Any recommendations to challenge IRS Proposed prior year change

[Michael Medeiros]

I received a notice from IRS regarding tax year 2016, they are asking for over $30K adjustment.  Anyone have a CPA or professional they have used to challenge this type of action?  Thanks.

[Michael Plaks]

@Michael Medeiros

In their letter (probably Letter CP2000), the IRS explains why they are making the adjustment. It is usually because their computer had some number reported under your SSN, but the computer cannot find it on your return. 

The most common situation is a flip sold say for $150k, bought for $100k and rehabbed for $30k. Many investors report just the $20k profit. However, the IRS computer is looking for the $150k number. The flip should have been reported as $150k minus $130k = $20k so the IRS computer could match. A letter of clarification is often all that is needed to close the issue.

Many other situations of this kind are possible. 

Notice the very important point made by @Steven Hamilton II: it is a proposed adjustment: something the IRS believes you owe, but they are not yet requiring a payment. They are saying: explain why we are wrong - or else we will formally charge you. 

And sometimes they are correct, too. It could be that something was missing from your tax return or reported incorrectly. Have it checked by a CPA or by an Enrolled Agent (EA) like Steven or myself.