IRS CP2000 Question
In 2012, I earned ,000 from contract work on a freelancing website called Elance. I had left the money there for about a year before I decided to withdrawal the money (because I did not need it at the time). Before doing so in 2012, Elance sent me 1099 which I had reported all the earned income for that year which was the ,000.
In 2013, I withdrew the money to Paypal and now Paypal is saying this is new earned income and they sent me a 1099-K with that amount added as earned income.
The IRS is saying I owe them that amount but I had already reported that earned income in 2012. What do I need to do to fix this? I have the transaction details from PayPal but I don't believe that is enough information to convince them.
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You'll need to show the whole paper trail: show that the 00 are the same 00 (i.e.: show that you didn't get any new income that was not yet reported on your Elance balance), and show that it was in fact transfer from Elance (matching transactions on both accounts). Obviously, add a letter describing the whole process and pointing to the specific pages and lines in the statements and prior year tax returns.
Follow the instructions on the notice about where to send your response, and make sure you send it certified USPS mail.
Consider having a tax professional (EA/CPA licensed in your State) helping you with this.
For the future - do not leave money on various private parties' accounts. It is uninsured, and if something happens to that company - you lose the money. That includes, in the US, also PayPal accounts.
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