twhalen67
Returning Member

Investors & landlords

I've ran into this multiple times when I started working for a company that used RSU's as part of your comp.  I also received the CP2000 form from the IRS.  The two 1099B's I receive is 1 for the sell-to-cover taxes, and then the RSU sales minus the taxes.  What IRS attempted to do was declare that both 1099B's were both income.  So if you paid 10,000$ in taxes for 25,000$, the IRS attempted to claim that my tax liability was for $35000.  Obviously this dramatically increased my tax liability and overstated my overall taxable income which can put you into another tax bracket without you even knowing it.  Because of this, they attempted to fine me for under paying and then demanded the perceived tax liability.  The good news is that the taxes have a different reference code on the 1099B from the RSU as income.  Also I went into the payroll system and downloaded copies of the RDU checks cut on my behalf.  When you have all the checks, you should be able to reconcile the taxes with the checks with the Sell-to-Cover total amount.  The remaining was the actual proceeds received as income.  Those two number matches the overstatement on the CP2000.  So all I did was explain how the two 1099B's are to be considered.  I put this documentation into a big PDF document and faxed it to the IRS referencing the the CP2000 letter, the challenge and justification in written form, outlining every steps of the math.  Also I challenged the penalty with interest.  It took them two years discover this.  the CP2000 was for tax year 2018 but they didn't alert me to the situation until 2020.     They had no reason to force a penalty especially since I could clearly show how their own math impacted the taxes incorrectly and the time window was based on their waiting for 2 years to bring it my attention.   About 3 weeks after the CP2000 response was sent and received, the I got a letter in the mail indicating they agreed with my assessment and no penalty was justified.  

 

The way this is handled by TT is really confusing and clear as mud.  Hope this helps 🙂