CP 22A – Notice of Change(s) to Your Tax Return

This third group of letters are not that dangerous. This is just a notice of changes in your tax return, these changes might cause you will have an amount due but that will be seen in a different letter, that will be in perhaps in letter CP 14 or in a different letter where the IRS is telling you that you owe some money. So in this case this is letter is not something that you purposefully committed, it is changes in the tax return and because of the changes of the information provided to the IRS and when that information was compared to the IRS records the numbers didn’t match and therefore you might owe money but once this calculation is given to you, the IRS will let you know if there is any amount owed. The objective of the letter is for you to present any discharge, for example, there is 1099 form that you didn’t receive timely, and you forgot to include it in the tax return and now the IRS receive this 1099 and you owe money. You should not pay whatever the IRS is asking because the 1099 is a gross income, you need to reduce that gross income for expenses that you will have when producing that income. When you apply those expenses that 1099 the amount of the profit will be lower, and the amount of the involved taxes will be lower as well. Even though you received a knowledge of changes in your tax return, and this is for a 1099, this is for a distribution for a 401k or an income that you receive, and it was not reported originally, you should not agree with the amount that the IRS is showing. You will be better off talking to a professional CPA, a tax attorney or an enrolled agent who are experienced in solving IRS Tax resolution and he will be addressing the IRS or asked their opinion and proceed.

At this point this is only an informational letter, just think of the consequence this might have. Whenever there is a change on the tax return it might have a debt, all the possible changes without any amount owed it could be changes in status. This is not something to get stressed out, but it is something you need to pay attention to and do something.

CP 3219A & Form 5564 – IRS Notice of Deficiency

This means that you pay short your taxes and therefore you need to pay the difference. At this point you can apply for an installment agreement. This letter means that you didn’t report the income or misreported the income and the IRS received notice that you have more income and at this point there is a deficiency in your tax return and the reporting of the income and therefore more taxes are created, and you need to address that. The IRS is notifying you to do something, saying that if this is correct or is not correct, and you will need to talk to the vendor or supplier that provided that 1099.

CP 508c – Possible Revocation or Denial of Passport

This is when you owe more than $50,000 and you have no installment agreements and you have not paid your debts, this can be a personal debt or company debt or even payroll tax debt whenever you have this the IRS is going to deny your passport. Meaning whenever you apply for a passport renewal because the IRS will notify the department of State for not to issue a passport on your name or if you don’t have one, they will not issue one. For example, if you are broke and have no many you are not supposed to travel so why are you going to apply for a passport. Let’s say you are in a 10-year frozen period for economic calamity and you want to apply for a passport is going to be denied because you have no money to travel. In other words if you owe more than $50,000 you are banned from applying to a passport, if you are in economic calamity you can’t apply for a passport, if you are in an offer in compromise and you want to apply for a passport during the period of the offer in compromise be very careful because the IRS will receive a notice and the they are going to come after you, because you have lied on your offer in compromise applications.

CP 2000 – Notice of Underreported Income

This is an automatic letter that happens when the records of the IRS are compared to the records of your tax return and if the records show more income than your tax return. When this comparison happens and your tax returns show more income than the IRS, they will not do anything. The problem is when the income that you report is lower than the income the IRS has on the records and at that point there is an automatic letter and this is will give you the detail showing why the income was misreported, they will give you the name of the company of the vendor that reported a 1099 with more income to you and even the calculation of the additional taxes will be there. This letter is the chance to pay your debt amicable without first notice or second notice and without any intent to seize assets. At this point you need to write a check and pay the money back to the IRS or do an installment agreement if you are not able to pay the amount in one shot.

Letter 1153 and Form 2751 – Proposed Assessment of the Trust Fund Recovery Penalty

This is for payroll taxes, whenever there are payroll taxes owed to the IRS, the company is never off the hook. There is no installment agreement, there is no forgiveness, there will not be any kind of reduction of penalties or interest. Because that money is not of the company.

Whenever a company has employees, they are obligated to withhold 3 types of taxes: federal income tax, social security and Medicare, those are that the IRS is supposed to receive. Many time companies pay payroll checks and they withhold those taxes, and they pay at the end of the year. The problem is when the companies are short of cash and instead of paying it monthly the companies will use that company believing that things will be better in the future and at that point, they will pay what they owe. This is a mistake. Even before paying the banks and credit cards you are supposed to pay the IRS because they are the government. They can trace you and will take you to jail. This trust is established to recover the money from the taxes that were withheld by companies and were not paid to the IRS.

This is the reason of the trust fund recovery. This is the intention of the IRS to recover the money that the employers are supposed to pay the IRS, so this is taxes from the employees, income tax, social security, Medicare, and the portion that the employer is also supposed to pay. So, whenever the employee doesn’t submit the money to the IRS is a felony, because this money doesn’t belong to the company. If there’s a taxpayer who can’t pay their debt and that debt is personal that will not create jail because that money is from the taxpayer. In this case its payroll taxes so federal income tax, social security and Medicare taxes that were not paid to the government, but that money is not from the company, that money is from the employee and was withheld and didn’t submit it to the IRS, that means the company has misappropriated funds from a third party and that is a felony. If this happens and there is no arrangement to recover the money the next step, the IRS will bring criminal charges with the individual. At that point there will not be renewal of passports, if the person escapes the country, they will not be able to return to the US never again and immigration will take that person to jail. To prevent this, if you have to pay your payroll taxes at the end of the month, borrow money from the bank because they cannot take you to jail. You do the riskiest activity first, and this is not doing your tax payments especially if they are payroll taxes.

Readers should note that this article is only intended to convey general information on these issues and that FAS CPA & Consultants (FAS) in no way intends for the contents of this article to be construed as accounting, business, financial, investment, legal, tax, or other professional advice or services.  This article cannot serve as a substitute for such professional services or advice.  Any decision or action that may affect the reader’s business should not rely solely on the contents of this article, but should rather be consulted on with a qualified professional adviser. FAS shall not be responsible for any loss sustained by any person who relies on this presentation.  This article is subject to change at any time and for any reason.