Got a big fat envelope from the IRS today, opened it up and just about had a fit, there’s a form explaining that I understated my income by (scandalous amount) and that I owe them about $5500, including interest. This is from my 2005 return.
I have a very simple tax structure (salary from one job, one big deduction which is my mortgage, that’s about it) so I’m wondering WTF is going on. Thankfully I have been keeping copies of all my old tax documents like a good little boy.
Start plowing through it and realize that I transferred some money from one investment fund to another. I didn’t realize that this means that they sell the old fund and then buy into the new fund…and you get taxed on the profits of the first sale.
This is my introduction to the wild wild world of the Capital Gains Tax.
However I got off lucky - when I sold it was actually at a bit of a loss, so after filling out a handful of forms I find out that my taxable income went down, and so the Feds owe me a few hundred bucks, as does the state. Worth getting scared over for a few minutes.