Why did I receive a CP21I Notice from the IRS?

Receiving a CP21I Notice from the IRS usually means that due to a recently conducted tax audit, the IRS has made certain adjustments to the tax return stated in the notice relating to Individual Retirement Account (IRA) taxes. As a result of those changes, you now owe money on your taxes. This could have an effect on any Income Tax Audits & Appeals that you are involved in, as well as IRS Tax Litigation or Tax Collections actions.

Who is qualified for relief under the Notice?

Any person who has a Federal income tax return or payment due on April 15, 2020, is eligible for relief under the Notice. Persons under this category include any type of taxpayer, such as an individual, a trust, an estate, a corporation, or any type of unincorporated business entity. The payment due relates to both 2019 Federal income tax payments, including payments of tax on self-employment income, and 2020 estimated Federal income tax payments, including payments of tax on self-employment income, despite the amount owed. The return or payment must be due on April 15, 2020. This relief is not applicable to Federal income tax returns and payments due on any other date.

How does relocating affect your tax return?

Individuals that make their mind up to relocate may have income or expenses that could affect the filing of their 1040 tax return. To confirm if your expenses are tax deductible, your move must be linked to the start of a new job or relocation of a job on hand.

The first step to take is to ensure to change your address with the Internal Revenue Service (IRS) and US postal service so that that you will receive notices and other correspondence from the IRS. This includes tax refunds if you have not made up your mind to receive direct deposit. Fill out Form 8822 Change of Address and mail it to the IRS.

To check if your expenses are tax deductible, your move must be related to starting a new job or relocation of an existing one and you must also pass the time and distance test. To pass the distance test, to keep it simple, the location of your new job must be at least 50 miles from your former residence. For the time test, employees must work full-time for 39 weeks during the first 12 months after getting to the new location. Self-employed individuals must meet the same duration and have a total of 78 weeks in the first 24 months subsequent to your move. Members of the military are not included in the time and distance tests if their move was as a result of an order by military.

Expenses that can be deductible include travel and lodging in relation to your move for yourself and members of your household. Expenses may include airfare, parking, tolls, and hotels. Expenses may also include the cost of packing, transporting, insuring, and storing your personal belongings as well as setting up new utilities and disconnecting old ones. If your previous or new employer reimburses you for all or part of your move, you may have to report this as income on your tax return.

What If I Don’t Pay The Full Amount Of The Tax I Owe On Time?

Interest will mount up on an unpaid tax balance starting on the day after the tax is due. Also, you will be levied a late payment penalty if the total amount of tax you owe is not paid on the day it is due. With regards to both interest and penalties, the due date is the final date on which you could file the tax return that is at issue, including extension requests.

How Long Do I Have To Request Audit Reconsideration?

A request for Audit Reconsideration can be filed any time after an audit evaluation has been made on your account and the tax still remains unpaid. However, the IRS will not grant your request if you earlier agreed to pay the amount of tax the IRS says you owe.

What to Do Whenever You Receive A CP21I Notice

In summary, whenever you receive a CP21I Notice, you should:

• Ensure to read the CP21I Notice and the Audit Report cautiously, especially the parts that show the specific changes the IRS made to your return, explain why the IRS made those changes, and also why the IRS believes you owe money on your taxes. The changes that will likely involve the IRS’s claim that you owe more tax on one or more distributions for an IRA than was reported on your original return, and consequently now have a higher tax obligation. The changes the IRS made to your income are usually on lines 1 through 4 of the Audit Report. Any penalties and interest claimed against you as a result of the changes the IRS made to your return are usually found on lines 17 through 19 of the Audit Report.
• Even if you agree with the changes the IRS made, it may still be a good idea to have a Tax Attorney. Take a proper look before you sign and return the Audit Report agreeing to assessment of additional tax against you and collection of that tax from you. Signing and returning an Audit Report to the IRS can stop you from requesting an Audit Reconsideration if information and documentation buttressing your position that the IRS’s changes to your return are not correct become known. If the expert you consult agrees that the best step to take is for you to agree to the changes, you should be sure to change the copy of your tax return that you kept to show the changes that were made, and then pay the tax and penalties owed in full by the given date in the IRS notice.
• If you agree but are unable to pay the full amount owed by the due date; pay as much as you can by the due date. You will need to make arrangements with the IRS for a payment plan to pay off the outstanding balance you owe. It is advised that to consult with a tax professional to determine if it there is a practical opportunity to negotiate a reduction in the amount owed and/or get the IRS to remove some or all of the penalties it assessed. The facts and situations that will affect the outcome of such items are unique to each taxpayer and therefore must be offered to a tax professional for detailed analysis.

If you do NOT agree with the changes the IRS made to your tax return and the sum/ the IRS says you now owe in taxes, the evidences and circumstances in your case may warrant requesting Audit Reconsideration. One key motive for requesting an Audit Reconsideration is when you have further information and documentation that were not presented to the IRS agent during the audit. A tax professional can aid you in identifying such supporting documentation and present it to the IRS in a way that is particularly intended to get the IRS to accept your request for Audit Reconsideration.