Re: Handling notice of insufficient tax payment


"Phil Marti" <prm20871@xxxxxxxxxxx> wrote in message
news:cqgrg.3989$Og3.3205@xxxxxxxxxxx
"Bishoop" <none@xxxxxxxxx> wrote:

I received a notice from the IRS that they believe I understated my tax
liability for 2004 by $15K and with penalties and interest they want a
total of $19.5K.

All of the understated income is related to securities sales during 2004.
When I entered the data into my software I was off a couple days in the
transaction date for for a couple of trades. I do not file
electronically so this must have been a manual audit, compaing broker
information against my Sch D.

Not necessarily. When you file on paper they transcribe the Schedule D
information. It sounds like you were missing some, specifically the
"basis" column, or they didn't transcribe it properly.

Although in one case, a $26K sale they highlighted is very clearly listed
on the Sch D on the "correct" date and for the correct amount. I assume
the audit clerk just missed it. It was the very first one listed under
short term gains/losses.

There is one transaction they high lighted that clearly is missing from
my Sch D with a gain of about $500. There is another transaction missing
from my Sch D that they did not catch with a net loss of about $100.

Without Schedule D entries they have no way of knowing how much the gain
or loss was, so the computer assumes a gain equal to the sales price for
each transaction.

<snip>

I redid the Sch D manually in the TaxCut software and the recalculation
put my tax liability at ($40) instead of the $153 I recieved as a refund
for 2004.

Actually my question is, how detailed should I be in my reponse to the
IRS.

Send them the corrected Schedule D with a check for the additional tax
due. We can hope that will take care of it.
--
Phil Marti
Clarksburg, MD


Thanks for the prompt informative reply.


.

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