They screwed up because espp income was on my w-2 under other income, but they thought it was extra money. Do I need to get a lawyer? Is there someway I can just explain it to them? This has been a pretty bad year.
Honestly, I would have no idea what to do in this situation (aside from hiring a lawyer and creating a thread like this for advice) but best of luck to ya man! [no sarc intended]
Contrary to expectations, in my experience dealing with the IRS, they were remarkably easy to communicate with, they were reasonably understanding, and they had a significant and lengthy appeals process. Were I you, I would contact them and see if you could explain yourself in a way that would clear up the issues informally. If that doesn’t work, there is still a formal appeals process and a chance to get a lawyer. Not sure if this is 100% the right answer, but it is what I would do. Whatever happens, don't panic, as it is a long process from where you are now to the point where they actually try to collect. In my case, the first letter I recieved from them, they told me I owed something obscene and absurd like $350,000, which totally freaked me out. As it turned out, I filed an ammended return and only ended up owing only a couple of thousand dollars.
First of all, before you call a lawyer, go to the local IRS office and talk with them about this- bring work with you because you may have to wait an hour or more (but hopefully less). Trust me, it's way better than calling or writing. Bring all your paperwork with you. They're trained to do what they can to help you (part of the new "customer friendly" approach). I went there due to a mess up, and she found $1,700 in child tax credits that my tax preparer company did not (well, I should say my former preparer). Anyway, visit them first. It's worth the trip. If they don't resolve it to your satisfaction, see a lawyer- go to one that offers a free consultation. Most of the time, attorneys can get your problems fixed and they can arrange payment plans for you. But I can't stress enough to visit them in person- try to get an afternoon off and plan to stay there the whole afternoon if you need to.
I agree with the person above- they're one of the nicest creditors I've ever dealt with. The people that don't like 'em are usually the ones who don't follow the rules-and the rules are really not that difficult. I've never had an IRS agent be anything other than super nice. If I could only say the same about CashCall....
My wife is a tax CPA and constantly deals with IRS agents. The "kindler, gentler IRS" is real thing. They are extensively trained for customer services and are actually a bastion of American customer service. Weird, I know. Anyways, again, contrary to popular belief, the IRS agents that you will work with truly want to help you get your taxes correct and within rules. They have no problem fixing their mistakes in most cases, and like another poster said, will often fix mistakes that people have made. I guess they figured out they can get more tax revenue if they are more service oritented and its not too scary to call them or talk to them. More flies with honey kind of thing. Now dealing with specific state taxing authorities is a whole other issue...
Tax question: If 100% of my income is 1099-misc, can my deductions go against my self employment taxes (SS/medicare)? Otherwards, am I required to pay 100% of my self employment taxes, even if my deductions exceed my income?
I had something like this happen to me about a year ago except it wasn't an amount as high as $10K but it was around $4K or so. What happened was that in 2006, I bought my first home and I took out my roth IRA to help pay for it as a down payment (which is perfectly legal as a first time home buy is one of the exceptions for making a full distribution). I had contacted my financial advisor to send in the cost basis which I knew was a loss since I had a lot of that roth in technology funds and stocks. Well, my stupid CPA never wrote the amount down on the return and as a result the IRS didn't know that it was a loss. They just thought it was additional income that was never claimed and they started applying penalties and interest accrued and all those fun things. Well, needless to say when I got a letter from them saying that I owed closed to 4 grand, I started freaking. But that is where the CPA comes in - I contacted her the next day and she wrote a letter to the IRS and re-did that part of the return that showed the loss from the roth (which she made it clearer unlike the original which got me in this mess to begin with). She even included the tax law/rule that stated I didn't have to pay taxes on a loss. Well, the IRS responded back with a letter a week later that thanked me for my prompt response but that they were still determining that what I told them was really on the level or not. They told me that they could still apply more interest and penalties if I did not pay. I told my CPA with what they came back with and she assured me that I wouldn't have to pay and not to pay them anything. Then 3 more weeks went by and they finally sent me another letter stating that what I had given them was sufficient and that I didn't owe anything. So I would definitely talk to a CPA as a good one can probably get this resolved for you without you having to go to a lawyer or attorney. Good luck.
You'll fill out a Sched-C that includes all your business income (1099 MISC + unreported) and includes all your relevant deductible expenses required to generate that income. Your self-employment taxes will be on the net of that. So if you have $100,000 in revenues and $90,000 in expenses, your SE and income taxes would be based on the $10,000 net profit.
You're absolutely right. But if you have $100,000 in revenues and indicate $90,000 in business expenses, get ready for the audit.
Write "Rangel Rule" on the top of your tax return and tell them it was an honest mistake. That should prevent you from having to pay penalties and interest.
I thought this was the case. For some reason, TurboTax is not calculating my deductions correctly. It is saying I owe the complete amount of self employment taxes on my gross (total of my 1099) income.
