IRS Letters

[Brian EA]

Earlier this week client called and said that she received a letter from Uncle Sam saying that she owes $3880 in underpayment of taxes.I asked her to come in the office so that I can look at the letter.
According to the letter the underpayment is an early withdrawal penalty because she had a distribution form her IRA..She is 58 years old.
In September 2008 she withdraw $38800 from a bank and rolled it over the same day to another bank.
I spoke to an IRS agent who said that they did not receive the 5498 . I asked her why the income was not taxed . She said it must have been a computer problem.
The following day the client mailed a copy of the 5498.

Today another client called and said that her letter from Uncle Sam says that she owes $1900.According to the letter, client reported an excess of $11920 in Mortgage Interest.
I advised client to mail a copy of the 1098.

I am wondering if this is a new way for Uncle Sam to pick up some extra cash.
Anyone else having the same kind of problems?

brian

[S T]

Sounds like

Maybe your clients are receiving CP 2000 notices - computer matching. Had a few for 2006 and 2007 and most I could explain or provide documents, so end result was no addditional taxes due. PITA to have to go through - seems like that dept can not read or match documents - And it seems like it takes about 3 -6 months to resolve.

Sandy

[ChEAr$]

Maybe your clients are receiving CP 2000 notices - computer matching. Had a few for 2006 and 2007 and most I could explain or provide documents, so end result was no addditional taxes due. PITA to have to go through - seems like that dept can not read or match documents - And it seems like it takes about 3 -6 months to resolve.

Sandy

And the problem is exacerbated with responses to cp2000 notices get lost in space even when received by IRS so that 7 months later they go ahead and issue the
90 day letter.

It sure would be nice if a "case" could be assigned to just one person and stay on
their desk from start to finish, like in the old days. Instead we have to call one
phone number after another, getting maybe a person in Austin, next time one
in Holtsville (brrrr!), again in Fresno.

[FEDUKE404]

Matters resolved how?

Question #1: Did she transfer the IRA funds herself, or have an institution-to-institution transfer? Is there a possibility she rolled over "everything I got" but there was some withholding that was taken with the withdrawal? One would think the Form 1099-R would have everything needed, including proper codes. Perhaps Code 1 in box 7 ??

Question #2: Perhaps an AMT issue on the mortgage interest versus the "correct" amount reported?? I thought Form 1098 numbers went to the government automatically.

Oh well, in the current environment it would not surprise me if the government is trying to squeeze some more pennies from the taxpayers....

FE

[DonPriebe]

I had a CP2000 earlier this year on a partial IRA rollover. The taxable amount on the paper 1099-R did not match the taxable amount on the IRS transcript of the 1099-R. Fortunately the IRS transcript also showed the 5498 with the rollover (listed as a contribution.)

[FEDUKE404]

Form 1099 confusion

I had a CP2000 earlier this year on a partial IRA rollover. The taxable amount on the paper 1099-R did not match the taxable amount on the IRS transcript of the 1099-R. Fortunately the IRS transcript also showed the 5498 with the rollover (listed as a contribution.)

Sadly, it has been my experience that the "taxable amount" shown on many, if not most, Forms 1099-R is basically a meaningless number - especially for IRA (traditional/Roth) issues. The fact you apparently had an instance where the IRS had a different number adds even more confusion to the mix!

I guess that's why clients pay us those fees to figure it all out.....

FE

[Brian EA]

Here we go again.
Senior Citizen who did not work or had any taxable income in 2008 received CP 59 letter.
Uncle Sam wants to know why they did not file a return.
They have not filed a return for a few years now except in 2007 for the stimulus.
I spoke to the IRS agent yesterday and he said if there is no reason to file, then ignore the letter.
It's getting better everyday.

[ChEAr$]

Here we go again.
Senior Citizen who did not work or had any taxable income in 2008 received CP 59 letter.
Uncle Sam wants to know why they did not file a return.
They have not filed a return for a few years now except in 2007 for the stimulus.
I spoke to the IRS agent yesterday and he said if there is no reason to file, then ignore the letter.
It's getting better everyday.

I never waste my time on the phone with IRS with these letters.
Simply scribble on back of it with date, notation "filing requirements less than minimum",
show client where to sign it and have client mail it back to them.