IRS Audit??

[Brdofpray]

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?

 

[GrayHare]

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.

 

[KM]

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.

 

[frayne]

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.

 

[jebmke]

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.

 

[Texas Proud]

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...

 

[Bram]

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.

 

[marko]

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.

 

[rescueme]

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

 

[REWahoo]

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.

 

[ERD50]

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

 

[GrayHare]

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.

 

[youbet]

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.

 

[braumeister]

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.

 

[nwsteve]

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.
Nwsteve

 

[Brdofpray]

Thanks everyone for your experiences. I KNOW this is their mistake. I will update this post, once I get some resolution.

Merry Christmas everyone!!

 

[Texas Proud]

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...

 

[Nords]

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.

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.

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).

 

[Purron]

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.

 

[frayne]

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.

 

[ChateauJoe]

Had an IRS audit recently where I had mistakingly received two IRA RMD for 2010. Tried to correct issue with IRS personally by mail. Very painful and slow process with no successful resolution. Got a friend CPA involved and issue was resolved successfully resulting in an additional $400 refund. I will let a professional handle any future issues.

 

[Brdofpray]

On the day after Christmas, I called the IRS contact number on my audit letter to verify their receipt of my back up materials. The reason I did this, their letter stated that if I did not respond within 30 days of the audit letter, they would find in their favor, and send me a tax bill. I wanted to know if they received my material.

While navigating their IRS phone tree, the automated voice requested that no calls be made in regards to the status of an audit case, until at least 30 days had passed, after I sent the my backup information. This would put me 14 days passed the original deadline.

If I complied with the voice and delayed my call for another 2 weeks, and they did not receive my material, I would be screwed.

When I finally got to a live body, the nice IRS agent had no clue in regards to my case. I didn't even try to talk with him, other than verifying they did indeed get my materials. "The holidays have slowed us down a bit", he said. I am supposed to be contacted in another week or two by an agent that is supposedly familiar with my case.

Stay tuned.

 

[jebmke]

On the day after Christmas, I called the IRS contact number on my audit letter to verify their receipt of my back up materials. The reason I did this, their letter stated that if I did not respond within 30 days of the audit letter, they would find in their favor, and send me a tax bill. I wanted to know if they received my material.

While navigating their IRS phone tree, the automated voice requested that no calls be made in regards to the status of an audit case, until at least 30 days had passed, after I sent the my backup information. This would put me 14 days passed the original deadline.

If I complied with the voice and delayed my call for another 2 weeks, and they did not receive my material, I would be screwed.

When I finally got to a live body, the nice IRS agent had no clue in regards to my case. I didn't even try to talk with him, other than verifying they did indeed get my materials. "The holidays have slowed us down a bit", he said. I am supposed to be contacted in another week or two by an agent that is supposedly familiar with my case.

Stay tuned.

I never send anything to the IRS without POD.

 

[Original Wally]

INTERTESTING juxtaposition between THIS topic and "talk to a cop" topic.

I am a (retired) CPA, and so perhaps view it differently... Depending on the amount of money involved, you can either do an IRS matter yourself OR get professional help. Depends. If you REALLY get tangled up in their beaurocracy, there is a "Problems Resolution Officer" who can help. I would say ... if you prepared the return yourself, answer yourself IF it is only a question of documentation. IF your return was prepared for you, TALK TO THE PREPARER and see what s/he suggests. AND remember this... there are three general areas of assessment" Additional tax, Interest on the tax and potential penalty.

Even if your return was prepared....
The TAX should ALWAYS be borne by the taxpayer. The correct tax is the correct tax.

The penalty should be borne by the "responsible" party - preparer AND/OR taxpayer. Did TP provide all the information? Did the Preparer ASK the right questions? So, liability for any penalty is negotiable

Interest charges... One COULD argue that the TP "had the use of the money" and should thereby bear the interest charge. BUT TP cannot earn NEAR what IRS charges. SO... if the issue is TP's fault, TP should eat the interest too. If it is preparer's fault, preparer should (INHO) suck up the whole interest. Otherwise, some split is probably reasonable.

Just my nickel's worth. (usta be 2 cents,,, but inflation takes its toll)

 

[FinanceDude]

Find the local Taxpayer Advocacy office of the IRS. They are trained IRS agents who actually are HELPFUL. They work on behalf of the taxpyer. It was the only way I settled my issue with the IRS, and paid nearly nothing..........