I just received a CP2000 from the IRS today for 2004. It basically
said I did not claim enough income according to the W2Gs that they
received and I owe more money.
I kept a daily log in 2004, so when I did my taxes I added my total
winnings and put that number on line 21 (other income). I then added
my total losses for the year. They were greater than my wins so I put
the loss equal to my wins on my schedule A. I then created a separate
sheet with my W2Gs listed on it and a note on the bottom stating that
my W2Gs are accounted for in my win/loss figures.
So I called the IRS and after 20 minutes I got to talk to someone. I
explained the problem.
Her reply was I did it wrong. I need to claim all W2Gs as profit on
line 21 (other income) and any losses as deductions on schedule A. I
then explained to her the numbers on my win/loss log. She said as
long as I was showing a loss she would increase line 21 (other
income) to match the W2Gs amount and increase my loss on schedule A
to match the win and a new letter will be mailed to me in about 4
weeks.
Can't wait for the CP2000 for 2005.
Mike