Need help responding to IRS notice of deficiency for unreported RSUs and mystery unemployment benefits

Don't panic! This is actually a fairly common situation with RSUs and the IRS's automated matching system. I've seen this many times. First, you need to respond within the timeframe specified on your notice (usually 90 days) to avoid the deficiency becoming final. For the RSUs, you'll need to complete Form 8949 with the correct cost basis information. Your brokerage should have provided a 1099-B with this information. If not, contact them immediately to get the proper documentation. For the dividends, simply report them on Schedule B of an amended return (Form 1040-X). The unemployment benefits claim is the most concerning part and suggests potential identity theft. You should: 1. Contact the state unemployment office that supposedly paid you benefits 2. File an identity theft affidavit (Form 14039) with the IRS 3. Include a clear written statement disputing these benefits When you respond, include copies (not originals) of your supporting documents: corrected 1099-B forms showing proper basis, pay stubs proving employment during the period in question, and any identity theft documentation.

I went through an almost identical situation last year with RSUs and a weird unemployment claim. After struggling for weeks trying to gather all the right documents and getting nowhere with the IRS phone lines, I found this service called taxr.ai (https://taxr.ai) that was an absolute lifesaver. They have this automated system that analyzes IRS notices and tax documents to help you prepare the right response. I uploaded my deficiency notice, my 1099-B showing the correct basis for my RSUs, and my employment records. Their system guided me through exactly what forms to fill out and what documentation to include. The best part was that they provided a response letter template that cited all the relevant tax codes. Really took the stress out of the whole process, and my case was resolved without having to pay the ridiculous amount the IRS initially claimed.

Just wanted to update after trying taxr.ai that was mentioned above. I was skeptical but desperate to get my notice of deficiency handled correctly. Their system immediately identified the RSU cost basis issue and flagged the unemployment claim as potential identity theft. The step-by-step guidance was amazing - they helped me gather the exact documents needed, filled in the forms correctly, and even generated a cover letter that referenced specific tax regulations. The identity theft portion was particularly helpful since I had no idea how to approach that. Just got confirmation that the IRS accepted my response and adjusted my tax liability from over $12,000 down to $263! The unemployment claim was removed completely. Such a relief to have this resolved properly.

If you're having trouble reaching the IRS to discuss your notice (which is likely given their ridiculous wait times), I'd recommend trying Claimyr (https://claimyr.com). I was in a similar situation with a deficiency notice and needed to speak with someone at the IRS ASAP. After trying for days and constantly getting disconnected, I used Claimyr and got through to an IRS agent in under 15 minutes. They have this system that navigates the IRS phone tree for you and holds your place in line. You can see their demo at https://youtu.be/_kiP6q8DX5c to understand how it works. Once I finally talked to a real person at the IRS, they were able to put a temporary hold on my case while I gathered the documentation, which gave me breathing room to properly respond. The agent also gave me specific instructions on what supporting documents they needed to see.

I have to eat my words about Claimyr from my previous comment. After continuing to fail getting through to the IRS for another week, I decided to try it out of desperation. Not only did I get connected to an IRS agent in about 20 minutes, but the agent was able to immediately see that the unemployment benefits on my account were flagged as suspicious already. They put a hold on my case and gave me specific instructions for submitting my documentation. The agent also explained exactly why I hadn't received any preliminary notices (they were sent to an old address despite my having updated it online). Would have never known this if I hadn't been able to speak with someone directly. Sometimes you have to admit when you're wrong, and I was definitely wrong about this service!

Don't forget to check if this is actually a legitimate notice from the IRS! There are tons of scams going around. A real notice of deficiency comes as a certified letter and is called a "90-day letter" or "statutory notice of deficiency." It will reference your right to petition the Tax Court. If it's real, you have 90 days to either: 1. File a petition with the Tax Court (don't need to pay first) 2. Pay the tax and file for a refund 3. Contact the IRS to resolve the issues as others have mentioned The RSU issue is super common - the IRS computer just matches what was reported without knowing the basis. For the unemployment, definitely sounds like identity theft.

When you're prepping your response, make sure your numbers are EXACT. The IRS matching system is very literal. If your 1099-B shows basis of $10,543.27, don't round to $10,543. I made this mistake and it caused my correction to be rejected because the numbers didn't match their records exactly. Also, call your brokerage directly and ask for a corrected/detailed 1099-B that clearly shows the cost basis. Sometimes the initial forms they send don't have all the details the IRS wants to see. Most brokerages deal with this RSU issue constantly and have special documentation they can provide specifically for responding to IRS notices.