IRS question- UPDATE 9/3/14!

[disneymagicgirl]

I got a notice regarding 2012 taxes that we didn't claim our state income tax return as income. Thought that was odd because I know the tax program asks about it.
I double checked the rules about it and it states that it does NOT have to be claimed as income as long as the previous year (2011 in this case) you claimed the standard deduction.

Well, I did. However, for tax year 2011 I submitted an amended return. In the original, I claimed an itemized deduction, but when I had to amend for an unrelated reason, I switched to a standard deduction because what I amended changed our itemizations.

I think what happened is their computers did not pick up the amended part since it is only submitted by mail, not electronically??? That is all I can figure.

Anyway, the question is....just pay it so they are happy or send in the form saying why we don't owe the extra $534 with the copy of the amended form showing our standard deduction.

I sort of think it is worth the $534 just to make them happy.

 

[mom2alix]

The letter you received was probably auto-generated based on the original return. If you return the letter with explanation of why you don't owe and the copy of the amended return, you should be fine. I wouldn't pay money I didn't owe to "make them happy". I know those letters always make people anxious, but it's usually not a big deal to send in your documentation to show that you don't really owe. Good luck!

 

[barkley]

write a short explanatory letter and attach the amended return.

we got a letter in may about our 2012 return and supposed unreported income. we sent a letter and our proof of how we had reported it, and by mid june we received a letter saying the issue was resolved at zero due them.

 

[crisi]

Agree with the above. Put all your documentation into the response, your amended return. Write a letter explaining your position. Its very likely to be no big.

Years ago we sold a bunch of stock options, and while I paid the taxes on them as income but I didn't fill out a schedule D - that triggered The Letter - and suddenly I owed some HUGE amount in taxes. I wrote a letter explaining what I'd done, filled out the D that had been lacking and mailed it all off. It took months, but eventually I got an "all clear" letter.

 

[clh2]

You worked really hard for that money...write the letter!

 

[disneymagicgirl]

Thank you all! There are many other things I would rather spend that $534 on! Will update the results when I finish this process.

 

[zoemurr]

write a short explanatory letter and attach the amended return.

we got a letter in may about our 2012 return and supposed unreported income. we sent a letter and our proof of how we had reported it, and by mid june we received a letter saying the issue was resolved at zero due them.

The IRS told us our 2012 taxes were incorrect. We've had phone calls and letters explaining where *they* made the mistake. (A number was transposed when they entered it in the computer.) Over a year later and nothing. Once in awhile we get a letter that says, "we are still working on it." Not confident it will ever be fixed.

 

[barkley]

The IRS told us our 2012 taxes were incorrect. We've had phone calls and letters explaining where *they* made the mistake. (A number was transposed when they entered it in the computer.) Over a year later and nothing. Once in awhile we get a letter that says, "we are still working on it." Not confident it will ever be fixed.

it's nuts.

in our case it was a lump sum of money that if it had been paid timely would have been 2010, 2011 and 2012 income. according to tax law there is a specific form you use for each of the years to determine if the income had been timely received and reported (with that year's other income/deductions) if you could spread it out/possibly file amended returns. in our case spreading it was the best way to go AND since the irs form showed no monies for any of those years owed/owing to us with the additional income our cpa just had to do a specific coding on the return.

when the cpa called the irs about the letter, despite the fact that her irs software wouldn't even permit her to use that income code without filling out (on-line) the specific forms-that form and it's information doesn't get sent to the irs with the return (irs rep admitted to our cpa that 'it should and we send out way to many letters about it every year). we ended up faxing a letter along with the forms to get things resolved (wonder how much it cost the irs to deal with a known problem).

 

[crisi]

it's nuts.

in our case it was a lump sum of money that if it had been paid timely would have been 2010, 2011 and 2012 income. according to tax law there is a specific form you use for each of the years to determine if the income had been timely received and reported (with that year's other income/deductions) if you could spread it out/possibly file amended returns. in our case spreading it was the best way to go AND since the irs form showed no monies for any of those years owed/owing to us with the additional income our cpa just had to do a specific coding on the return.

when the cpa called the irs about the letter, despite the fact that her irs software wouldn't even permit her to use that income code without filling out (on-line) the specific forms-that form and it's information doesn't get sent to the irs with the return (irs rep admitted to our cpa that 'it should and we send out way to many letters about it every year). we ended up faxing a letter along with the forms to get things resolved (wonder how much it cost the irs to deal with a known problem).

And frankly, it isn't likely to get better. Congress and taxpayers hate to fund the IRS - that leaves them underfunded, without sufficient investment in technology, understaffed and those staff underpaid, so they aren't able to hire the best people to solve either technology issues or audit mistakes, which in turn makes the technology they do invest in more expensive.

 

[zoemurr]

it's nuts.

(wonder how much it cost the irs to deal with a known problem).

Not as much as they spend giving money (in the form of Visa debit cards) to crooks that have your name and SS#.. even though the state, marital status, job, salary, dependents, etc. don't match other years. Then when the real person tries to file (me) you need a police report, three forms of ID and the patience to wait 6 months to get your money.

 

[ellochka]

It seems like I get a letter from the IRS, the State, or the city every other year asking to pay more taxes. They were right only one time. I had a letter from the IRS about $0.11 rounding up (I ignored that one). I once had the IRS asking to substantiate the costs of a stock option grant even though only net proceeds were reported on W2. I had the state telling me to pay their taxes for the years I did not live in that state (and I even paid income taxes to a different state). I had the state lose the record of my payment, and of course asking to pay the bill one more time. Ugh. Send them the documents. You are not losing anything here.

 

[disneylove69]

Agree with the above. Put all your documentation into the response, your amended return. Write a letter explaining your position. Its very likely to be no big.

Years ago we sold a bunch of stock options, and while I paid the taxes on them as income but I didn't fill out a schedule D - that triggered The Letter - and suddenly I owed some HUGE amount in taxes. I wrote a letter explaining what I'd done, filled out the D that had been lacking and mailed it all off. It took months, but eventually I got an "all clear" letter.

I did the same thing and thought I did it right. Received a $35k bill. Thanks to my boss, who told me prior to the letter, sharing the same story and what he did to fix I didn't freak when the bill came. I just went online found the form needed, mailed it in and IRS wiped it clean. Don't pay to government money which they are not owed.

 

[disneymagicgirl]

OP HERE-

UPDATE:

I sent off all the paperwork to the IRS showing why I didn't believe we owed the money, along with copies of everything, and a typed letter with all the facts I was presenting.

Got a letter back from them last week saying we owe $0!!

Hoping that is the last of it.

Thanks for all of your advice!

 

[trip]

 

[georgina]

Glad to hear it was resolved. It is always unsettling getting those letters from the IRS claiming you owe them money. We've had them, and my DD got one this summer wanting her to pay taxes on her 529 withdrawal for her college in 2012. I helped her with her taxes that year and told her they were done correctly. She called them up and reminded them she used the money for college, and they sent her a correction letter saying she did not owe. Silly!

 

[ellochka]

YAY!

 

[crisi]

Congrats - its really much easier to deal with than you think its going to be, isn't it. That letter causes all sorts of panic.