^%$#&ing IRS

[cute fuzzy bunny]

I love the IRS.

Got a notice today showing about 40 stock/fund sales from my 2002 1099's dont match up with my 2002 return.

First problem: my office entropy. I immediately found all my tax returns and supporting evidence for 1987-2003, except of course for the 2002 materials. A real pisser since I had the 2002 return out just a few months ago when I did my 2003 return.

Argh.

I have the 2002 turbotax file, but also can find all my turbotax software except the 2002 copy. I sense an invisible hand is at work.

After totally demolishing my office and removing every box, bag and filing cabinet filled with paperwork, I find in the bottom of the last drawer (now why didnt I look there first), all the paperwork and returns in a heap upside down. I must have been in a hurry cleaning up at one point and decided I'd be refiling everything sooner or later...ok...later...so in the drawer with it.

Quick review. Not one thing amiss. For each item they list, I have a corresponding item, same amount, on my return.

The ONLY thing I can think of is for about 5 or 6 of the sales, they were multiple lot purchases and sales, and I listed each lot for cost basis and sales amount, rather than lumping them. Thats how quicken and turbotax decided to handle them, anyhow, and I didnt see anything wrong with that.

Please tell me they decided not to simply add up a couple of numbers before adding 50 points to my blood pressure...

[end rant]

 

[wabmester]

It probably wasn't a human. If there's one thing you can count on, the IRS will contact you if your 1040 data doesn't match your W2, 1099s, etc. Check the corresponding 1099 to see how your broker reported the sales.

 

[Cut-Throat]

TH,

This is one reason I do not do my taxes myself. My preparer is aware of all the gotchas and saves me from these hassles. Well worth the $175 per year.

Think about it.

 

[unclemick]

1987 - That's when the IRS finally admitted they were wrong on 1985 and gave me a refund -ticked them off and the money wasn't worth the hassle. Got and kept the same accountant ever since - although I do have this incurable habit of 'roughing out' my taxes before I take them to her - just to see if I'm staying 'current and up to snuff', tax strategy wise.

 

[cute fuzzy bunny]

I'm wondering about whether it was a computer thing or an actual review. The 1099's and the bottom line of my schedule D are in tune to the penny. I'm thinking it was a hand review simply because my 2002 return was the first one where I had no W-2 income, and my taxable income dropped from high six and seven figure levels to about $8k.

I'm certain THAT got someones attention. They probably already had my tax check spent on a new set of wings for a B-1 bomber or a rocket engine for one of those trips to mars.

In an entertaining demonstration of my mindset, I did the schedule D using separate reporting lines for each stock lot to make MY life easier in the event of an audit with no thought to how the IRS would like it; I can simply show buy/sell sheets for each item. I suppose if it annoys them they can send me a letter and I can "do the math" for them.

The big deal was not being able to find the paperwork for six hours. Had it been available immediately I wouldnt have gotten so worked up about it.

Motto of the story: keep your paperwork in order. I've now completely refiled my paperwork and you can even walk into my office without stepping over several bags of golf clubs, tripping over my old computer which is laying on the floor in parts, and having to push aside the meter wide ball of various cables and wires.

I guess having an accountant do it, especially when you're in the high value range we're at, makes a lot of sense. I'm just too much of a do-it-yourselfer on everything.

I'm still bemused that instead of a few minutes of looking it over and seeing that the bottom line math was correct, that they initiated this action.

Maybe Ted went to work at the IRS and is trying to scare me back to work

 

[John Galt]

I made a living as an accountant for many years of my
career. I do my personal income taxes, but for my small
holding company I use a CPA. Like Cut-Throat, for
me it's worth the money even though I could do it
myself. And, I am a guy who draws his own will,
buys and sells real estate, etc. without an attorney.
Tax law is just too complex for me to keep up with.
One example. I noticed the personal income tax guide for 2004 was about twice the size as it was 10 years ago.

John Galt

 

[wzd]

There is also an instant computer generated flag, and since you say it is for 2002, this could be it. Total the 1099B numbers for sales proceeds (there is one total number on each 1099B). Then total the numbers on your schedule D for "total short term sales proceeds" (line 3) and "total long term sales proceeds"(line 10). If these two numbers do not match, and if the 1099 number is larger, red flag. The schedule D number can be larger, since not all transactions are reportable to the IRS (I'm not sure why they leave holes like that!)

One trap for the unwary is the treatment of open short sale positions as of the end of the year. These actually have to be reported for the 1099B to equal the schedule D.

Wayne

 

[retire@40]

A good CPA can be an ER's best friend. Especially when the CPA wants to ER too! The few hundred dollars you spend on a CPA who understands your situation can easily come back to you multifold in the form of tax savings and good investment planning.

Find yourself a local CPA and ask him what he can tell you about retiring early, and what strategy to use, and ways you can improve your financial situation. He probably won't give you a silver bullet right away, but as he gets to know you and your risk tolerence, he should be able to put you on the road to financial success. Oh ya, he can do your tax returns too.

Of course, your CPA should also be practicing what he preaches, so you should ask him if he plans on retiring early too. If not, I would move on another CPA.

 

[cute fuzzy bunny]

Wayne -

The delta between the 1099 and the schedule "D" was two bucks out of roughly $300,000. I think offhand that this is closer than most filers manage.

I think the red flag was going from paying about a half million a year in combined state and federal taxes through 2001, then paying zero in 2002 and 2003.

Anywho, I took the schedule D, penned it up for grade schoolers, wrote them a nice letter, and sent it all back.

 

[John Galt]

I'm pretty sure you are right about the "red flag".
It's like the line from 'Ghostbusters'............"that's
a really big Twinkie!"

John Galt

 

[cute fuzzy bunny]

Yeah, I hear that a lot

 

[John Galt]

I used to hear that about my "Twinkie". Lately, though
the comments run more to "Where is our old friend?"
I don't mind really. My courtship days are far behind me
now, and I will never run out of adventures.
Still........................

John Galt

 

[wzd]

Wayne -

The delta between the 1099 and the schedule "D" was two bucks out of roughly $300,000. I think offhand that this is closer than most filers manage.

Years ago, I was sent a notice for unreported 1099B income, and the difference was due to rounding errors - when rounded according to their directions. I have since checked the totals and fudge the rounding until they match exactly.

But I also agree, that a year to year change like you mention is also a very likely audit trigger (although you might want to discount it since it makes too much sense....).

Wayne

 

[John Galt]

Yep, adding "making sense" to anything controlled
by your government is an embryonic oxymoron.

John Galt

 

[cute fuzzy bunny]

8 syllables at 4am...BRAVO!!!