CP-2000

Any comments on a recent CP-2000 would be appreciated.

Client receives CP-2000 wanting $5,700 in tax and $1,000 penalty for under reported income. Upon review, it's determined they owe the tax do to an error of mine. They send a check for the tax plus interest, and a letter requesting abatement of the penalty. The abatement letter is detailed and a little convoluted. Client next receives a CP-2005 titled "Closing Notice", saying, "...we were able to clear up the differences between your records and your payers' records. If you sent us a payment based on our proposed changes, we will refund it to you..." A refund was forthcoming. For the sake of argument, assume I was correct in the final assessment of "they owe the tax". IRS says Case closed. What next?

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Many, many years ago two of my employer's clients provided us with IRS communications in which the IRS had over-refunded taxes paid by their respective children. To each I offered to convince the IRS to take the money that was owed; I pointed out that my firm was then billing out my time at about $25 per hour and that a higher level person would also spend time reviewing my work. Both clients said thanks but no thanks.

Realistically these two possibilities exist. First, despite saying "case closed," the IRS could come after the money again. Second, when the IRS and you concluded that you had made a mistake on the original return, you both could have been wrong. Let's here it for "convoluted" requests for penalty abatements.