You’d think so, but not really. Sometimes it will take them years to go back and reassess a return. Other times something triggers them to look back at your old returns and make sure they were done right (for instance, a mistake on a current return).
And she may have not gotten a bill at the time because the IRS didn’t think she had a debt to them at the time.
Like I said, my dad’s a tax representative that’s been doing this 30 years. We JUST got a notice that the IRS supposedly didn’t receive my 2004 tax return (IE the first year I filed as an adult). The tax return my father did and even paid the tax for me (I was still in high school). He had a copy of the check. They still threw a huge fit.
And that was 3 years later. Oh and my income that year? $5000! Woo! So yeah, if they’ll go over a poor (literally) 18 year old’s returns, you can be sure that they’ll go back over a REAL return with a fine tooth comb if they can.
No! I didn’t deduct the childcare expenses on my refund. That is one of of the great (supposed) benefits of having the FSA do it–I didn’t have to fill out the worksheet, go through steps 1-39, and all that.
I just think it’s weird that, having complied with everything to get that FSA and then get the money back, it turns out to be not only ordinary income, but ordinary income for which no taxes were withheld. Between that and the medical, that was an extra $2500 on my return, and I think that year (2004) I didn’t even use up all the medical in my medical FSA.
Hate to ask the dark question, but is it possible that your husband withdrew $80k from a 401(k) plan without your knowing? I know that 401(k) does get reported as income. If he’s over 50, he could certainly have accumulated that amount.
Did you take any disbursements from a 401(k)?
I don’t know specifically how this works, but do you have to claim dollars earned from overseas royalties? Was that on a 1099? Did you do it?
I have a flex account for childcare and one for medical care through my employer, and I do my own taxes (with turbo tax). The money for those accounts is taken out as pre-tax money, just like a 401K. The money goes into an account and is not taxed, ever. You can use them to pay only qualified medical and childcare expenses.
It is easy to get confused when looking at the deductions while doing your taxes, but make double sure you did not claim your expenses as deductions again. If you have childcare expenses, for example, you can claim them as a deduction but not if you had them taken out of your check pre-tax. It’s an either-or situation but it could be easy to do both accidentally if you are doing your own taxes and you see the line about “claim childcare expenses here” or whatever. The first time I did this I had to triple-check that everything was done correctly. If you had them taken out pre-tax and then really got taxed on that amount anyway, that is wrong but I have the feeling you are just confused on that issue. (you still have to write in the amount on a line somewhere, that does not mean you were taxed on it.)
Claiming child care expenses as a deduction (or medical, or both) when you were not supposed to could easily mean you owe a few thousand more, but I have no idea where the $80,000 figure could come from! But that would be something I would look into. Who did your taxes for the years in question?
I’ve done health FSAs for years, and have never had a problem. If you had to pay taxes on the money you got back, there’d be no reason for them, right? Plus, assuming some third party, like SHPS, handles it, your employer would never know how much you got back.
Do you have an explanation from your employer as to why they gave you a 1099?
For us, we need to re-enroll every year, and the amount gets set to 0 if you don’t explicitly said it to what you want. Maybe you didn’t re-enroll, they took money out by mistake, and then had to declare it as income? (I’m clutching at straws, here.)
Anyhow, that is neither a $3,000 tax bill or $80K in additional income.
I think you may be close. We had various small amounts from various jobs which we were told we could roll into one account, and turn it into a joint account (I think). It looks to the CPA like they are treating the entire account as income for the year. Of course my great fear is that it will turn out that we did some little thing wrong and it will never be fixed. But that still doesn’t add up to the amount they’ve got.
This all comes through my agent, who takes out her 20% (which is what she charges on foreign sales) and forward my check. I always get a 1099 from the agency. Anyway, that wasn’t much.
There was this great myth, at one time, that if you traveled to the country where you earned the royalty and picked it up in person, that the IRS couldn’t ever find it. And of course your trip could be tax deductible if you signed some books while you were there. I never got to test that one but I think it was only a myth.
Well, I am confused about many things, but I was right about this. My CPA is going to redo the thing (again!) and get the FSA amounts off. He seems to feel that the amended return will fix everything right up. I hope he’s right. I am not encouraged that he let the FSA stuff slip by, particularly since I’d already asked him about it.
It is forbidden, under law, to crash airplanes into buildings. Obviously, this “9/11” thing I keep hearing about was some sort of mass hallucination. :rolleyes: :rolleyes:
I’m not a CPA but I did our taxes for years using TurboTax and have a basic understanding on how taxes work. $80k is a significant amount of money to miss. Even if I hired a CPA, I’d still want to know how the IRS got to that figure, for my own edification. That is your right; exercise it.
I would definitely make it a point to be more involved in my own finances going forward. If you get a royalty payment, then write it down in a ledger so that you will remember to report it as income if you don’t receive a 1099 for some reason. If you have a potential taxable event (e.g. you sell property), write it down. Even if you don’t get a 1099, you are still on the hook for reporting the income.
Yeah, your CPA does not sound like a winner. It could be that there is just major miscommunication but it sounds like he did not catch something that seems pretty basic. If you got taxed on your flex accounts that is obviously wrong and he should have seen that. I would look into getting a new CPA, and find one that will sit down with you and explain everything until you can understand what happened, not one that takes everything away from you and magically produces a result.
That’s encouraging. I still think you need to see why your employer screwed up, though, so he doesn’t do it again next year.
As for the IRAs, ours are kept separately in our joint ML account. (My wife’s is actuall a SEP, and mine is ia 401K.) Withdrawal without penalty depends on your age, and if you mix them I don’t see how you could show that the money you withdraw is from the right person. Even if it can be done, keeping them separate would make your accounting much easier.
You might want to check to see if the action of merging them triggered the early withdrawal penalty.
You can merge each person’s 401Ks from different sources into one, though - I think. I moved the one from my old employer into my new employer without difficulty.
If you read carefully it looks like the OP hired her CPA after she got the audit notice, the CPA didn’t prepare that return, I think . So far, since the CPA has the Deficiency down to just $650 it sounds like he is doing his job. Perhaps he could be explaining this better to the OP, but since she wants him to limit his hours, I can see why he isn’t.
. So far, since the CPA has the Deficiency down to just $650 it sounds like he is doing his job. Perhaps he could be explaining this better to the OP, but since she wants him to limit his hours, I can see why he isn’t.