It is always stressful to receive a notice from the IRS. It is far more stressful if the IRS is assessing you over $20,000 for additional taxes and penalties. This was the situation of one client who I assisted a few months ago.
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| Image from forbes.com |
This individual, who for the sake of her privacy I will refer to as X, had always prepared her own tax returns as she only had a W-2, some interest and dividends, and the occasional stock sale. However, in early 2015 she received a Notice from the IRS that she owed over $20,000 of additional taxes and penalties relating to her 2012 income tax return.
She initially tried to resolve the issue with the IRS herself, but unfortunately did not get any positive results. She then talked to a CPA who referred her to me.
I quickly discovered that she inadvertently did not report several stock sales in 2012. The IRS knew the amount of proceeds she received from the transactions because of 1099s that were filed, but they did not know her basis (what she paid for the stocks in the first place). The IRS took the position that X had no basis in the stock, and that the proceeds were 100% taxable gain. This of course was not the case.
I worked with X and her financial advisor, and we discovered that X's basis in the stock was greater than her proceeds (she sold the stock at a loss). I presented this information to the IRS, and prepared amended tax returns for 2012 and all the years subsequent to claim her newly discovered capital losses.
When everything was done, not only did X no longer "owe" the IRS over $20,000, but they owed her money.
If you have received a Notice from the IRS and would like to discuss it, please feel free to send me an e-mail.
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