IRS Notice CP3219A:
Understanding & Responding to Notice of Deficiency

At DimovTax, we frequently assist clients with various IRS notices, such as the CP3219A – Notice of Deficiency. This notice often follows the CP2000 notice if the IRS doesn’t receive a response within a specified timeframe. If unattended, the CP3219A notice typically indicates a higher tax balance due with additional interest and penalties.

What Triggers a CP3219A Notice?

• The IRS issues a CP3219A Notice of Deficiency when the information on your tax return doesn’t align with the data provided by third parties, such as employers or financial institutions. This discrepancy could arise from various sources:
• Missing income from Restricted Stock Units (RSUs), Employee Stock Purchase Plans (ESPPs), or other types of equity compensation.
• Neglected brokerage statements.
• Unreported interest or dividends.
• Withdrawals from 401k or Individual Retirement Accounts (IRAs) that were not accounted for.
• Debt Forgiven income.
• Gambling income, even when losses outweigh the winnings.
• Any other missing income.

For instance, if you forget to include a form 1099-B for sold stocks that yielded a capital gain, the IRS will notice the discrepancy and issue a CP2000 notice. Failing to respond to this notice in 30 days will prompt a follow-up CP3219A notice. Keep in mind that in the event of missing equity income, the cost basis listed in the notice often needs to be adjusted, which results in a significantly larger amount of balance due than the actual tax owed. That is one of the areas that we are specialized in and we can help guide you through such complications.

What To Do When You Receive a CP3219A Notice?

Upon receiving a CP3219A notice, it’s crucial not to ignore it or try to resolve it independently, as this may lead to further complications with the IRS. Instead, it’s advisable to engage professional tax assistance like ours at DimovTax.

Here’s how we can assist you:

1. Comprehend the Notice: We’ll help you understand the proposed changes and why you’ve received the CP3219A notice.
2. Prepare an Accurate Response: We will work with you to submit a formal response. If you agree with the changes, we’ll guide you through the process of signing Form 5564 and returning it to the IRS. If you disagree, we’ll help you compile any additional information to reduce the amount owed.
3. Amend Your Return if Necessary: We’ll help you amend your tax return and appeal the tax and penalties if necessary.
4. Cost basis adjustments: We can help you adjust the cost basis of the RSU, ISO, NSO, and ESPP transactions which significantly reduce the amount owed.
5. Request Abatement: Depending on your specific situation, we may request the abatement of interest, penalties, and tax on your behalf.
6. Avoid Tax Court: We recommend avoiding filing a petition with the U.S. Tax Court. The court process can significantly increase the complexity of your case. We have a streamlined non-court process that has proven successful over the years.

The DimovTax Advantage

We at DimovTax have extensive experience dealing with IRS notices and have a success rate of over 98% on first attempts. We’ve honed a streamlined process to appeal notices, often eliminating the need to file a petition with the Tax Court.

If you receive a CP3219A notice, don’t panic – we’re here to help you resolve the issue. For a custom approach tailored to your specific situation, contact us below today!