How to respond to IRS letter claiming I owe taxes - cost basis mistake on stocks

Thanks for the quick response! The letter gives me 30 days to respond, so I have about 27 days left. Do you think I need to hire someone for the full response, or could I just have a consultation with a CPA to make sure I'm doing it right? Also, is there a particular type of CPA who specializes in investment tax issues?

For a $40k issue, I'd recommend at least having a CPA review your response before you send it. Many CPAs offer a consultation service where they'll guide you through preparing the response yourself, then review it before submission. This is more cost-effective than having them handle everything. Look for a CPA who specializes in individual taxation rather than business taxes. You don't necessarily need an investment specialist - any experienced personal tax CPA handles these basis issues regularly. The key is finding someone who has experience responding to IRS notices specifically.

That sounds really helpful! I'm dealing with a similar issue but mine involves crypto transactions. Does their system work with crypto exchanges too or just traditional brokerages? I've got like 50+ transactions and I'm drowning in spreadsheets trying to figure it out.

I'm skeptical about these online services. Did you actually get your issue resolved or are you still waiting to hear back? $22k is serious money and I'd be nervous trusting some automated system instead of a professional who can actually represent me if needed.

For crypto transactions, yes it definitely works with those! I actually had a mix of regular stocks and some ETH/BTC trades. The system was able to process both my Coinbase and traditional brokerage PDFs. It organized everything by transaction type which made it super clear. Regarding whether it actually worked - yes, absolutely. I got a resolution letter from the IRS about 6 weeks after submitting my response. They accepted all my documentation and reduced what I owed to just $240 (which was actually correct - I had missed reporting a small dividend). The key was having everything organized perfectly with the matching documentation.

So how exactly does this work? Do you still need to be on the phone the whole time or can you just go about your day while it waits? I've literally spent entire afternoons on hold with the IRS only to have the call drop after 2 hours. It's absolutely maddening.

This sounds like a scam honestly. How does some third-party service magically get you through the IRS phone system when millions of people can't get through? Do they have some special back channel or something? I'm very suspicious of anything claiming to solve government inefficiency.

The service works by using an automated system that waits in the queue for you. You don't need to stay on the phone at all - you just enter your phone number, and their system calls you right before an agent picks up. Then you take over the call. It's basically just holding your place in line. Regarding whether it's a scam - it's definitely not. They don't have any special back channel or insider access. They're simply using technology to solve the hold time problem. They don't see your personal tax information or get involved in your actual IRS conversation at all. The system just navigates the phone tree and waits in the queue so you don't have to. Many tax professionals use it because waiting on hold for hours isn't a good use of billable time.

That's a really good point I hadn't considered. I did file pretty early (mid-February) because I usually get a refund. I'm going to log into my brokerage account right now and see if they issued a corrected 1099-B that I missed. If they did, would I need to file an amended return or just respond to the notice with the updated information?

You typically don't need to file an amended return in this case. The response to the notice effectively serves as your correction. In your response letter, you should explain that you filed with the original information provided by your brokerage, and include copies of both the original and corrected 1099-B forms. Make sure to clearly reconcile the differences between what you reported and what the corrected form shows. The IRS mostly wants to see that you can account for the discrepancy and that you're not trying to hide income. They're generally reasonable when the error originated with the brokerage rather than you.

Online response is definitely better when available! But you still need to scan and upload all your supporting documents. I did mine online last year and still had to upload about 20 pages of stock transaction records. But processing time was only about 3 weeks versus the 2+ months it took when I mailed in a response the previous year.

You make a good point about still needing to provide all the documentation. I should have been clearer. The main advantage isn't reducing what you need to submit, but rather the processing time and confirmation. When you submit online, you get an immediate confirmation that they received your response, which gives peace of mind compared to wondering if your mail got lost. The other major advantage is that online responses typically get processed in the order received, while paper responses can get shuffled into various processing backlogs. This is especially important when responding to a notice with a deadline.