The letter says "Apologies, love, hugs, & kisses from your kinder, gentler Internal Revenue Service."
I wish. It actually says "Your income & payment info that we have on file does not match the entries on your 2004 Form 1040."
That's right-- not the tax year we just finished, but the tax year before that. It must be a coincidence that it took the IRS computer over a year to decipher our cryptic message hidden between the lines of Forms 1040 & 8606. We filed electronically but it's almost as if TurboTax didn't give the IRS both pages of 8606.
In Nov 2004 I converted $35,031 of my traditional IRA to a Roth. This was painstakingly calculated against our income & deductions to take us to the top of the 15% tax bracket. The conversion plugs through Form 8606 to determine that the basis in my traditional IRA knocks down the taxable portion of the conversion to $26,062. (I made over a decade of non-deductible traditional IRA contributions.) Line 15a of 1040 says "IRA distributions-- $35,031." Line 15b says "Taxable amount (see instructions)-- $26,062."
I checked our 1099-R from Fidelity-- $35,030.56 with block 7 distribution code "2", which decrypts to "Early distribution, exception applies (under age 59½)." That appears to be the correct code. TurboTax filled out Form 8606 with what appears to be the correct instructions and math.
The last time we had a problem with a tax return we wrote a letter. My plagiarized update for this issue would read:
"As discussed on (date) with (name) at your 1-800-###-#### phone line, we've enclosed a copy of our 2004 Form 8606. This should have been received by the IRS in March 2005 when we submitted our electronic filing for tax year 2004.
Our Form 8606 shows that the IRA conversion amount is correct and that no penalty is due. We ask that you abate your request to pay a penalty, and we’d appreciate your written confirmation that no penalty is due."
Before I get on the phone with the IRS' Customer "Service" staff, I'm wondering about a couple questions for you enrolled agents & audit experts:
- Is it possible that TurboTax screwed up the electronic filing and didn't provide page 2 of Form 8606 to the IRS?
- Or is it possible that TurboTax filed correctly and the IRS screwed up their computer-matching process?
- Besides our paper copy of 8606, is there anything else I should be submitting?
- Are there any other key words or tricky phrases I should use in our letter?
- How long will this go on? Last month we filed spouse's partial IRA conversion for tax year 2005. Is there any way to get the IRS to understand that we'll be doing this for a few more years, or are we going to exchange annual form-letter gunfire for the rest of the decade?
- As a result of this letter and our response, will I be upgraded to a personal appearance with Vinnie the Auditor?
Any semblance of this situation to the movie "V for Vendetta" is entirely coincidental.
It's interesting to note that the IRS' eight-page form letter has many paragraphs about payment options-- partial payments, payment plans, and even bankruptcies. However I couldn't find the block to check that says "The IRS computer is wrong, here's why, and we don't owe the feds any more money." You'd think that the effort to generate & mail this letter is a waste of taxpayer money, but I guess if even one blissfully ignorant taxpayer is intimidated into overpaying their taxes then the entire project is worth it!
I wish. It actually says "Your income & payment info that we have on file does not match the entries on your 2004 Form 1040."
That's right-- not the tax year we just finished, but the tax year before that. It must be a coincidence that it took the IRS computer over a year to decipher our cryptic message hidden between the lines of Forms 1040 & 8606. We filed electronically but it's almost as if TurboTax didn't give the IRS both pages of 8606.
In Nov 2004 I converted $35,031 of my traditional IRA to a Roth. This was painstakingly calculated against our income & deductions to take us to the top of the 15% tax bracket. The conversion plugs through Form 8606 to determine that the basis in my traditional IRA knocks down the taxable portion of the conversion to $26,062. (I made over a decade of non-deductible traditional IRA contributions.) Line 15a of 1040 says "IRA distributions-- $35,031." Line 15b says "Taxable amount (see instructions)-- $26,062."
I checked our 1099-R from Fidelity-- $35,030.56 with block 7 distribution code "2", which decrypts to "Early distribution, exception applies (under age 59½)." That appears to be the correct code. TurboTax filled out Form 8606 with what appears to be the correct instructions and math.
The last time we had a problem with a tax return we wrote a letter. My plagiarized update for this issue would read:
"As discussed on (date) with (name) at your 1-800-###-#### phone line, we've enclosed a copy of our 2004 Form 8606. This should have been received by the IRS in March 2005 when we submitted our electronic filing for tax year 2004.
Our Form 8606 shows that the IRA conversion amount is correct and that no penalty is due. We ask that you abate your request to pay a penalty, and we’d appreciate your written confirmation that no penalty is due."
Before I get on the phone with the IRS' Customer "Service" staff, I'm wondering about a couple questions for you enrolled agents & audit experts:
- Is it possible that TurboTax screwed up the electronic filing and didn't provide page 2 of Form 8606 to the IRS?
- Or is it possible that TurboTax filed correctly and the IRS screwed up their computer-matching process?
- Besides our paper copy of 8606, is there anything else I should be submitting?
- Are there any other key words or tricky phrases I should use in our letter?
- How long will this go on? Last month we filed spouse's partial IRA conversion for tax year 2005. Is there any way to get the IRS to understand that we'll be doing this for a few more years, or are we going to exchange annual form-letter gunfire for the rest of the decade?
- As a result of this letter and our response, will I be upgraded to a personal appearance with Vinnie the Auditor?
Any semblance of this situation to the movie "V for Vendetta" is entirely coincidental.
It's interesting to note that the IRS' eight-page form letter has many paragraphs about payment options-- partial payments, payment plans, and even bankruptcies. However I couldn't find the block to check that says "The IRS computer is wrong, here's why, and we don't owe the feds any more money." You'd think that the effort to generate & mail this letter is a waste of taxpayer money, but I guess if even one blissfully ignorant taxpayer is intimidated into overpaying their taxes then the entire project is worth it!