My dad sold stock, given to me by a family member, when I was 14. He was placed in charge, per my relative’s wishes, and sold the stock, but he did not file the taxes on the capital gains. I’m now 20 and I got a phone call from the IRS saying that I am responsible for back taxes, he was acting as my guardian, since the sale was under my info.
2007-12-06 06:58:36 · 9 answers · asked by Anonymous in Business & Finance ➔ Taxes ➔ United States
A chronological list of events would be nice.
If you are in fact getting calls from the IRS collections area, the tax, penalty and interest were already assessed. If the sale of the stock was 6 years ago, the initial IRS letter about unreported income would have been generated 4 years ago. If no one responded to it, the additional tax would have been assessed about 6 months later.
Of course, the IRS will use a basis of zero and treat this as all short term gain, thus maximizing the tax bill. Interest is charged all along. A failure to pay penalty would also be charged but is often waived once the tax is paid, if you ask for the waiver.
The problem is, your father sold these as your custodial parent. It was his responsibility to file and pay the taxes, as well as managing the remaining money for your benefit. If your dad didn't manage the money correctly, you can sue him. The current tax bill is still your responsibility as it was generated under your SSN.
Step one, ask your dad and your relative for ALL records. If you can at least establish that the income was long term capital gain, even if you can't establish a basis, the tax bill can be cut by 1/3rd (and the penalties and interest would go down by the same amount).
By the way, if the value of the stock was more than $10,000 at the time it was given to you, the giver should have filed a form 709 for the gift. That form should show the basis of the stock as it was a required entry.
Second, ask your dad what he did with the money and ask for his assistance in PAYING the tax bill.
If there is any question about the legitimacy of the collections phone call, call the IRS at 1-800-829-1040 and ask for an account transcript.
2007-12-06 07:27:24 · answer #1 · answered by Anonymous · 1⤊ 0⤋
The IRS can abate penalties for reasonable cause, which you certainly have. However, they cannot abate tax or interest.
Keep in mind, though, that the IRS only knows what the stock was sold for. It is basing the tax on that full amount. You need to find out how much your relative paid for the stock, as that reduces your taxable gain. You also need to know when the relative obtained the stock, as you may be eligible for the more favorable long term capital gains rate.
At this point, for all you know there may be a loss on the sale. If so, you would owe nothing.
Edited to add: That was a great catch by Boston above. You should have received a letter.
2007-12-06 15:10:08 · answer #2 · answered by taxreff 7 · 0⤊ 0⤋
If you got a call from IRS it was following at least four balance due notices by mail. You may have been subject to an IRS "Substitute for Return" assessment. In this case, IRS has taken the sale proceeds and presumed the cost was zero. If that is what happened, you will have to have a correct tax return prepared.
2007-12-06 15:40:27 · answer #3 · answered by Anonymous · 2⤊ 0⤋
If the stock was in your name, you are responsible even though he's the one who should have filed a return for you. He could have paid any tax that was due out of the proceeds of the sale.
Something is weird here though - if there's a problem, the IRS sends you a letter, they don't call you on the phone. I'd call them and see what's going on.
2007-12-06 17:03:36 · answer #4 · answered by Judy 7 · 0⤊ 0⤋
This doesn't sound Kosher !! When were the shares sold? You were a minor at the time? It is time you prepare a listing,in chronological order, of everything that happened and be ready to submit it to the IRS.
2007-12-06 15:13:04 · answer #5 · answered by googie 7 · 0⤊ 0⤋
Respond to the IRS in writing with full details of what happened. Since you were a minor at the time of the sale, you may not be liable.
2007-12-06 15:01:38 · answer #6 · answered by npk 7 · 2⤊ 1⤋
Your Dad created a legal mess for you. He should pay and help you get this resolve immediately like starting today.
2007-12-08 08:25:05 · answer #7 · answered by Gary 5 · 0⤊ 0⤋
The IRS does NOT call you on the phone and tell you that you owe taxes. It's ALWAYS done by Snail Mail! It's a scam. Ignore it.
2007-12-06 15:02:42 · answer #8 · answered by Bostonian In MO 7 · 5⤊ 2⤋
interesting, you may need professional help with this one. Oh yeah, and ask your dad for the money!!!
2007-12-06 15:09:38 · answer #9 · answered by Anonymous · 0⤊ 1⤋