2007 and the 1008 Form 1040 instructions,

> as the following quotes are the same for each year.

> On page 21 of the 2008 (page 19 of the 2007) instructions, for Form

> 1040 line 9a (ordinary dividends) it says

> "Each payer should send you a Form 1099-DIV. Enter your

> total ordinary dividends on Line 9a. This amount should

> be shown in box 1a ofForm(s) 1099-DIV>"

> On that same page of the instructions, it covers Line 9b, Qualified

> Dividends:

> "Enter your total qualified dividends on Line 9b....

> Generally, these dividends are shown on box 1b of

> Form(s) 1099-DIV."

> It then explains that in some cases you do not report the qualified

> dividends.

>>and is certainly not common knowledge. Therefore, the correct way to

> Common knowldge? I have yet to find a tax preparer who does

> not know this. And anyone who took the time to just read those

> few sentences would now know how to report both ordinary dividends

> and also qualified dividends.

>>prepare the Dividend Income is based on verbal direction from the IRS.

>>That should have been clear in the IRS 1040 publications.

> OK, which sentence posted above, taken directly from the

> IRS instructions, did you find not to be clear?

I'm sure you know a lot more about taxes than I do, but I had already
read those sections. Nowhere did I see (AFAIK as I said) to put the same
data from line 9a also on 9b. That is the correct way, but nothing says
that.

>>The IRS representative said existing IRS input processing procedure

>>was in error in not detecting my mistake at the first processing stage

>>of the 2007 1040. When data exists in line 9B and there is no entry in

>>line 9A, the IRS is supposed to call this an error. The presence of

>>this mistake is supposed to stop processing the return and a error

>>letter is then sent within a month of first submitting the return.

>>That never happened in this case..

>>The IRS representative said his office sees this exact same issue

>>repeatedly.

>>Comment on the above?

> Yes. The Congress, not the IRS, created the notion of a Qualified

> Dividend as well as an Ordinary Dividend. The IRS created the forms

> for payers to report these to you, and for you to report these to

> the IRS.

> In my own opinion, the instructions shown above are pretty well

> understood, but if you cannot understand the instructions, I

> recommend you seek professional tax preparation help.

>>We accepted the requested additional tax payment, but I appealed the

>>interest charge and the penalty charge, stating the reasons above,

>>enclosed an explanation. I made a total payment to stop the interest

>>clock.

>>A month later, we got a IRS check for the entire payment, tax +

>>interest + penalty, and interest for the month they held my payment.

>>This was a surprise, very unusual?

>>Comment on this?

>>We just got a letter from the IRS: "regarding my correspondence of

>>4/27 (the above payment and explanation). We will contact you again

>>within 60 days to let you know what action we are taking".

>>What to expect?

>>Does the IRS ever make a payment, and then ask for it to be returned?

>>BTW, the letter includes a 800 number in Fresno, and a contact, but

>>that 800 number is totally voice mail, no way to contact a human

>>there.

> You should not have had your tax refunded unless your taxable income

> even with ordinary income was zero.

> Wait and see.

ms

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>

Posted by Arthur Kamlet on June 1, 2009, 11:57 pm

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>kamlet@panix.com (Arthur Kamlet) wrote in

>> wrote:

>>>There are several questions below:

>>>Our 2007 1040 return was submitted to the IRS without incident. Being

>>>retired, our 1040 is pretty basic, using the standard deduction, etc.

>>>

>>>In April of this year, we got a CP2000 regarding the 2007 return. It

>>>involved our qualified dividends. I then called the IRS, was referred

>>>to the Dividend/Capital Gain section. They stated that dividend entry

>>>in my return was incorrect. The amount shown in line 9B, Qualified

>>>Dividends, should *also* be entered in line 9A, Ordinary Dividends.

>>>They stated that the IRS rule is *all dividends are ordinary

>>>dividends*.

>>>

>>>That definition is not AFAIK covered in the 1040

>>>handbook/instructions,

>> If you chose to fill out your tax return without reading the

>> instructions that's your decision, but why blame your lack of

>> knowledge on the IRS?

>> I am now looking at the 2008 Form 1040 Instruction booklet, a massive

>> volume that costs us taxpayers quite a bit, so that taxpayers can

>> read and understand how to fill out their tax returns.

>> I am looking at both the 2007 and the 1008 Form 1040 instructions,

>> as the following quotes are the same for each year.

>> On page 21 of the 2008 (page 19 of the 2007) instructions, for Form

>> 1040 line 9a (ordinary dividends) it says

>> "Each payer should send you a Form 1099-DIV. Enter your

>> total ordinary dividends on Line 9a. This amount should

>> be shown in box 1a ofForm(s) 1099-DIV>"

>> On that same page of the instructions, it covers Line 9b, Qualified

>> Dividends:

>> "Enter your total qualified dividends on Line 9b....

>> Generally, these dividends are shown on box 1b of

>> Form(s) 1099-DIV."

>> It then explains that in some cases you do not report the qualified

>> dividends.

>>>and is certainly not common knowledge. Therefore, the correct way to

>> Common knowldge? I have yet to find a tax preparer who does

>> not know this. And anyone who took the time to just read those

>> few sentences would now know how to report both ordinary dividends

>> and also qualified dividends.

>>>prepare the Dividend Income is based on verbal direction from the IRS.

>>>That should have been clear in the IRS 1040 publications.

>> OK, which sentence posted above, taken directly from the

>> IRS instructions, did you find not to be clear?

>I'm sure you know a lot more about taxes than I do, but I had already

>read those sections. Nowhere did I see (AFAIK as I said) to put the same

>data from line 9a also on 9b. That is the correct way, but nothing says

>that.

It says

Enter your total ordinary dividends on Line 9a.

What is not clear about that? Why did you think it meant

Don't Enter your total ordinary dividends on Line 9a?

--

ArtKamlet at a o l dot c o m Columbus OH K2PZH

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>

Posted by Steve Pope on June 2, 2009, 1:02 am

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>It says

> Enter your total ordinary dividends on Line 9a.

>What is not clear about that? Why did you think it meant

> Don't Enter your total ordinary dividends on Line 9a?

You know, it's clear to you and it's clear to me but to a
person just reading the 1040 form and instructions for the
first time, they might simply guess that "ordinary dividends" and
"qualified dividends" are two mutually exclusive categories.

They'd be wrong, but it's not exactly illogical.

The IRS could have, should have, said "ordinary dividends
include qualified dividends". It does not look like they did so,
in the basic instructions.

The "hint" is that the qualified dividend box is off to the
left of the main column of figures. That usually means it's a
sub-amount to something in the main column, rather than its own amount.

Steve

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>