posted
wife just called me to say we had got a letter in the mail today saying we owe the IRS $16,000 for something on our 2005 tax return. I cashed in a mutual fund that my grandfather had given me a while ago to use as a down payment on a new house, and that seems to be the crux of the issue. Haven;t actually seen the letter yet, so I'm hoping there's a mistake, but the total amount was like $38,000 he opened it with $10,000, and I put in another $3-5,000 over time. I would think that even if I scrwed up the taxes the most it would be would be about 28% of $25,000. $6,250 would still suck a lot, but would be better than $16,000.
Hopefully the whole thing is just a mix up.
Like I said, not really stock, but just wanted to relate a (possibly) amusing anecdote.
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posted
PC I am hoping that it is a screw up on IRS's side...but if you used it for a down payment on a home...seems you would be good... Hope it truns out for the postitive!!! GL!
-------------------- #1 Rule: Protect your capital! #2 Rule: Never fall for the BS on the boards!
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I just glanced at the letter, and will look ore thoroughly this weekend, but here's the basic deal.
They said I made $46,000 that year in capital gains. $38,000 from a mutual fund that my grandfather had set up for me years prior, and $8,000 in Scottrade.
Really though, I broke even for the year in Scottrade (they only showed gains, not counteracting losses), and of the $38,000 in the mutual fund, my grandfather opened it with like $10,000 and I had added another 3-4,000, so I thikn I may owe long term cap gains on like $25,000. SO my guess is I'll owe like $3,000 plus some fines and interest, which is doable.
When they added $46,000 to my income it pushed me to the next tax bracket, put me over the limit for child tax credit, and student loan deductions, and put me in the next % bracket, so it effected everything. Then they showed like $4500 in "inaccuracy" fees and interest, which is why it got up to $16,000.
I'm pretty sure it's definintely my fault in that I didn't do it correctly, but I didn't think I had to file the Scottrade stuff since I didn't make any money, and thought since I used the mutual fund for our new house I didn't have to pay on that either.
I'll get it all figured out this weekend, but my guess is just that $4K or so.
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when the IRS sends these letters they only look at gross proceeds on the 1099-b. any amounts not reported on your return they just assume that as income. you are correct they don't take into account cost basis. so they just tell you you owe them x amount based on the sales only. you just need to respond with proof of cost basis and they will adjust amount owed accordingly.
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Thanks! Just got off the phone with the mutual fund company (American Century) and they're sending me a new 1099. Looks like I'll owe taxes on $14,000 of long term cap gains and $2000 of short term so should be under $3,000 total. Woo hoo!
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