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Check the letter for a notice number (usually in the top right corner or mentioned somewhere in the text). Even if the form fields are empty, the notice type itself can tell you what they're looking for. Also, was your original CP2501 response complete? Did you include: - A signed statement explaining why you disagree - Supporting documents for each disputed item - A copy of the original notice If you missed any of these, that might be why they're asking for more info in this weird follow-up.
That's the weird thing - there's literally NO notice number anywhere on this letter. It has the IRS letterhead and my address, but all the actual fields where information should be are just blank. I double checked my original response and I included everything - signed statement, all supporting docs for the disputed amounts, and attached the original notice copy like they asked. That's why this is so confusing!
In that case, it's definitely a printing error on their end. Sometimes their antiquated systems generate letters but fail to populate the fields with the actual information. Given that you properly responded to the original CP2501, I'd suggest two things: Call the IRS directly at the number on your original notice. Tell them you received a blank follow-up letter and want to confirm the status of your case. Be persistent but polite - the first-line reps sometimes need to transfer you to someone who can actually access your case details. While waiting, keep all your documentation (including this blank letter) organized. Note the date you received it and take pictures/scans of it. If you get any further notices or if they try to assess penalties based on you "not responding" to this blank letter, you'll have evidence that they sent you something impossible to respond to.
Has anyone noticed that these weird IRS letter issues have gotten worse in the last couple years? I've been filing taxes for 30+ years and never had problems until recently. Now I'm getting duplicate notices, letters with missing information, and contradictory statements about what I owe. Is there a specific tax software that's better at helping with IRS notice issues? I've been using TurboTax but they don't seem to have much support for dealing with these kinds of problems.
I switched from TurboTax to FreeTaxUSA and found their audit assistance to be more helpful with notices. I think part of the problem is the IRS is still dealing with a backlog from the pandemic plus they're working with computer systems from the stone age. But yeah, these issues seem more common lately.
One thing to consider before amending - check if your mortgage interest plus other potential itemized deductions (property taxes, state income taxes, charitable donations) actually exceed the standard deduction. Many people assume they should itemize after buying a house, but with the higher standard deduction amounts since 2018, it often doesn't make financial sense unless you have a very large mortgage or lots of other deductions. I amended unnecessarily one year and it was a hassle for what turned out to be only a $120 benefit. Sometimes it's not worth the paperwork!
That's really good advice, thanks! Our property taxes were about $3,400 and we donated maybe $1,000 to charity. Plus the $9,800 in mortgage interest... that's still not enough to exceed the married filing jointly standard deduction, right? Sounds like maybe I shouldn't bother with amending?
Based on those numbers, you're looking at approximately $14,200 in itemized deductions ($9,800 mortgage interest + $3,400 property tax + $1,000 charitable). Since the standard deduction for married filing jointly was $27,700 for 2023, you're still better off with the standard deduction by a significant margin (about $13,500 better). So in your case, I wouldn't recommend filing an amended return since you correctly benefited from taking the standard deduction. Even if you had included the mortgage interest initially, the tax software would have automatically selected the standard deduction since it's more beneficial.
Don't forget about the SALT (State And Local Tax) deduction cap of $10,000! Even if your state income tax and property tax combined are higher, you can only deduct up to $10k when itemizing. This trips up a lot of homeowners in high-tax states who assume all their property taxes will help push them over the standard deduction threshold.
This is such an important point! I live in New Jersey and our property taxes alone are $15k, but I can only claim $10k total between those and state income tax. Really changes the math on whether to itemize or not.
This happened to me too! The key thing to understand is that the safe harbor rules changed slightly after all the COVID relief expired. During COVID years, the IRS was much more lenient with underpayment penalties. What fixed it for me was adjusting my withholding at work by submitting a new W-4. Instead of trying to be precise, I just added a specific additional amount to be withheld from each paycheck (Line 4c on the W-4 form). I took what I owed last year, added a bit more as a buffer, then divided by the number of pay periods remaining in the year. Also definitely look into first-time penalty abatement if this is your first time getting hit with the penalty!
Does adjusting your W-4 really work if a lot of your income is from stock? My regular salary withholding seems fine, but when my RSUs vest, the company only withholds like 22% which isn't enough for my tax bracket.
Adjusting your W-4 absolutely works for addressing under-withholding from stock compensation. The key is to use line 4c on the W-4 form to specify an additional dollar amount to withhold from each regular paycheck to make up for the shortfall from your RSUs. Yes, companies typically withhold only 22% for supplemental wages like RSUs (up to $1 million), which is the standard supplemental withholding rate. If you're in a higher tax bracket, that creates a shortfall. The solution is to calculate that expected shortfall for the year and distribute it across your regular paychecks through the additional withholding amount on line 4c.
Just wanted to mention that the underpayment penalty rules changed slightly after the TCJA (Tax Cuts and Jobs Act) as well. It used to be that you could avoid the penalty by paying 90% of your current year tax OR 100% of your prior year tax (110% if your AGI was over $150k). Under TCJA, they briefly adjusted the 90% threshold down to 80% for one tax year, but then it went back to 90%. Some taxpayers got confused by this temporary change and didn't realize it reverted back. Also, the IRS uses a quarterly assessment for underpayment - meaning they look at when you made payments throughout the year, not just the total by end of year. If you made a lot of money early in the year but your withholding was more evenly distributed, that could trigger a penalty even if previous years didn't.
Wait so they actually look at each quarter separately? I thought they just cared about the total amount withheld by the end of the year. What if most of my stock vests in Q4? Does that mean I should be making estimated payments earlier in the year even though the income hasn't hit yet?
Have you tried completely starting over with the healthcare section in TurboTax? Sometimes their interview gets confused if you go back and change answers. When I had this problem, I cleared the entire healthcare section and started fresh, being super careful about my answers, and it worked. Also, make sure you're indicating you had "minimum essential coverage" through a government program for all 12 months of the year. That's the magic phrase that usually prevents these 1095-A related errors.
I ended up trying this approach last night after seeing your comment. You were right - I deleted all the healthcare info and started fresh, being super careful about how I answered each question. The key was making sure I selected "full year coverage" through a government program AND specifically selecting "Medicaid" from the dropdown. My return got accepted this morning! Thanks for the tip about "minimum essential coverage" - I think that was the phrase I needed to look for.
Is anyone else annoyed that TurboTax has gotten worse over the years despite charging more? Like, for a premium tax product, it should be able to handle something as common as Medicaid without throwing confusing reject codes. I'm switching to FreeTaxUSA next year.
I switched to FreeTaxUSA two years ago and never looked back. It's way more straightforward about healthcare stuff, and they don't nickel and dime you for every form. I used to get so many weird errors with TurboTax.
Gabrielle Dubois
Something no one mentioned yet - if you qualify for Head of Household filing status, that's usually more valuable than an extra dependent deduction. Run the numbers both ways before deciding. Also, the parent who claims the child gets the Child Tax Credit which is worth up to $2,000 per kid for 2024 taxes.
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Tyrone Johnson
ā¢Don't forget that healthcare coverage matters too. The parent who covers the kids on their insurance can usually claim the premium payments as a medical expense (if they itemize and meet the threshold). I learned this the hard way last year!
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Ingrid Larsson
Just be careful - if you both try to claim the same kid without proper documentation, you'll both get letters from the IRS and one of you will have to file an amended return. Happened to a friend of mine and it was a huge headache.
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