Anyone see these CP2000s that show Ordinary dividends that were omitted from return, but it shows that the same qualified dividends were included on return?

[Just-Lisa-Now-]

Ive seen a few of them for 2016.   The program wont even let you input qualified dividends in box 1b of a 1099DIV without the same or larger amount of ordinary dividends in Box 1a.

It makes the amount due on the CP2000 wrong since its not computing the tax as qualified dividends, so rather than have the client just pay the amount on the CP2000 I've got to prepare a 1040X and attach it to the CP2000 response.

Pretty sneaky IRS, DIYers will just see that they forgot to include the 1099DIV and just pay the amount shown on the notice!

[PhoebeRoberts · Accepted solution]

It's been like that since qualified dividends first became a thing. The IRS has no way to know that the dividends you received were actually "qualified," rather than just tentatively qualified. (Whether the 60 day holding period was met.)

[Just-Lisa-Now-]

Why would it show that the qualified dividends were already included on the return then (when they clearly were not)?    That part doesn't make any sense to me.

[PhoebeRoberts]

They assume you calculated the total qualified dividends correctly, and only omitted nonqualified dividends.

The IRS's computer is programmed to not give you the benefit of the doubt, because people will game that system.

[Marc-TaxMan]

I am confused.  You entered on Sched B input 1a Ordinary Dividends (which includes Qualified Dividends, so 1a must always be bigger than 1b) and 1b Qualified Dividends?  The program properly computed tax but IRS did not?  Yikes

[Just-Lisa-Now-]

Client forgot to bring in that 1099DIV so it was completely omitted from return....it showed $1277 in ordinary divs and the same $1277 as qual divs.   (the return had $135 in ord div and $135 in qual div reported on it from a different brokerage, but that's all)

How that CP2000 could say that $1277 in Qual divs was included on return, but -0- ordinary divs were included is what baffles me.....