Sorry, but I just have to vent! I'm gravely concerned about the competency of IRS's employees. It's bad enough that I recently had to teach a supervisor and an auditor the difference in accountable and non-accountable plans and when employee business expense deductions are allowed recently for a correspondence audit, however, the letter one of my clients got today totally blows my mind!
From what I can tell, while IRS did the matching of 1099's to returns, my clients did in fact not tell me that they have had a very small amount of dividends each year since they were married. Finally in 2011, the $19 in dividends did make a $3 difference on their Federal return. It appears that when the computer spits out such a return for not including an income item, then a person (IRS employee) takes over and reviews the rest of the return.
From reviewing the many changes to the return that are in the CP2000 notice, it is very, very, very evident that the employee absolutely does not know what he/she is doing! I always try to figure out before we contact IRS what they did wrong and I've been playing with figures all afternoon. This is what I found: Spouse received an IRA withdrawal due to the death of one of her parents. The withdrawal was coded "4". The total withdrawal of the IRA PLUS the amount withheld in Federal taxes were BOTH added to the spouses WAGES....thus they are saying that the spouse's wages were underreported on the return. The withholding on the IRA withdrawal that was included on Line 62 is gone.....poof! It was noted in the CP2000 letter than an error was made on the total withholding. (Remember IRS added it in with the spouse's wages as INCOME). With the additional income (the IRA was already reported on the original return) added to the couple's income, now their education credit is lowered because they are over the threshold.
Now my clients have a bill for over $1,000. This is by far the most pitiful case I have ever had where an employee really screwed up a return....certainly not the ONLY time, just the most pitiful job of screwing it up!
I will follow up and get my clients to send in the $3.00 they owe (+interest...lol), however, after we receive the final "case closed" correspondence from IRS, I will forward the whole package to the Ways and Means Committee who I believe is over IRS. If not, I will find out exactly who to send it to. I have often complained about my local H & R Block office, but from what I've seen lately coming out of the IRS office itself, I do believe H & R is gaining ground on them and at a fast pace also!
Thanks for listening! I feel better now!!!!