Letter from IRS and Call to Prove Identity
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I received a letter from IRS that a portion of my income reported as Miscellaneous on line 21 is cash received for services performed (Form 1099-MISC) as compensation and the payer didn’t withhold required taxes and those earnings were subject to self-employment tax. They asked my to file Schedule SE. I am going to send Schedule SE, Schedule C and Form 8829. They asked me not to send 1040X – just what they asked (Schedule SE) to process my 2016 return. But if I re-characterize Miscellaneous income to earned income (business income as an independent contractor) then other parts of my original tax return will be affected (for example, I must now remove the income originally reported on line 21 and report Business income profit or loss on line 12). If I send them just those schedules they asked (actually, they asked explicitly for Schedule SE) will they complete the rest for me without me sending them 1040X that they asked explicitly not to send? PS: Even though they only asked for Schedule SE, I have to attach Schedule C and Form 8829 as a package because they are closely related.
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Were you working as a independent contractor?
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I wouldn’t trust them to help you out on the rest of your return, so I would send the recalculated 1040X too.
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I worked as an independent contractor and I believe 1040X is sent after they have processed a return (1040). But my return has not been processed because of missing information they are asking (Schedule SE). It is technically rejected for that reason (I paper-filed).
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@richard said in Letter from IRS:
I worked as an independent contractor and I believe 1040X is sent after they have processed a return (1040). But my return has not been processed because of missing information they are asking (Schedule SE). It is technically rejected for that reason (I paper-filed).
Let me rephrase my question. Were you knowingly working as a independent contractor? If you are paid for WORKING someone has to pay the SS tax on it.
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I worked as an independent contractor and signed W-2 Form with a couple of clients. However, I thought I could skip filing Schedule C and simplify by categorizing the income as Miscellaneous. However, it was apparently rejected by IRS computers. Income was reported to me on Form 1099-MISC and no taxes were withheld.
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If your return hasn’t been accepted at all, then don’t do a 1040X, just start over from scratch and categorize your 1099-MISC income correctly this time. Submit a brand new complete return (and a check). Good luck.
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Thanks, they specifically asked not to send 1040X. They asked for SCHEDULE SE (Self-Employment Tax) for Social Security tax. They mentioned no other forms and schedules. I now plan to attach SCHEDULE SE and SCHEDULE C and since I am characterizing my 1099-MISC income as business income I plan to complete a brand new 1040 Form only and not a complete return. There are no changes to other forms and schedules such as SCHEDULE A (Itemized Deductions), SCHEDULE B (Interest and Ordinary Dividends), SCHEDULE D (Capital Gains and Losses) and Form 8949 (Sales and Other Dispositions of Capital Assets).
So I am not attaching these forms and schedules, but only Schedule SE, Schedule C and Form 1040.
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@richard That should work. Only attaching forms that actually have changes on them is probably the best way to go. Don’t forget to send the check since you’re already late!
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I received a follow-up letter from IRS that confirms they received my above forms. Now they want me to call to verify my identity before they process the return. Has anyone on this forum had a similar experience, and if so, what would be your advice when I call them?
From their correspondence:
To expedite the process when you call, you MUST have:- This letter
- Your prior year tax return
- Your current year tax return
- Any supporting documents for each year’s return (such as w-2’s, 1099’s, Schedule C, Schedule F, etc.)
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@richard Not what you asked but… a few years ago I received a letter from my State Tax Dept notifying me that a return had been filed in my name that they didn’t think was real. I confirmed that I hadn’t yet filed my taxes. State advised me to notify the IRS but before I had a chance to do that, the IRS notified me that a return had been filed in my name that they didn’t think was mine. Of course the false returns were looking for large refunds. This happened nationally, to thousands of folks.
So, I would just have in hand the documents they mentioned. They might want you to read a line entry from a previous return so they can confirm its really you.
When my SS# was mis-used I was in the process of re-financing. The lender wasn’t able to get a copy of my previous year’s return because of all this. So I had to call the IRS. I was on “hold” for literally an hour.
My advice for when you call them? Empty your bladder, pour yourself a cup of coffee, grab some snacks and get comfortable.
