What is the IRS Matching Program?

When a taxpayer earns income, the issuing party will provide them with an IRS form. This may include a Form W2, Form 1099-MISC, Form 1099-DIV, Form 1099-INT, etc. The key thing to remember is that not only does the taxpayer receive this form, but so does the IRS. Well, at some point in time, the IRS runs “checks” to make sure that the income reported on these forms “matches” what is reported on the tax return. If there is a mismatch? Well, let’s just say that the IRS will send you a “love letter” bringing the discrepancy to your attention.

Understanding upfront matching

With this program, the IRS scrutinizes income reporting before issuing a taxpayer’s refund via the following steps:

  1. The IRS receives a tax return.
  2. The IRS matches the return against Forms W-2 and/or Forms 1099 that the IRS has received.
  3. If everything matches between the return and the information statements, the IRS releases the refund.
  4. If the IRS finds a mismatch, the IRS freezes the refund and sends a notice to the taxpayer asking for more information to prove their income and withholding.

Understanding CP2000 matching

When a tax return’s information doesn’t match data reported to the Internal Revenue Service by employers, banks and other third parties, the IRS will send a letter to the taxpayer. The letter is called an IRS Notice CP2000, and it gives detailed information about issues the IRS identified and provides steps taxpayers should take to resolve those issues.

This isn’t a formal audit notification, but a notice to see if the taxpayer agrees or disagrees with the proposed tax changes. Taxpayers should respond to the CP2000, usually within 30 days from the date printed on the notice. If a timely response can’t be made, taxpayers need to call the toll-free number shown on the notice and request additional time to respond.

The key thing to note is that CP2000 matching doesn’t typically happen immediately unlike upfront matching. In fact, it often happens months (if not almost a year) after a tax return is filed. Let’s take a look at a 2017 tax return as an example shall we?

A tax year 2017 return was due April 15th 2018, but could have been extended until October 15th 2018. During the early part of 2018, the payor’s of income (e.g. employers, banks, etc) send their corresponding IRS forms to the IRS. These in turn, populate the Wage & Income module associated with a taxpayers account (i.e. SSN or EIN) all the way until December 31st 2018. Once the extension deadline passes (10/15), the IRS matching program will begin to “flag” unreported/under-reported income between October 2018 and March of 2019 via a code 922 on the Wage & Income transcript (i.e. review of unreported income). The IRS will then send taxpayers CP2000 notices between March and October of 2019!

The income matching and CP2000 timeline illustrated

What Can You Do?

To avoid a mismatch, make sure that you report all of the income that is reported on the IRS forms that you receive. If you are working with a tax advisor, make sure that you give them all the documents you receive so they can file an accurate return and report all income received in a tax year. In addition, if you discover a tax return error, make sure to amend the return as soon as possible to avoid penalties or audits.

Need Help With a CP2000 Notice of Amending A Return?

We routinely assist taxpayers when they need help “fixing” a return. Furthermore, since we deal with filing old tax returns, we have the software to go back up to 10 years if needed!  So, if you need help, give us a call now via the number above or shoot us an email via the address in the footer on this page. We can help you address your letter and correct your return in as little as 48 hours.

Should I Amend My Tax Return?

Sometimes you will get a Form 1099 or Form K1 after you already filed your income tax return.  Sometimes you will “remember” that W2 or 1099-MISC that you should have gotten in the mail but didn’t (like when you move and don’t tell your old employer).  No matter what the reason is, sometimes you simply need to make some changes to your return.  But what changes require you to file an amendment and just how do you go about the whole thing?  Keep reading dear friend, keep reading.

When you should make changes.

Amend to correct errors.  You should file an amended tax return to correct errors or make changes that are needed to your original tax return. For example, you should amend to change your filing status, correct the amount of income reported, or fix erroneous/omitted deductions or credits.

Don’t amend for errors where the IRS also receives a form.  You normally won’t need to file an amended return to correct math errors where the IRS receives the same form. The IRS will typically correct those for you.  For example, if you failed to report $1,000 of interest reported on Form 1099-INT, the IRS will usually fix it and send you a letter telling you they did so.  But if you transposed the income number for your cash based vending machine business on Schedule C (i.e. $8,999 vs $9,899) then you’ll want to file an amendment to report the correct figure as the IRS will never know it is wrong.

How long do you have to file your amendment?

You usually have three years from the due date of your original tax return to file an amended return.  This is particularly true if you need to claim a refund. You can file it within two years from the date you paid the tax, if that date is later. For example, the last day for most people to file a 2011 claim for a refund was April 15, 2015 as the due date for that return was April 15, 2012.  For more information about this and other IRS statute of limitations, check out this post.

How do you file an amendment?

Use Form 1040X, Amended U.S. Individual Income Tax Return, to correct your tax return.  Note that this form must be filed via paper as it can’t be e-filed. As such, check out this post on the IRS website for the address applicable to your state as to where it should be mailed.  It should also be noted that you will want to include the Form 1040X, the original schedules that you filed and then the amended or changed schedules.  This way the IRS will be able to see what was originally filed and what was changed.

Other helpful things to know.

Wait to file for a “second” refund.  If you are due a refund from your original return, wait to get that refund before filing and amended return to claim an “additional” refund.  Amended returns take up to 16 weeks to process so:

  1. you don’t want things to get crossed up in the IRS system by having two returns being simultaneously processed.
  2. expect to wait a while before you receive your money.  Amended refunds will come via check, even if you provide direct deposit information.

Pay additional tax as soon as you can.  If you owe more tax as a result of your amendment, pay the tax as soon as you can. This will stop interest and penalties from accruing unnecessarily. You can use IRS Direct Pay to pay this amount directly from your checking or savings account

Don’t amend to correct Form 1095-A errors.  Taxpayers who filed a 2014 tax return and claimed a premium tax credit using incorrect information generally do not have to file an amended return even if additional taxes would be owed. The IRS may contact you to ask for a copy of your corrected Form 1095-A to verify the information.

Track your amended return.  You can track the status of your amended tax return three weeks after it’s been filed with the IRS ‘Where’s My Amended Return?’ online tool or by calling 866-464-2050. The tool can track the status of an amended return for the current year and up to three years back.  If you have filed amended returns for multiple years, you can check each year one at a time.

Need help filing your amendment?

If you don’t want to go through the hassle of doing all those calculations, filling out the various forms and then trudging down to the post office to wait in line and mail them, why not give us a call?  We’d be happy to help you navigate the process and get the correct forms to the IRS ASAP.