I used Turbotax to file 1040 tax return 2018 - Now I have to pay over $2,400 due to penalty!

[rizzay]

Turbotax, 

I need your advice. I used your system in 2018 to file 1040. Your system told me it was accurate.

However, I got a CP2000 notice. I am being told I need  to pay $2,452. It stated that there is an "Accuracy - related penalty substantial understatement of tax". They told me this on 02-18-20. They gave me until March 19, 2020 to respond to have them amend it or not. They are right, there was a drastic understatement because I followed Turbotax and listened when Turbotax told me they "checked" my 1040 and it was accurate. I had multiple W-2s but turbotax told me it was accurate to not report all. I am not a tax expert and initially relied on turbotaxes advice.

I responded to IRS with a letter saying "no" I didn't agree with changes. I wrote them saying the "understatement is due to an accident - not a malicious attempt to fradfully under-report." I didn't want this to be on my record years down the line that I am a tax evading fraud.

Please advise me because I trusted your product, which partially got me in this position.

Now I have questions:

1. Does saying "yes" to a 1040 amendment stay on some "record" that could be brought up later to say I am a tax fraud? That is, will I get in "trouble" if I pay my penalty and tell the IRS to amend my 1040?
2. Should I just resend the initial notice (I kept a copy), this time, selecting "yes" to amend my 1040 then pay my +$2,400 online? 
3. The letter said interest will continue to increase after March 19,2020. When I look on IRS website to check my name/SSN, etc. for "owed money" it says $0. Do you recommend that I even pay if they are telling me online that I have no money outstanding?
4. I need valid tax return documents to apply for mortgage next month.  I want to purchase a house by July 10th. However, my 2018 tax return is inaccurate. If I move forward with the process of getting an amendment, with COVID-19 and IRS refusing to answer calls right now, how long do you think this will take?
5. If I apply for mortgage with tax return saying I make less, is that illegal? It will only hurt me in the long run because when I apply for mortgage I appear less credit worthy due to less income anyway.

[DawnC]

No, saying YES to an amendment will not label you as a tax fraud.  It happens all the time.  And yes, you should pay your tax asap if it is in fact due.  It will take at least 14 weeks to process the amendment, probably longer due to COVID.   You can use your filed tax return to apply for a mortgage and let them know it is being amended.  That should not cause any issues.  

See the TurboTax Accuracy Guarantee and following the instructions if you need to file claim.  

In plain English, if you pay an IRS or state penalty or interest because of a TurboTax calculation error, we'll pay you the penalty and interest.  For complete details, see our Intuit Software End User License Agreement (look about 2/3 of the way down the page, under the heading TurboTax Accurate Calculation Guarantee).

You can read the fine print at the Intuit Software End User License Agreement for TurboTax Desktop Software or the End User License Agreement for TurboTax Online. Enter accurate calculation in the Find feature in your browser (usually listed under Edit) to go to it quickly.

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