nonqualified pension income and IRS not recognizing their revised reporting requiements

[Jim19431]

TurboTax properly reported my nonqualified pension income on Form 1040 Schedule 1 Line 8t per IRS' own requirements given on Page 24 of IRS Form 1040 Instructions.  However, I received a CP-11 stating that I was mistaken in reporting my income from my W-2 (which is where my nonqualified pension income is reported in Box 11).  I called the number given on the CP-11 but 3 IRS folks could not help me even as I walked them through the IRS requirements.  Per their recommendations I sent a detailed explanation along with documents to the Kansas City office showing that my nonqualified pension income was properly reported on Schedule 1 and hence on Line 8 of Form 1040; please correct the IRS mistake.  Two weeks later I received a CP 503 with threats to pay up or IRS would consider a levy of my property.  Per the instructions for the number given, I talked to 3 different IRS personnel none of whom could help me.  All researched the IRS instructions I referred them to and all give various reasons why it was outside their narrow preview of analysis to help me; the last of which told me I was on my own and hung up.  Has anyone else encountered this difficulty with the IRS?  I would have been nice if TurboTax had cautioned us that a simple change in IRS forms might present a problem for the IRS and that a short note explaining the change should have been included in our tax return.

[Bsch4477]

Is this relevant?

https://mystockoptions.typepad.com/blog/2023/03/tax-returns-nonqualified-deferred-comp-issues-to-be-....

[Jim19431]

Thanks for the reply.  My issue is not with the qualification of my nonqualified pension income; for over 10 years my employer has been including my nonqualified pension income with my wages in W-2 Box 1 and that portion of Box1 that is nonqualified pension entered in W-2 Box 11; all in compliance with the instructions for completing W-2 Statements.  I have been trying to figure out how this situation came up.  It appears to me that the IRS auditor compared Line 1a of my 2021 Form 1040 with Line 1a of my 2022 Form 1040 and found them to be very different.  He also found that Line 1a of my 2022 Form 1040 does not equal my 2022 W-2 Box 1 and concluded that I made an error and so initiated a CP11.   He apparently did not know that for Tax Year 2022 the IRS changed the income reporting requirements for Line 1a of 2022 Form 1040.  Even if he is untrained as to the Tax Year 2022 Form 1040 Instructions and relied only on comparing 2022 to 2021, he did not compare my 2022 Form 1040 Schedule 1 with my 2021 Schedule 1 to see that there is a new line, 8t, with an entry there that is not in the 2021 Schedule 1 (there is no line 8t in the 2021 Schedule 1).  And, of course the rollup of Schedule 1 into Form 1040 was also not looked at.   I'm just curious if anyone else has run into this and also to say that there are grossly untrained auditors looking at our income tax returns and generating short notice payment demands followed by short notice threats if not paid promptly.  

[dmertz]

I wonder if the generation of the CP503 was already in process before the explanation you provided was considered.  The IRS states that it can take 30 to 60 days to process the explanation.  In any event, since your nonqualified deferred compensation was properly reported on your 2022 Schedule 1 line 8t, it seems that you'll need to continue to pursue this with the IRS.

Even if this income had been reported on Form 1040 line 1 instead of Schedule 1 line 8t, it shouldn't change your taxable income.  Apparently the IRS examiner is counting the deferred compensation twice by thinking it should be on Form 1040 line 1 without removing it from Schedule 1 line 8t.

Given that you received the CP503 only two weeks after mailing your explanation, I wonder how long it took you to mail that after receiving the CP11.

[Jim19431]

Thanks for your comments.  I followed up with more detailed letters on Dec 26 responding to the CP11 (again) and the CP503 and began trying to schedule an appointment with the local IRS office.  Nothing available until February. But I got passed along to IRS "representatives" who were more knowledgeable and had access to my account and my 2022 Return.  Each rep contributed his understanding of my problem to notes on my account and by the third rep in the Law Department I found a rep who was able to put it all together and actually do something about it.  He reversed the changes made to my return in the CP11, voided the additional taxes, interest and penalty payment demand in the CP503 and restored my 2022 overpayment to my 2023 estimated taxes.  I was told to expect a letter confirming all of this within 4 weeks.   I learned a few things along the way: the telephone numbers in the CP11 and CP503 didn't get me anywhere; the call to the local IRS office led me to the "IRS representatives" who had access to my tax return (although it was tabulated in a different format in their system which caused some confusion in our conversation) including my W-2 ; the Law Department actually pulled up the 2022 Instructions for completing the Form 1040 and followed my argument and had the authority to make decisions over the phone; the IRS will respond to written inquiries within 30 days; the IRS' response to my first letter won't come until about Jan 5 and my second letters until February 26 (so I got ahead of myself and overloaded them); the CP11 and CP503 make threatening demands to meet a stated deadline to pay up which was played down by the representatives I talked with because I had timely responded and was trying to get the problem resolved.  What a trip!  Many hours on the phone; a lot of time with the letters and quit a few bucks for overnight deliveries.  Hopefully I will see all of this resolved in writing soon!