I got a notice 746 from IRS asking me how I paid my mortgage in a year I didn't file. I actually wasn't working and lived off a cash out refinance. Can I ignore letter, can they ask this?? Will they pursue this?
2007-07-27 03:04:45 · 9 answers · asked by K s 2 in Business & Finance ➔ Taxes ➔ United States
sure they can ask, and sure you don't have to answer. But don't be surprised then if they decide to audit you to see if you are underreporting your income. Better to explain to them exactly what you have said in your question, that you weren't working and lived off a cash out refinance.
2007-07-27 03:47:42 · answer #1 · answered by Anonymous · 2⤊ 0⤋
There should be a contact number on the CP59 letter. Call them and tell them that your income was less than the filing requirement amount for 2007 and that's why you did not file. If their records say otherwise they will provide copies of a transcript that shows what they think that you earned. Keep in mind that unemployment comp IS taxable so if your unemployment was more than the filing requirement amount for your filing status for 2007 ($8,750 if you were Single) then you are required to file a return. It is possible that the mortgage interest 1098 triggered the CP59 letter. Letting them know that you survived on savings and unemployment and earned less than the filing requirement amount may be sufficient. If it's not, just go ahead and file a return and report whatever your interest income and unemployment income were, show no tax liability if that's the case, and they'll close the file.
2016-05-20 17:13:57 · answer #2 · answered by ? 3 · 0⤊ 0⤋
Yes, they can ask that question. Your answer is acceptable and if it's true you will not trigger any tax consequences by answering it truthfully.
If you ignore the letter, the IRS will likely estimate your income based upon the information that they do have available, i.e. the mortgage interest statement (Form 1098) that they have a copy of. They'll use the average income reported by people reporting similar mortgage interest amounts on Schedule A and assess tax based upon that income, plus penalties and interest.
If you do not answer the question, the IRS will almost certanily pursue the issue!
It is NEVER wise to ignore a letter from the IRS, no matter how odd or outrageous the request may seem.
2007-07-27 06:56:44 · answer #3 · answered by Bostonian In MO 7 · 2⤊ 1⤋
Never ignore a letter from the IRS - you'll only cause yourself trouble down the road. And yes, once they have asked, they WILL pursue it, won't just forget about it.
Yes, they have the right to ask. And if you have a valid answer, and it sounds like you do, then give them the answer. They might ask for proof of the cash out refi, but that should close the issue.
2007-07-27 12:11:07 · answer #4 · answered by Judy 7 · 0⤊ 0⤋
The IRS can ask a lot of things and the worst thing you can do it ignore the letter.
I once didn't file because I had been out of work all year and, like you, I lived off of savings (as well as taking in a roommate to share the living expenses.) You'll likely need to be able to document the cash-out refinance. Respond to their letter in whatever way they've requested and under no circumstances do you want to miss the deadline they've given you to respond.
2007-07-27 03:26:15 · answer #5 · answered by ISOintelligentlife 4 · 2⤊ 1⤋
This is a type of audit you are having. Send in documentation showing the cash out refinance and any other documents that establish that you lived off of nontaxable money.
If they are not satisfied, they will pursue further investigation of how you managed to pay your bills and not have any taxable income. They will look at your bank deposits. If there are deposits that didn't come from the refi they will want to know where that money came from.
2007-07-27 03:30:50 · answer #6 · answered by ninasgramma 7 · 4⤊ 1⤋
Unless you want the pain and suffering of an audit down the road, you'd better answer the letter. The IRS (or any branch of the government, for that matter) can make your life hell if you don't cooperate. Trust me - I've been audited by the IRS, and it wasn't pleasant. Avoid it at all costs!
2007-07-27 03:13:18 · answer #7 · answered by Christie 4 · 2⤊ 0⤋
No you cannot ignore this. However, your explanation is perfectly logical. Should they require documentation, you can show them the paper trail, and it will all go away.
2007-07-27 04:18:58 · answer #8 · answered by Gerald 2 · 2⤊ 1⤋
I would answer it simply with the answer you provided us. They can ask & they can pursue.
2007-07-27 03:17:55 · answer #9 · answered by Chaney Lake Girl 2 · 3⤊ 1⤋