I failed to pay the 10% penalty on the withdrawl and the financial institution did not report it. I am told that if they audit me I will be penalized.
2007-08-20 05:08:53 · 5 answers · asked by charlotte q 2 in Business & Finance ➔ Taxes ➔ United States
The wiothdrawls have never shown up on my 1099 either.
2007-08-20 05:35:19 · update #1
this happened in 2001
2007-08-20 11:26:33 · update #2
The financial institution that distributed the IRA money to you must report it to the IRS. If you did not receive the 1099R showing the withdrawal, rest assured that the IRS has or will receive the information regardless. The 1099R is coded to show that a penalty applies to the withdrawal as well.
If there is any penalty owed on the withdrawal, it is very likely that the IRS will catch the fact that you did not pay the penalty. You will receive a letter sometime in the next three years with penalties and interest on top of the 10% penalty.
If the financial institution did not issue a 1099R, they will catch their own mistake and then send you one. I suggest you ask the financial institution for an accurate 1099R immediately. Amend your return and pay the 10% penalty, and ask that additional penalties be waived because of the delay in issuing the tax document.
2007-08-20 11:19:19 · answer #1 · answered by ninasgramma 7 · 0⤊ 0⤋
It won't take an audit. They will have gotten the info from your 1099 for that year, and their computers can easily match it up. Yout best move would be to file an amended return and pay the 10% penalty. They'll bill you for any interest and penalties already due. Otherwise it could take a couple years for them to catch it, and by that time you'd owe a lot more penalties and interest.
You should have gotten a separate 1099 for the IRA withdrawal. If you didn't, you'd be wise to contact the company holding the IRA.
I am assuming that this is a traditional IRA - if it's a Roth, the rules are very different, and you might not even owe taxes. Or if you rolled it over directly into another IRA, then there might not be any reporting requirements and wouldn't be tax owed.
2007-08-20 12:16:47 · answer #2 · answered by Judy 7 · 1⤊ 0⤋
Did they tell you they didn't report it? That is very odd. If you got a 1099R from the IRA manager, they reported it! They are required by law to report it, so they may get around to doing it later, especially now that you pointed out the error to them.
You've got more to worry about if the withdrawl was from a Traditional IRA since the withdrawl amount would also be taxable, in addition to the penalty. Roth IRAs are potentially taxable depending how much you pulled out and how much earnings you've made. The devil is in the details on that one.
If you are worried about being audited (a lot of that is done by computer nowadays) the sooner you get this fixed, the better. Penalties and interest start accumulating from Apr 15th and they can come back up to 3 years after that date to get what you owe. I'd suggest getting it cleaned up now with a 1040X form and a little help from a tax expert.
2007-08-20 12:23:10 · answer #3 · answered by Patrick S 3 · 1⤊ 0⤋
6 years ago, and they haven't said anything yet?
If you never got a 1099, and it was that long ago, the chances are very slim that they'll find out anything. But you are right; if they audit you, you'll owe an amount equal to 10% of the withdrawal as a penalty for early withdrawal. You'll also owe back interest on the amount.
My money says you're home free.
2007-08-24 01:18:46 · answer #4 · answered by Let me steer you 7 · 0⤊ 0⤋
very likely and when you least expect it too
2007-08-20 12:15:12 · answer #5 · answered by Anonymous · 0⤊ 0⤋