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Discussion:CP2000

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Wildcat 24 (talk|edits) said:

31 March 2009
A PITA client who seems its appropriate to give me info in tiny pieces received a CP2000 for unreported income on her 2007 return that she self-prepared. She failed to report income from both an IRA distribution and roth converstion. She claims the investment company failed to send her 1099's and is outraged with the amount of additional tax ($13,341 including accuracy penalty & interest). I know that ignorance is no excuse, but there is absolutely no way my client can pay this. It's obvious an installment agreement will need to be established, but is it worth the effort to write and/or call so the penalty and interest can be removed-claiming she never received the 1099's? This is my first experience dealing with this and would like to help her.

Also, after obtaining the 1099's, the roth conversion 1099 indicates "Roth ira converstion amount" of $20K in box 3, yet the FMV in box 5 equals $14K. Retirement income on CP2000 has full amount of $20K. Isn't the taxable amount upon conversion the FMV?

I'm beginning to hear soft voices suggesting to review past returns for Trad ira deductions - if not, then 8606, especially since client indicated to me she has no recollection of deducting any IRA contributions. Am I on the right track?

Thanks Wildcat24

Joanmcq (talk|edits) said:

31 March 2009
maybe. interest cant and will not be removed. You may be able to cry a good cry and get the penalty waived. Not getting the 1099 is not an excuse, however. How do you not remember getting the money???

Wildcat 24 (talk|edits) said:

31 March 2009
Joan - there is no question she received the money, just whether it was deducted the past x number of years. I've asked my client to obtain a contribution and earning summary by year for both IRA's. I will also ask her to obtain copies of tax returns for as far back as the contribution summary goes (they were self prepared online with HR) to confirm they were or weren't deducted. Worst case I can request transcripts if she can't get a hold of the returns.

If no deductions were taken at all, I would presume her IRA basis to be 100%, however not a single 8606 was filed for the past x number of years and my questions sound like chinese to her. So, my new question:

If after reviewing tax returns/transcripts based on the year of contributions per the summary, and she does in fact have basis due to not deducting contributions, would I then need file an 8606 for each year, then respond to the CP2000 saying her basis is now Y, not 0? Am I tip toeing on the right path?

Deback (talk|edits) said:

March 31, 2009
Chances are that she rolled over a retirement account into an IRA rollover account in the past.

Joanmcq (talk|edits) said:

31 March 2009
My remark regarding the not remembering getting the money has to do with the "I didn't get a 1099 so why do I have to pay all this money' excuse for not putting it on the return, not as to whether she actually got it..and if her memory is that bad, I can see how she would not remember deducting it. Also, if she prepared it online, the program would ask, 'did you make an IRA contribution' but she may never have seen the return, nor known what to look for if she did. So she would not have a clue as to whether she deducted an IRA contribution or not. If she didn't print a copy, its likely she never looked at the return. The broker should be able to get you the 5498s for the IRA, showing contributions and rollovers. the returns show you if they were deducted.

Joanmcq (talk|edits) said:

31 March 2009
oh, and another thing, if she converted 20k, that's the taxable amount. I'm a bit confused though, since box 5 on a 1099-R is for employee contributions or employee premiums, not FMV. If you are looking at the 5498, the FMV is as of 12/31/07, not date of conversion.

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