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IRS Audit??
Old 12-19-2012, 06:14 PM   #1
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IRS Audit??

Just got word the IRS is auditing our 2010 tax return. They say we owe an additional 5 figure sum in tax penalties for tapping our IRA's early! I would be worried, except for the fact, we did no such thing. All our earnings from that year, were from our employer's traditional pension plans. I think a computer flagged us for some reason, and triggered the audit. We have sent in the needed documentation, and are now waiting.

Has anyone else experienced anything similar?
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Old 12-19-2012, 06:21 PM   #2
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A Turbotax error resulted in similar for me once and the IRS wanted big bux. I sent paperwork documenting the error (other people were hit by the same problem) and the IRS settled for the difference in tax plus interest on late payment. Yeah, Turbotax "guarantees" accuracy and covers penalties, but they make filing a claim very difficult such that I suspect few people bother unless serious dollars are involved.
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Old 12-19-2012, 07:06 PM   #3
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I received a letter from the IRS a few years back saying we owed a lot of money for some mutual funds we sold. We sold them....but was pretty sure I didnt owe what they said. When I reviewed what they sent me - I saw they had the cost basis wrong. I just sent in the documentation, asked them to notify me if I needed to do anything else, and never heard from them again.
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Old 12-19-2012, 07:07 PM   #4
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Originally Posted by Brdofpray View Post
Just got word the IRS is auditing our 2010 tax return. They say we owe an additional 5 figure sum in tax penalties for tapping our IRA's early! I would be worried, except for the fact, we did no such thing. All our earnings from that year, were from our employer's traditional pension plans. I think a computer flagged us for some reason, and triggered the audit. We have sent in the needed documentation, and are now waiting.

Has anyone else experienced anything similar?

Yup, been there done that, with the exception that I was two years into doing a 72T and the IRS said I wasn't and couldn't. I sent all the documentation, time started, annual amount taken, statements from Fidelity, accountant, etc. and got back a letter saying no problem, no exceptions and I was OK.

Just as a suggestion, might want to go back to to make sure your 1099R was coded correctly and if a form 5329 needed to be completed with the appropriate exception properly noted.

I have dealt with the IRS on a number of occasions, a few times for myself and through the years and a few times for and with others and have never had a problem.
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Old 12-20-2012, 09:21 AM   #5
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I have had a couple desk audits. One was complicated -- a challenge to an admittedly complicated deduction. It took me approximately two years to sort things out with them but eventually they agreed to my return and paid the refund in full with interest. If your facts and documents are correct, you should be OK although it may take time to clear the return. Make sure all communications are in writing and get POD on everything you send to them. They "lost" my entire file twice in the process so that accounted for a lot of the time on my difficult one.

They have a machine that spews out nasty looking letters. You will find that you get these letters even when they seem to have acknowledged receipt of other info. I think they have no control over said machine.

Good luck.
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Old 12-20-2012, 09:53 AM   #6
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I have had a couple desk audits. One was complicated -- a challenge to an admittedly complicated deduction. It took me approximately two years to sort things out with them but eventually they agreed to my return and paid the refund in full with interest. If your facts and documents are correct, you should be OK although it may take time to clear the return. Make sure all communications are in writing and get POD on everything you send to them. They "lost" my entire file twice in the process so that accounted for a lot of the time on my difficult one.

They have a machine that spews out nasty looking letters. You will find that you get these letters even when they seem to have acknowledged receipt of other info. I think they have no control over said machine.

Good luck.

Also be aware that this machine LOVES eating trees.... something that should take one page will be 10 pages with lots of sections and numbers that do not make sense (and I used to do tax work, so kinda understand it)....

Know that they take the least favorable stand with you which is why the tax due is so high... even if you made a mistake, the amount owed is probably a lot less than they say.... with me, I typed in a dividend for $1088 as $188... with this, they then disallowed my college credit and something else.... when it was all said and done, I had to pay taxes on only my error...
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Old 12-20-2012, 10:49 AM   #7
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We had an audit on the business expenses portion of our tax return. This happened the year after I turned my sister in for tax fraud after she stole our mother's meager savings & claimed mother as a dependent. I always thought that might have precipitated our audit... that they audit both the whistle blower & the person in question??

Ours turned out fine, tho' I was a bit nervous because my records were in a bit of disarray. My sister? Don't have a clue how she fared; actually don't have a clue if the IRS actually did an audit. Sister could have been otherwise prosecuted (financial abuse), but brothers & I opted not to put elderly mom thru that, she'd suffered enough. Sister gone from our lives... that's good enough.
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Old 12-20-2012, 11:15 AM   #8
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Just wondering if the IRS has regional offices where one can make an appointment and actually sit down face to face with someone. Is that an option?

I hate doing stuff by mail.
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Old 12-20-2012, 11:54 AM   #9
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Just wondering if the IRS has regional offices where one can make an appointment and actually sit down face to face with someone. Is that an option?

I hate doing stuff by mail.
Google is your friend:

Contact Your Local IRS Office
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Old 12-20-2012, 12:18 PM   #10
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Just wondering if the IRS has regional offices where one can make an appointment and actually sit down face to face with someone. Is that an option?
Don't worry, if the amounts are large enough you'll get an invite to show up in person - might even send out a uniformed officer to your house as a personal escort.
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Old 12-20-2012, 01:12 PM   #11
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Yup, been there done that, with the exception that I was two years into doing a 72T and the IRS said I wasn't and couldn't. I sent all the documentation, time started, annual amount taken, statements from Fidelity, accountant, etc. and got back a letter saying no problem, no exceptions and I was OK.

