When the IRS documents differ from what you placed on the return, they will send you any one of the many notices sent by the IRS for a "Return Error" or "Math Error". Essentially, you will have to investigate to resolve this problem.
Often, the notice will have a list of items the IRS says were not included on your return (which is essentially a Wage & Income Transcript). The IRS is not usually wrong about these missing items but they lack offsetting information to reduce the tax.
IRS Correct
If you feel the IRS information is correct, then you may not need to order your "Wage & Income Transcripts" to verify the accuracy of your information. But, if in doubt, go ahead and order the transcripts. You may uncover other valuable information.
IRS Incorrect
Compare the Wage and Income information with your return. If there is a discrepancy, you can correct it with an Amended Return (1040x).
Often, offsetting information must be shown to the IRS with an amended return to lower the tax burden. For instance, if the IRS says you had Capital Gains from the Sale of Stock on a Form 1099-B, you obviously purchased the stock for some amount which then reduces the income and lowers your tax. It would be prudent to prepare an Amended Return to contest the IRS.
You could write a letter to the IRS to try and resolve the issue. It is usually better to file a formal document which requires the IRS to respond. Letters to the IRS tend to get lost or misinterpreted. In the rare case, the IRS could importune the employer to correct a W-2 they issued to you (See Letter 62C). They'll ask you to complete a "Substitute for Form W-2" - Form 4852, to file your estimate of the W-2 information.
So, even though this "Math Error" procedure is not technically an "Audit" you must prepare with great diligence. If you receive an IRS Math Error Notice, bring in the notice, your return. Also bring any information necessary to prove your case.
We will prepare an Action Plan for you to win! In about 2 months after we send a response the IRS will reply with Notice CP2006 or Letter 2645C which indicate that they have received the response and are processing or investigating your case. Be prepared to wait another 3 months.
J. David Hopkins, JD, LLM
