The IRS Audit Blog

Archive for August, 2008

Question: Can a capital loss reported on a schedule K-1 (form 1065) be used to offset a realized capital gain?

A large capital loss of $150,000.00 is going to be received by me on a schedule K-1 (form 1065) in 2008. If I sell a non qualified variable annuity that I purchased in 1996 and has no surrender charges can I offset the realised gain from the annuity against the K-1 capital loss? Also I am not 59 and a half yet so there will be a 10% IRS penalty for the sale of the annuity, I have been told that only the realised gain is subject to the penalty and not the original investment amount, is this correct? Finally would the 150,000.00 K-1 capital loss qualify me for a hardship exemption so I do not have to pay the 10% penalty?

Answer: 1. The capital loss on the k-1 will flow to the schedule D. Any gains that are also reported on the schedule D will absorb the loss. If you have a loss at the end of the form, you can take $3000 against ordinary income and carry the rest forward.

2. What form will the cashing out of the annuity create? If it’s a 1099-R (which I think it will be), it’s reported on the front of the 1040 and doesn’t go anywhere near the schedule D. Thus is won’t cancel out the loss. The penalty form 5329 has waivers, but hardship isn’t one of them.

The Dog Ate My IRA Rollover

If you miss the 60-day rollover deadline, will the IRS be sympathetic?

How to get into IRS Hardship status

Question: tax ques (HELP)?

Apparently I just found out that my accountant, who was supposed to file a state tax form in a state that i worked in for a few months (if i made more than a certain amt and i did) did not do so (and he prepared my federal irs and home state taxes) This was about 7 years ago… but im scared and dont know what to do since i was in college, never worked out of state before and didnt know that i had to do anything out of the ordinary in terms of filing. He has done my taxes since i was a teenager so I was surprised to learn of this slip up (which of course he wont acknowledge). If this happened 6 years ago, is there anything to do?

Answer: Well, where do I start. Greg’s advice is very bad.

I have a question or two. Was the amount from this state included in your federal return? Did you sign anything that said you didn’t want him to file that state’s return? If the first answer is yes then you are in very good shape. As long as the second answer is no.

I have always had my clients that didn’t want to file a return they should have filed sign a waiver… just for this reason.

Now, if this amount was included on the federal return that means he was aware of it. And, there is a very good chance that you can get the interest and penalties abated. However, you will still owe the tax. The argument that you should use is that you relied on a professional and it was his mistake.

But, this works two ways also. If it is not included in the federal return that supports his claim that he didn’t know about this income.

When you sign a return you are responsible for the accuracy of the return. Even if you hire a professional. What I mentioned above is the best remedy that you will ever get. Unless, you sue them in civil court.

Hope this helps.

BNA Software To Present Free Webinar To Explore Options of the Five-Year NOL Tax Provision

BNA Software®, an operating division of BNA, today announced the company will present a live Webinar, “Taking the 2, 3-4 or 5-Year NOL: Which Is Really Your Best Choice?” on Tuesday, March 30 at 2:00 p.m.

Tax Tips: Alternative Minimum Tax

IRS to regulate paid tax preparers

Paid tax return preparers across the East Valley should be ready to hear from the Internal Revenue Service as part of its upcoming crackdown on unscrupulous preparers.

Pt 3 – “THOM” Tithe on yr economic stimulus tax rebate? NO!!

IRS to test, register tax preparers

By TOM HOWELL JR. Three out-of-state men arrested for carrying more than $100,000 cash during a traffic stop in Byram last February have admitted the money was acquired illegally.

IRS Tax Settlement, Offer in Compromise. Heres what to do first

Question: Can anyone recommend a good tax attorney in Houston, TX?

We are in deep doo with the IRS. They have notified us that they have an “Intent to Levy” and are notifying us of our right to a hearing. We have heard we should submit an “Offer to Compromise” but have no way of knowing how much to offer or if there are other routes we should take.
Actually, the total tax, interest and penalty is $164,000. We are living in a house that is in my mother-in-law’s name and we have some stocks for retirement (we’re in our late 50′s) and we both have been out of a job since January. The $3000 in the bank now won’t last long. What do you recommend?

Answer: Don’t waste money on an attorney unless they file criminal charges. DO consult with a local CPA or EA who specializes in OIC issues. Do NOT call those firms that advertise on cable TV or talk radio. They are a ripoff.

Bear in mind that only about 20% of all OIC applications are ever approved by the IRS. Basically you must offer them MORE than what they reckon that they could recover by liquidating all of your assets at fire-sale prices AND put you on a payment plan on an austerity budget for 4 to 5 years. If you owe the IRS $40k and can swing $1,000 a month in payments, there’s virtually NO chance of an OIC going through. If you owe them $40k, live in a rented apartment with junk furniture and a junker car and could swing $100 a month, they MIGHT settle for $10,000.

To see what an OIC entails, grab a copy of IRS Form 656 and read up on the instructions included with it. It’s 44 pages long, so get busy. I’d post a link, but YA is blocking links right now.

Blind Boys of Alabama perform in Morristown, and other events for week of Jan. 20

Blind Boys of Alabama, perform at The Community Theater, Mayo Center for Performing Arts, 100 South St., Morristown, at 8 p.m. on Friday, Jan. 29,; and events calendar for week of Jan. 20, 2010.

IRS Tax Negotiator