Just as a suggestion, might want to go back to to make sure your 1099R was coded correctly and if a form 5329 needed to be completed with the appropriate exception properly noted.

I have dealt with the IRS on a number of occasions, a few times for myself and through the years and a few times for and with others and have never had a problem.
Similar to above, I have had two 'glitches' over the years. One was my mistake (I can't believe I forgot to include a copy of my Sched A - but there it was, in my stack at home!). The other I think was their fault - the number they had on one entry did not match my number, and this was all done on the computer (and mailed in at the time). My pdf copy had the number, I can't imagine theirs didn't.

Anyhow, in both cases, just submitting the proper documentation cleared it all up. It was pretty painless.

If you are sure you are in the right, just get your docs in order. Should be no problem.

-ERD50
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Old 12-20-2012, 02:43 PM   #12
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Just wondering if the IRS has regional offices where one can make an appointment and actually sit down face to face with someone. Is that an option?

I hate doing stuff by mail.
In-person may not be a good idea: an innocent incorrect statement too easily becomes a fact.
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Old 12-20-2012, 02:53 PM   #13
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I've never been summoned by the IRS, but did hear from the Illinois tax folks one time. I couldn't understand what they wanted. It had to do with my estimated payments not being in synch with my income. They thought I sent in too much of the money too late in the year vs when I was earning the dough. I called to discuss. They were supposed to set me up with someone who would actually look at the case and be prepared to discuss it and answer my questions. It was obvious he didn't and couldn't. I asked for an appointment to come in and talk in person. He insisted we didn't need to do that. I insisted. He insisted. Back and forth, on and on. Finally he said he would get back to me. About three weeks later I got a letter saying the issue was closed and to disregard........ There was very little money involved but I was glad to not have to deal with it just the same.

I was fearful I'd be earmarked for future audits (just to keep me in line - this is Illinois) but in the several years since then, nothing.
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Old 12-20-2012, 04:48 PM   #14
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I've been audited (by mail) twice, and didn't pay a penny either time. Once was a slip I made on a return, the other was an error they made.

As for securities sales, when the IRS doesn't know the cost basis, they simply assume it was zero (to maximize the tax hit) and you just have to show them what it really was.

The only real nuisance was that they took several months to digest the information I sent them, but then they sent me a letter acknowledging that we were still friends.
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Old 12-20-2012, 05:01 PM   #15
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I've been audited (by mail) twice, and didn't pay a penny either time. Once was a slip I made on a return, the other was an error they made.

As for securities sales, when the IRS doesn't know the cost basis, they simply assume it was zero (to maximize the tax hit) and you just have to show them what it really was.

The only real nuisance was that they took several months to digest the information I sent them, but then they sent me a letter acknowledging that we were still friends.
Had same experience. Forgot to include a mutual fund sale, which the IRS got from the funds reporting. They assume zero basis on the full amount of proceeds. Happened to have plenty of unused capital gain losses, so the little real gain was covere. No additional tax due. Also took at least three months before all correspondence was completed.
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Old 12-21-2012, 03:51 PM   #16
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Thanks everyone for your experiences. I KNOW this is their mistake. I will update this post, once I get some resolution.

Merry Christmas everyone!!
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Old 12-21-2012, 04:29 PM   #17
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Thanks everyone for your experiences. I KNOW this is their mistake. I will update this post, once I get some resolution.

Merry Christmas everyone!!
OK... I will be looking for the update next Christmas...
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Old 12-23-2012, 12:18 AM   #18
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Just wondering if the IRS has regional offices where one can make an appointment and actually sit down face to face with someone. Is that an option?
I hate doing stuff by mail.
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Originally Posted by REWahoo View Post
Don't worry, if the amounts are large enough you'll get an invite to show up in person - might even send out a uniformed officer to your house as a personal escort.
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In-person may not be a good idea: an innocent incorrect statement too easily becomes a fact.
Visiting an IRS regional office sounds like a really, really, really bad idea.

If you want to review the issues face-to-face then you could take the IRS letter (and your tax returns) to a CPA or tax attorney who's experienced at visiting IRS regional offices. Then you could have them visit the office for you, or at the very least with you (as long as you agree to say nothing).
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Old 12-23-2012, 06:50 AM   #19
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Visiting an IRS regional office sounds like a really, really, really bad idea.

If you want to review the issues face-to-face then you could take the IRS letter (and your tax returns) to a CPA or tax attorney who's experienced at visiting IRS regional offices. Then you could have them visit the office for you, or at the very least with you (as long as you agree to say nothing).
Agree. Going in person would allow them to notice and open up other issues from either the return in question or other returns.

Strongly agree any personal visit should be by a paid, experienced representative and not the taxpayer.
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Old 12-23-2012, 07:11 AM   #20
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Agree. Going in person would allow them to notice and open up other issues from either the return in question or other returns.

Strongly agree any personal visit should be by a paid, experienced representative and not the taxpayer.
I beg to differ. I think it all depends on what the issue is all about. Twice I have sat down in an IRS office and resolved the issues without any problems. Both cases were mistakes made by the preparer involving omissions, a 1099 and another case an estimated tax payment that was never made but the client took credit for.

Now if you are the emotional type or one who loses your objectivity easily then it is better to have someone represent you. It is after all a business negotiation. The people I dealt with from the IRS face to face were very professional and actually helpful. Just my two cents.
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