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Tax Law (Questions About Taxes)/2011 return being audited


QUESTION: I received a letter today from the IRS indicating that my 2011 return underreported income based on information provided by others.

I was self-employed in 2011 and received only one 1099 for work I did up in Michigan at a client site (it was a very long project).  I billed my client monthly for fees as well as travel expenses.  On my 1099, my client included all fees and expenses, but later corrected the 1099 to only include fees.  I only reported my fees on Schedule C (and also did not report my travel expenses). My client must not have filed the amended 1099 as the IRS thinks I underreported my income by the same amt of my expenses.  So, it's really a wash. I could file an amended 2011 return, but there would be zero impact to AGI and taxes owed.

Have any advice on what to say or do in my response to their letter?


Thanks for your question.

Since they have notified you DO NOT file an amended return.  That will only serve to hopelessly confuse the issue.

My guess is that you got a CP2000 form. These are computer generated with no human input.  It is possible the computer picked up on this one and no one realized an amended one had been filed. Respond to that form and tell them just what you told me.   Include the amount of the expenses and emphasize that you did not deduct them on the return since you did not treat them as income.

Hope this helps.

John Stancil, CPA

---------- FOLLOW-UP ----------

QUESTION: Yep, sure was a CP2000 notice.  Has bar codes all over the address area.

Also has a bar coded payment voucher as well.

Should I only respond with the story, or should I provide a lot more proof that I incurred lots of travel expenses and even summarize the amount by month?  Should I send a picture of all my receipts that I've kept? I don't want to open a can of worms here, but obviously want this to go away without running the risk that a human gets involved and wants to then audit my $75k or so in travel expenses that I didn't report in income or as expenses on my Schedule C.

btw, thanks for the timely response

I would give them a listing of the expenses by category: office supplies, meals, etc. than total them up.  Show the expenses you did take and those you did not deduct.  Don't send the a picture of the receipts, its not that serious, yet.

It is highly likely that, when the IRS actually looks at it, they will realize that a corrected 1099 has been issued.  Be certain to emphasize that first.

John Stancil, CPA

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John Stancil, CPA


I can answer questions on personal income taxes, partnerships, and some corporate income taxes. I can deal with some state tax questions. Limited gift and estate tax questions. I am also familiar with ministerial and church tax reporting issues. I am Professor Emeritus at Florida Southern College. Sales taxes and property taxes are state and local issues so I am not likely be be able to give you an in depth answer on those types of taxes. I have maintained a CPA practice, specializing in tax, for over 35 years. I am a member of the National Association of Tax Professionals, The Florida Insititute of CPA's, The NCPE Fellowship. In addition I am a Certified Mentor for SCORE. Visit my website at I also offer seminars and consultations to churches and clergy on their tax issues at Also visit my blog, I am listed on Tax Connections at Prepare and file your own taxes at


I hold a doctorate in Accounting, and am a CPA. My certifications of CIA, CFM, and CMA are inactive. I passed all certification examinations on the first attempt, and received honorable mention for my scores on the CIA exam. I have operated a CPA firm for over 37 years and have taught accounting and tax at the college level for over 35 years.

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The CPA Journal, Florida CPA Today, Green Consumer, Green Business, Global Sustainability as a Business Imperative, Palmetto Review, NATP TaxPro Quarterly, Mustang Journal of Finance and Accounting.

DBA University of Memphis MBA University of Georgia BS in Accounting Mars Hill University

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