It is so important to know your rights before turning any information over to the IRS. San Diego Tax Attorney William D. Hartsock offers this advice.
Why did I receive a CP30 Notice from the IRS?
If you have received a CP30 Notice from the IRS, it usually means that the IRS believes you did not pre-pay enough of your federal income tax obligation for the year specified in the notice within the required timeframe, and has therefore assessed a penalty against you. As a result, the IRS may have collected the penalty from a refund it owed to you, or from tax pre-payments you made for the next tax year; consequently, your refund may be less than you expect it to be, and/or the total amount of your tax pre-payments for next year that you expect to be applied toward your tax obligation for next year is less than you expect it to be. Although taxpayers can meet their pre-payment obligations in a variety of different ways, most do so by directing that a certain amount of tax be withheld from income they earn, or by making quarterly estimated tax payments.
Whenever you receive a CP30 Notice, you should:
- Read the entire CP30 Notice and any enclosures carefully, then determine whether or not you indeed failed to make timely and sufficient tax pre-payments for the tax year(s) in question. Depending on your unique situation, you may need to consult with a Tax Attorney to help you with this. Use IRS Form 2210 to help you determine whether you owe a penalty for underpaying your estimated tax, and if you do, to help you figure the amount of the penalty.
- If you determine that you did underestimate your tax obligations and failed to make timely sufficient tax pre-payments for a particular tax year, in addition to addressing the penalty imposed for that year, you should evaluate whether you need to make adjustments in tax pre-payments you are making for the current year.
- In many cases, a penalty for failing to timely make sufficient estimated tax payments can be reduced or even eliminated, but this depends on whether the facts and circumstances in your case qualify you for such relief. After obtaining sufficient factual information from you, the tax law experts at www.TaxLawFirm.net can better assess whether you have sufficient grounds for requesting that the penalty be reduced or removed.
Answers to Frequently Asked Questions:
How can I tell if enough tax is being withheld from my income?
First, estimate your total tax obligation for the year. Consult IRS Publication 505 and/or a tax professional for guidance with this. Then, determine the amounts that are currently being withheld from all income you are receiving. If enough money to satisfy 90 percent of your estimated tax obligation for this year (or 100 percent of your tax obligation for last year) is not being withheld from your income, make necessary adjustments to achieve that result by doing such things as submitting a new W-4 form to your employer.
How can I determine whether I am making sufficient estimated tax payments?
Consult IRS Publication 505 and/or a tax professional for guidance in determining appropriate estimated tax payment amounts.
How much do I have to pre-pay in order to avoid being assessed an underpayment penalty?
You generally have to pre-pay at least 90 percent of your tax obligation, or pay what is known as a “safe harbor” amount equal to 100 percent of the tax you owed for the year before. However, special rules apply for certain taxpayers like qualifying farmers and fisherman.
When are estimated tax payments due?
In most cases, quarterly tax payments are due on April 15th, June 15th, September 15th and January 15th.
The following images are an example of what an IRS Tax Notice CP30 actually looks like.
This sample notice is for example purposes only. The case facts and figures on your notice will vary according to the specifics of your case.