Just Shoot Me II

[RitaB]

Twice today, "Why is my refund less this year?"

#1 - Well, you made $7,000 more and had the same amount of income tax withheld. And you did not pay tuition, so you did not have education credits.

#2 - Well, you retired. Remember not going to your job? Where you had $6,000 in income tax withheld?

I have noticed, when the refund is more, no explanation is needed.

[Ray in Ohio]

"But I made a lot more money this year than last" "Shouldn't my refund be higher too?"

[Jack from Ohio]

It is an epidemic!!! I have answered that question 25 times this year at least!!

ME: "You made more money, you had less taxable income, your withholdings were considerably lower, you kept a greater percentage of your income than last year."

HER: "But why is my refund smaller? Something must be wrong."

ME: "Did you notice your paychecks being larger?"

Her: "My checks are direct deposited and I never even look at them."

:dunno:

[kcjenkins]

Jack, there is nothing you can say to a client that dumb, that will satisfy them. So keep it short and sweet. "You had less withheld this year." Or "You made more, but your withholding is less." Or, "They changed the withholding tables to give you more up front." Or my favorite, "The IRS is playing games with your head."

[joanmcq]

I like the last one.

Did good today, big refunds to my two pick-up clients, including one who thanked me profusely because she can now fix the A/C and window on her car. Got to explain how unemployment isn't taxable in CA (yes, there is something that CA doesn't tax!) And did get to give a stern lecture to a client who just retired and didn't have any withholding from her pension.

Did get a rather scary call from a guy who lost his job and took out $640,000 from his 401(k). At least he knows he's in trouble (and is over 55 at least).

[bstaxes]

Gee I wish I had that kind of money in my 401. What is he doing with 640,000?

[Lion EA]

So, client uploads IRS letter (2010) to my portal. How did she forget she sold $44,000 of securities?! She was unemployed, so $44,000 would matter.

By the way, do I just fax IRS a Schedule D, or amend her 2010 return (and amend from what I have in my software or amend from what IRS now says it is with additional $44,000 gross) or...? IRS gave a 4 April deadline! (Yes, I already have her getting her Form 1099-B and gain/loss statement from her broker for 2010.)

[michaelmars]

i would send the 1040x along with a D to the irs as response to the notice but say its for reference only to support the check that you enclose with it.. If they want one filed only then would i file an X

[Lion EA]

That makes sense. Hoping she might have a loss carry forward, as I haven't prepared her 2011 yet. But, her dad invested for her and usually did a great job, so probably a net gain -- and a check.

[Catherine]

Hi Lion --

They usually do NOT want a 1040X with these letter responses. Send a Schedule D showing all the sales they have with basis. Fill out the letter with the checkbox saying "agree with some of the changes" (after all, you agree that there were sales made). Add another letter saying "client did not realize taxable event; we include completed Sch D showing basis; actual gain is $X and not $XXXXX as stated in CP-whatever letter dated-whenever; additional tax due is $X, enclosed/taxpayer has refund due of $X."

That will take care of it, better than 9 times out of 10. But 1040X tosses another wrench in the works unless you find other errors.

[Lion EA]

Thanx. She found her statement. About $8,000 loss. (Dad didn't do as well in this account.) So, should I fax Schedule D with CP letter voucher, and that'll get her federal refund? I'll amend for the states (NY & CT) after tax season.

[Catherine]

Thanx. She found her statement. About $8,000 loss. (Dad didn't do as well in this account.) So, should I fax Schedule D with CP letter voucher, and that'll get her federal refund? I'll amend for the states (NY & CT) after tax season.

Yes, fill out CP letter, fax it with Schedule D plus whatever other written explanation you think pertinent. That should do it. The IRS will eventually inform the states -- up to you whether to wait for the state letter or pre-emptively send an amendment.

In Mass, when the change means MORE tax will be owed, I advise waiting. But that's because the amended return people do NOT share information with anyone else, and are super-slow at processing the returns. Easier/less stressful for client to wait for letter and send right back with already-prepared amended return and note. Then it gets processed right away and there are no extra letters sent automatically when you keep telling the state the amendment is already submitted and in process and please go talk to that unit. 'Cuz you can't submit twice; that is even worse.

[Lion EA]

Thanx. This is my after corporations project !!

[joanmcq]

I don't know about NY & CT, but in CA, if you don't amend within 6 months, you get penalties for not doing so. I don't amend until I get the response back for the CP2000.

Oh, and I'll find out about the $640,000 on Thursday....

[michaelmars]

ny keeps adding interest etc until they get the X

[Catherine]

I have a client (was from MA; moved to WA, now works in CA but lives in WA - yoikes!) who keeps getting letters from CA demanding an amendment we've sent them, in full, TWICE. Called with the last letter and they said to ignore the letters as they are auto-generated. One more letter, though, and I'll be back asking for hints from CA preparers on how to get them to process what they have already been sent!