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worried about triggering an audit
Old 02-26-2017, 09:44 AM   #1
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worried about triggering an audit

Last year I worked four months on a 1099 contract.
I put $10K into a solo 401K at Fidelity.

That is a sizable subtraction on line 36 of Form 1040 essentially taking 1/4 off the gross income.

Would this cause the IRS to look more closely at my return?
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Old 02-26-2017, 10:04 AM   #2
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Why would you care, assuming you're honest?

Most audits are very simple. I've been through a couple of them.
  1. They send you a letter telling you what they think.
  2. You send them a letter back with an explanation and copies of pertinent documents.
  3. They send you a final letter saying "Never mind."

Of course that simple 3-step process will take several months, but still nothing to cause any concern. Just keep all your paperwork for 3-4 years and don't worry.
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Old 02-26-2017, 10:05 AM   #3
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I don't know, but TurboTax tells you if you are audit bait or not. They said I was not (whew!). I didn't do anything too weird but my AGI was much lower than the previous year so I was a little uneasy until TurboTax told me that.
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Old 02-26-2017, 10:54 AM   #4
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Quote:
Originally Posted by braumeister View Post
Why would you care, assuming you're honest?

Most audits are very simple. I've been through a couple of them.
  1. They send you a letter telling you what they think.
  2. You send them a letter back with an explanation and copies of pertinent documents.
  3. They send you a final letter saying "Never mind."

Of course that simple 3-step process will take several months, but still nothing to cause any concern. Just keep all your paperwork for 3-4 years and don't worry.
+1
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Old 02-26-2017, 10:56 AM   #5
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Old 02-26-2017, 11:00 AM   #6
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No, this doesn't sound like it would trigger an audit. It's done, so what are you going to do about it anyway? Or do you usually try to do other shady things but are afraid to do so this year because of a potential audit? In which case, yes, you almost certainly will be audited, so don't cheat on your taxes.
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Old 02-26-2017, 12:13 PM   #7
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Old 02-26-2017, 12:21 PM   #8
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I've got a fairly complicated return every year, with being self-employed (and yet still FIREd), having rental properties, investment income, renting a townhouse to DW for less than fair market value and having to declare that income, and in the last few years dealing with my Mom's estate and the sale of her house. TurboTax always has me well into the orange on the audit scale, but I've never been audited during this time (just knocked on wood as I typed this). It's slightly easier to get a full rubber glove audit than it is to win the lottery, but not much. Back when my returns were much simpler (job and some investment income only), I did get mail audited once. As has been said, no big deal. Asked, answered, never hear from them again.
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Old 02-26-2017, 12:24 PM   #9
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Sometimes I worry I may get audited because I have a somewhat complex filing situation due to military status, state of residence, etc. Then I figure, even if I get audited and they find I did something wrong, I'm not evading anything and I'm not doing anything illegal. Maybe they'll tell me I calculated something wrong or claimed some $1000 deduction that isn't correct... but they're not going find anything that causes me to do anything more than: (1) respond via letter; and/or (2) write a small check.
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Old 02-26-2017, 12:29 PM   #10
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I put 100% of my 1099 income less 1/2 FICA+medicare tax into my solo 401(k). I do this routinely. It's all legal for me.

I don't know about your numbers because you didn't provide details.

Here is the NYTimes sample 1040 for 2016. It seems less than half of one's income ends up being taxable. Check it out: https://www.nytimes.com/2017/02/17/b...form-1040.html
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Old 02-26-2017, 03:31 PM   #11
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I put 100% of my 1099 income less 1/2 FICA+medicare tax into my solo 401(k). I do this routinely. It's all legal for me.

I don't know about your numbers because you didn't provide details.

Here is the NYTimes sample 1040 for 2016. It seems less than half of one's income ends up being taxable. Check it out: https://www.nytimes.com/2017/02/17/b...form-1040.html

Thank you for the link.

This is the first time ever where my entire income came almost all from 1099 work and dividends.

Because of qualified dividends and itemized deductions (high NJ real estate taxes) and $10K into the solo 401k, I end up with zero taxes on Line 44. That's a first for me. Obviously, I have the self-employment tax on Line 57.
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Old 02-26-2017, 05:12 PM   #12
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Unless you have a lot of other income that could be subject to tax I would think this is a non-event....

IOW, putting that $10K back into income would not be much money to them... maybe nothing...

I would bet no audit...
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Old 02-26-2017, 10:09 PM   #13
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OP - don't worry, you made me look and last year I put 71% of mine into the 401K solo.
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Old 02-27-2017, 03:10 AM   #14
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IRS audit team most likely has bigger fish to fry.......
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Old 02-27-2017, 08:47 AM   #15
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At least this year will give me an idea of what a year with only Roth conversion would look like.
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Old 02-27-2017, 01:11 PM   #16
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Originally Posted by broadway View Post
Last year I worked four months on a 1099 contract.
I put $10K into a solo 401K at Fidelity.

That is a sizable subtraction on line 36 of Form 1040 essentially taking 1/4 off the gross income.

Would this cause the IRS to look more closely at my return?
If $10K is 25% of your gross, or even 10%, you're too small for the IRS to give a hoot about.
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Old 02-27-2017, 01:26 PM   #17
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Originally Posted by braumeister View Post
Why would you care, assuming you're honest?

Most audits are very simple. I've been through a couple of them.
  1. They send you a letter telling you what they think.
  2. You send them a letter back with an explanation and copies of pertinent documents.
  3. They send you a final letter saying "Never mind."

Of course that simple 3-step process will take several months, but still nothing to cause any concern. Just keep all your paperwork for 3-4 years and don't worry.
+1

I have also been through this process - if you have the paperwork proof it is no big deal. I would not be concerned.
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