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Taxes: I got audited
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Addicted to MacNN
Join Date: Mar 2001
Location: The Rockies
Status:
Offline
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And I deserved it.
In 2004, I made a large withdrawal from a mutual fund savings account to pay for a bunch of home improvement and landscaping stuff. Well, I didn't declare that mutual fund sale on my taxes that year. The rules for figuring how much tax you pay on mutual fund withdrawals are confusing and not easy if you do your taxes online with turbotax like I do, with different methods like FIFO and average cost basis. So rather than try to figure it out, I just didn't do it.
So when I get the "notice" (they apparently don't call them audits anymore), they said I owed them over $3000, plus interest. They had just treated every last bit of that withdrawal as capital gains, and want to tax me on all of it. In reality, with the stock market doing so crappy over the period in question, only a small portion of that would really have been capital gains. Most of it would have been just my own money from my paycheck that I deposited in this fund. My guess is that I might have really paid a few hundred dollars and been done with it.
So I guess I got what's coming to me. At this point I have to go to the trouble of challenging the notice so I can pay the real, much smaller amount that I should have paid to begin with, rather than the several thousand dollars they want.
Ugh. Any advice?
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Addicted to MacNN
Join Date: May 2001
Location: Cupertino, CA
Status:
Offline
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When they find missing data from a tax return, the IRS tends to 'fill in the blanks' in the way most favorable to itself. Just one of those nice favors those good folks at the IRS are willing to do for us citizens. I'd consult a tax advisor since you don't seem to want to deal with the hassle yourself (can't blame you, personally).
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Mac Elite
Join Date: Aug 2002
Location: Chicago, IL
Status:
Offline
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You bear the burden of proof. If your financial records are accurate and complete, then you shouldn't have a problem proving you owe less.
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Professional Poster
Join Date: Mar 2001
Location: Pit Slab #35
Status:
Offline
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Hire a tax attorney, not a tax advisor.
A good tax attorney will talk to the IRS for you, and handle all of the arguing back and forth through faxes and letters.
DO NOT talk directly to the IRS on this issue without being told to do so by your attorney.
This isn't cheap, but it is a mistake that caught up to you, don't make another one by trying to handle this yourself, or on the cheap.
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I tried to sig-spam the forums.
ADVANTAGE Motorsports Marketing, Inc. • speedXdesign, Inc.
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Addicted to MacNN
Join Date: Mar 2001
Location: The Rockies
Status:
Offline
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So I've been pissing around with this stuff all morning, and from what I can figure out, I don't owe anything at all. My first fund purchases were in the late 1990s, when the stock market was going gangbusters, and the price was around $15 per share. When I sold them in 2004 they were at $14.50. So I actually had a capital loss on it, in which case, they probably owe me money.
Here's the fund.
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