I recieved a letter from the IRS saying I owe $4400..?

Question

i recieved a letter saying I OWE $4400 from 2005, it seems that I had stock sales where they dont have a cost basis for me, so when they saw that i made money on stocks, they are not taking into consideration the amount i paid for the stocks, even though i filled out a schedule Dshowing what i paid and what i sold them for, they are not inclding what i paid and claiming the whole sale of the stocks as capital gains, even though on some of the stocks i lost money on. what's the deal,, dont they have my schedule d?? it wasnt even for all my stocks just a few of them. .anyone ever get tihs type of letter??

Answer 1

Check to be sure these weren't some additional sales that you forgot to list on your schedule D. If these items weren't listed, then they don't know what you paid for them so they assess tax like you have zero cost basis. This is easily corrected with them.

The letter should say what to do if you disagree with their assessment. Follow those instructions, and you'll be fine.

If you DID show those sales on your schedule D, is it possible that you combined two sales on one line on schedule D?

In any case, be sure to respond by the time they give, and figure out what happened and correct it, and send them a new schedule D. You almost certainly don't owe that much, and might even not owe anything, it might just be paperwork. And if you had a loss on the stocks, you could even end up with a refund if you had a loss.

Yes I've seen this type of letter, and the IRS is very cooperative and easy to work with in getting things corrected.

Answer 2

These "letters" are called CP2000 forms regarding underreporting of income. The IRS has received some type of document reporting income that they believe was not "properly" reported on your return. These are very common for stock transactions. They get a 1099B reporting a stock sale which you did not see because it was tucked away in a 10 page form regarding all of your stock tranactions for the year. The 1099B shows only that you sold a given amount of a stock (for say $15,000). The IRS has no idea what the basis is for that stock nor do they care if it is short or long term gain. They send you a CP2000 which says that you owe tax on the additional $15,000 and any other adjustments that may have occured had you really made $15,000 on that deal (like your SS income is now taxable). If this was a stock option you may have already paid the tax via your earnings as reported on yopur W-2. They don't care they want you to explain why you don't really owe the tax. Some folks just send in the money they ask for but you should never do that. Carefully research the issues they are reporting on the CP2000 and send them an explaination. Normally that will take care of the matter unless you really did not report a stock transaction. In that case you figure out what the tax would have been, write out your explaination and send them some money. These forms are confusing to those who have not dealt with them but more often than not you don't owe them anything. In some cases they owe you. Find a tax professional to help you with the response.

Answer 3

Dd you file your 2010 tax return? Some income sources are reported to the IRS. If you had W-2s and did not file your return, the IRS filed it for you and is refunding the money. But they usually don't do that so quickly. You might have forgotten some of your W-2s if you hs multiple jobs. The IRS is nw correcting your return and refunding the additional overpayment.

Answer 4

Judy is absolutely correct. You don't need any additional answers.