I got one that kind-of falls into something similar to “evasion or avoidance”… and I didn’t want to start a new thread.
Received an IRS notice CP12 which claims I made a mistake on my 2021 return. I have a Schedule H for one employee with wages > $2500. My understanding per this and this is that if 2021 wages exceeded $2300 (the links show $2400, which is for 2022), then I was supposed to withhold and pay SS and Medicare taxes. The notice says “the amount of cash wages reported on Schedule H was not enough to be considered taxable for employment tax purposes”, so they will refund the employment taxes and I should return half to the employee.
I’m 100% sure they f’ed up, because the wages are way above the threshold, and because I used my spreadsheet and H&R Block to file (print and mail). I downloaded the transcript and the numbers for Schedule H look correct. I did find one number on form 2441 was fat-fingered / mis-scanned, but it shouldn’t make any difference for Schedule H calculations. The question is – do I proceed as the notice suggests (file a corrected W-2C for the employee and refund the money withheld from their paychecks), or do I attempt to dispute? One concern is that once I refund half to the employee who no longer works for me, I won’t be able to get it back. Since I did everything right and the IRS f’ed up – would they be able to reverse this in case of some future audit and send me a bill?
ETA: Further, if I issue a W-2C, then the employee might have to file their own tax return and pay the employment taxes anyway. What a PITA.