I was sent a check for a settlement on Dec 30th 2005 that was a Friday. I got it on Jan 4th and put it in the bank. Since I got it in 2006 I thought it would be for the 2006 year. Now I am getting a notice from the IRS saying I owe big time. What can I do?
2007-03-08 03:11:22 · 7 answers · asked by lorilou 2 in Business & Finance ➔ Taxes ➔ United States
The amount was 40k and the IRS now wants 27k
2007-03-08 04:32:51 · update #1
It was from a former employer from an accident. I did not get a 1099.
2007-03-09 09:29:38 · update #2
Hold on a second!
What kind of settlement is it?
Some kinds of settlements are not taxable.
Did you receive some kind of Form 1099 or other notice related to the settlement breaking down the amount subject to income tax? Was any of it a reimbursement of previously taxed money?
How did the IRS find out about the amount of the settlement?
Even if it is taxable, I would dispute the year it should be included in income with the IRS. You are looking at some pretty large amounts of interest and maybe penalties. If you are a cash-basis taxpayer, than it taxable when you received it, not when it was mailed and not when you deposited it. Send them a letter disagreeing with the inclusion of the settlement in 2005 and explain why it should be included in 2006 income. If the IRS persists with this position discuss it with a CPA.
To follow up.
Is the settlement for lost wages or for a permanent disability? Did your employer do backup withholding on the payment?
It is beginning to appear that this question may be too complex to resolve here. You might need to consult with a CPA.
2007-03-09 08:56:19 · answer #1 · answered by RAG 2 · 0⤊ 0⤋
2005
2007-03-08 03:49:11 · answer #2 · answered by krazyshadowkat 2 · 0⤊ 0⤋
Yvonne is right, it's 2005 income. Now don't waste anymore time, contact the IRS and try to work out a deal. If you feel uncapable find a good lawyer or see legal aid help if you qualify to reduce the penalties and fees. But don't waste anymore time, in January 2006 is when you should of been calling the IRS. Then all you had to do was amend your return. Good luck
2007-03-08 03:46:50 · answer #3 · answered by Staci 4 · 0⤊ 0⤋
The only thing that matters is the date on the check, even though you got it in 2006 it is still income from 2005 because it was dated 12/30/05.
2007-03-08 03:21:17 · answer #4 · answered by Yvonna L 2 · 0⤊ 0⤋
Call the IRS and ask them. Since it was mailed on 12/30 the company claimed the payment on their 05 taxes. That is the reason the government wants their share.
2007-03-08 03:23:08 · answer #5 · answered by Fordman 7 · 2⤊ 0⤋
If it was mailed Dec 05, it certainly couldn't be for 06, because 06 wasn't here yet.
2007-03-08 03:19:10 · answer #6 · answered by J. P. 7 · 0⤊ 0⤋
This is a challenging question, and one that has made me curious for quite a long time.
2016-08-23 20:40:44 · answer #7 · answered by Anonymous · 0⤊ 0⤋