Audit Hero

For our member, Scott, 2018 had been a tumultuous year. He had lost his wife of 53 years and was dealing with all the pain and grief that accompanies such a major loss. Then, out of the blue, his brokerage firm terminated an investment product he had been in for 40 years, setting off a far less tragic, though challenging, string of problems. When the time came to do his taxes, everything relating to the sale of stocks and mutual funds due to the Transfer on Death for his wife’s investments and the closing of the brokerage product had seemed complicated and confusing. When he clicked the button to file his taxes, he had a feeling he had missed something.

Indeed, Scott had missed an important item on his tax return – but it took more than a year before he would find out. When he received the IRS CP2000 Notice with a proposed tax of $186,000 earlier this year, he thought he might have a heart attack. But then he remembered he had purchased Audit Defense, and he contacted TaxAudit immediately.  

A CP2000 is generally a mismatch notice, issued when the IRS’s computer system identifies a discrepancy between the items on a tax return and the information they’ve received from a third party, such as an employer or a financial institution. In this case, Scott had not been aware that he was supposed to report the sale of the terminated product. After all, there had been no cash out and the broker had simply moved all the funds to a new product. But the financial institution did report the transaction to the IRS, and this is what had triggered the notice.

It took a 3-way call with Scott’s broker to get the correct document support, but we got it all together for him.  In the end, all that was needed was to include a missing cost basis. When we added it in, Scott’s amount due dropped by $182,800.  

When he received the updated notice showing an amount due of only $3,200, Scott called me immediately. All he could say was, “Lisa, you’re my hero!”