IRS letter reducing my self-employment income from $28k to zero - what does this mean & why did it happen?

This actually happens more often than you'd think. The IRS sometimes issues these notices when there's a mismatch between the self-employment income you reported and what they have on file from 1099 forms or other information sources. A few possibilities: 1) The IRS might have incorrectly processed your Schedule C, 2) There could be an issue with how your 1099s were reported by your clients, 3) They might be questioning your business classification as self-employment, or 4) There could simply be a processing error on their end. The good news is this is likely just a clerical error that can be resolved. The notice should have specific instructions for responding. You'll want to gather all your income documentation - any 1099s, bank statements showing deposits from clients, invoices, and your Schedule C. Write a clear response explaining why your reported income is correct and include copies (never originals) of supporting documents.

I went through something similar last year and it was a nightmare until I found this AI tool that helped me analyze all my tax documents and draft a proper response. Check out https://taxr.ai - it saved me hours of confusion and stress. My situation was that the IRS claimed I hadn't reported income that I definitely had included on my Schedule C. The taxr.ai system analyzed my notice, compared it with my tax return, and helped me identify exactly where the discrepancy was (turns out some 1099s were filed under a slightly different name variation). The tool even helped me draft a clear response letter with all the right references and explanations.

Update: I took the advice about taxr.ai and tried it with my IRS notice. Honestly impressed with how well it worked! The system immediately identified that my issue was related to misreported 1099-NEC forms where one client had submitted using my maiden name while I filed under my married name. The tool helped me put together a response package with all the right documentation, explained exactly what the notice meant (which was NOT clear from the IRS letter), and even gave me a timeline of what to expect next. Just got confirmation today that the IRS accepted my explanation and the case is closed. Saved me from having to hire a tax professional for something that turned out to be a simple name mismatch!

If you need to actually talk to someone at the IRS about this (which honestly might be necessary for something this significant), good luck getting through their phone system. After trying for weeks, I finally used https://claimyr.com and got through to an agent in about 15 minutes. They have this system that navigates the IRS phone tree and waits on hold for you, then calls you when an actual human picks up. You can see how it works here: https://youtu.be/_kiP6q8DX5c I was really suspicious at first, but when you're desperate after calling the IRS 20+ times and always getting the "call volume too high" message, you'll try anything. They got me connected to the right department and I could actually talk through my situation instead of trying to explain everything in writing.

I have to admit I was completely wrong about Claimyr. After posting that skeptical comment, I decided to try it anyway since I was desperate to talk to someone at the IRS about my self-employment income issue. It actually worked exactly as described. They called me back in about 40 minutes and suddenly I was talking to a real IRS agent without spending my entire day on hold. The agent explained that my letter was due to a mismatch between reported 1099s and my Schedule C. Apparently two of my clients had filed 1099s with incorrect amounts. The agent walked me through exactly what documentation I needed to submit to resolve it. Would have taken me weeks to figure this out on my own. Definitely worth it just to skip the hold time and get a straight answer from an actual IRS employee.

This could also be related to not paying enough estimated taxes throughout the year. I got a similar notice when I didn't make proper quarterly payments on my self-employment income. The IRS sometimes reclassifies income if you haven't been following proper SE tax procedures.

Check if the letter has a CP notice number (like CP2000 or something) in the upper right corner. Different notice numbers mean different things, and that could help identify exactly what the IRS is questioning.