IRS Audit question- turns out we over paid.. what now?
 

I helped my g/f last year with her taxes. I asked her numerous times whether she had given me all her tax papers and she assured me that she had.

The IRS just sent her a letter saying she was being audited for over 50K in unreported stock transactions. Guess she didn't give me all the papers. :eek:

Well to make a long story short, I figured out what happened and apparently we never reported her stock transactions. Fortunately, with all her deductions and only small profits in those transactions, it looks like she overpaid her taxes by about $4k. I am thinking we should just send the IRS back an explanation with an amended return as well as her appropriate brokerage statements and wait for a refund. Since she is owed money, does anybody see any problems with this approach?

Thanks,

It's worth a shot, but I suspect they'll be doing the audit. Is it a full audit or just certain things that they want to look at for a certain year or so?

It's a pain in the azz, but as long as they owe her, it should turn out fine.

It seems as if they just have questions about those unreported transactions. So hopefully sending in the documentation and an explanation should suffice.

If she overpaid her taxes, I think you should file an amended return.

I did my wife's taxes the other night and was pretty frustrated by some of the stock transaction papers. The one with the dates of sale and sales price has big boldface print saying, "This information is being furnished to the IRS." But the other sheet with the purchase date and price reads that it's "For your records only. Not being reported to the IRS." Why? How does the IRS know whether you had a cap. gain or loss, if they only know the sales date and price?

Neil, I think that once they schedule you for an audit you have to just go to the appointment and they deal with it there. But, if you've got it all figured out, you probably don't have to worry about much.

If you have an audit notice that has the local person your case is assigned to, maybe you should give 'em a call. If you can file an amended return, then fine. But then they might just scrutinize that one and audit you anyway, a few months later.

(And, remember those auditors deal with a-holes ALL DAY LONG, so laughs and smiles go a looooong way. My last audit lasted and hour and 5 minutes, even though they ask you to allow 3-4 hours.)

Tell me about it Rick.

When we got the letter, I was doing the math wondering how much trouble she was going to be in for under reporting 50K. The audit form had the gross of all the sales, yet the net profit might have been a couple thousand $. Why doesn't the IRS request all the data while they are at it?

Don, the audit letter specifically states not to file an amended return. We'll include an amended return in our response.

IRS lost my return in 1999. Took all of my deductions and turned them into income. Said I owed them $118,000.
I asked the guy if he's take a check.
He said sure.
Dug up all of my old records and corrected them.

welcome to the club.
the IRS doesn't care what you paid, they only care what you got and will tax you on it. The onus is on you to show the cost and profit.....ask me how i know....

Just don't give 'em my name.

How retarded is that system?

Don't bother answering that.