There is no need to submit a letter of explanation with your tax return. They won't read it anyways.
You have three options:
- Submit your tax return with the information from the current SSA-1099. If the SSA changes it, then you can amend your tax return.
- Submit your tax return with the way that you think it should be. Then wait for the IRS notice (it will likely take several months). Hopefully your dispute will be resolved by the time the IRS notice comes. If it not resolved by then, that is when you can provide the letter of explanation (and any proof of your case) in response to the IRS notice.
- Don't file your tax return at all until the dispute is resolved. If you have paid the entire amount that you owe, there would not be any penalties. But in a few rare situations, that could possibly complicate other matters, so I would not recommend this option.
Just keep in mind that if you decide on option #2 and the SSA does not change things and the IRS does not agree with your argument, there will be interest owed and possibly penalties and the amount that you should have paid on the disputed amount.
