How Do I Resolve A Tax Problem?i Mis-calculated My 2006 Taxes And Now Owe Irs Approx. 3,000 In Back Taxes,but?
here is my problem, i did my taxes online w/freetax.com who checked my taxes and confirmed they were ok to fwd to irs. irs also reviewed my taxes and issued me a refund,so i ask why did neither agency catch my error? i have had adjustments made on account errors in the past from irs, but this time it was not and i am stuck w/ a payment plan with irs for the next 5-6 years. please advise me how to fight this money re-payment w/irs
If you put the wrong information in, you get bad information out. In IT we call this “garbage in, garbage out.” The program has no way of knowing if you put bad information in so it dutifully cranks out the wrong numbers.
The IRS has 3 years from the filing deadline to audit your return. They did catch your error, just not on the schedule that you might have preferred. Assuming that the IRS is correct in their assessment there’s nothing that you can do but pay the bill. Sorry.
Why do you owe additional tax? If you didn’t report some income, that would not come up when the return was prepared. Is there anything that could be added to reduce the additional tax?
No real way to answer that without knowing what the error was. If it was just a math error, it would have been caught in the first place, so sounds like it was some kind of income or deduction not reported correctly. freetax.com has no way to know that so no way to catch it. And it takes a year or two for the IRS to compare all the info they receive, and catch omissions or misreporting.
Sometimes, the IRS just does strange stuff like that. It’s often not your fault; the best thing to do might be to work with a tax preparer (or tax prep site) to figure out 1) if you have to pay (it could be their mistake!), and 2) how to pay.
I’ve linked to an online tax preparation company below.
Let’s see. 2006 ended on 12/31/2006. You probably filed in February as soon as you got your W-2/1099s. Since the IRS doesn’t get *their* copies of the W-2./1099s until June, they had to use your numbers. (Ditto for the software.)
If you entered a number wrong (say transposed digits in your withholding) or forgot you had 2 more jobs (and looking like you qualified for EIC when you didn’t) or totally misunderstood that something was taxable (like a 1099-R with a 10% penalty), there was no way to catch the error yet.
So, yeah, you are stuck with payments. There is usually *nothing* to fight over unless you forgot an entire form (like cost basis on a schedule D) or qualified for an exemption to a penalty…..
You didn’t say what the error was…. If it was a math error, it SHOULD have been caught by the IRS computer and then it was sent to be reviewed by a human in their Exception Unit.. (where returns go that are kicked out by the computer with something wrong on them)…. the human recalculates the return based on the figures you provided and it either generates out a bil because you owe more or a refund because your tax withheld was larger then the tax on the adjusted gross income (after deductions)…. If you want, you can make corrections to your 2006 taxes by filling an amended return, HOWEVER, if it comes to be that you still OWE, you will have to stick to your payment plan until it is paid off. $3000 over 5-6 YEARS is a very low monthly payment.. and next time If it was NOT a math error – - as I suspect it might not have been, the computer would NOT have caught it and it would have sent your return ahead for refund. There is something called the Federal/State Tape Match which is conducted every year on previous and prior year returns…when the your Federal Return was checked on computer tape to your State return for 2006, THAT is when the error was discovered…. maybe you had incorrect standard deduction or exemptions or different amounts of income or what have you between the two returns… THIS generated an estimate of what you SHOULD have paid on your Federal (and probably State return as well) and the IRS issued you a bill for the $3000 which includes penalties and interest to date… If the error was a MISTAKE in this case…. I would suggest you could still AMEND the 2006 return and show proof that you were entitled to take every deduction and exemption that you claimed… You will also have to amend your State return as well.. or, just accept this IRS bill and pay it…. Remember there are 2 things and ONLY 2 things in life you can NEVER ESCAPE from – - -Death and TAXES