The IRS Audit Blog

Posts Tagged ‘irs publication’

Question: Claiming losses in ROTH IRA.?

I closed my Roth IRA in 2009 and want to claim losses on Schedule A.
In 2003 I converted Simple IRA to Roth IRA and the amount ($12000) is indicated on that year form 8606. Also I made contributions to this ROTH IRA account in 2005 and 2006 ($4000 each year). But looking at 2005 and 2006 Federal return I do not see any indication of these contributions (no form 8606). I do my taxes using TaxAct so I probably put the contribution but 8606 was not generated.

So now I need to establish the basis and every publication says that I have to use 8606 tax forms from previous years to do that. So even though I contributed $20K the IRS knows only about $12K.
My question is: can I still use the basis of $20K? I have brokerage statements from previous years that show the contributions made.

Thanks.

Answer: Sure. That is the correct basis.

The brokerage firm reported the contributions to IRS each year so they do have a recorde.

Twin savings goals, one account?

Dear Dr. Don, I want to save money for the education of my 10-year-old child. What is the best way to do this while keeping an eye on my retirement , too? I guess my questions are: Which type of savings plan can take care of both? What will be the tax advantages?

Reader Mailbag: The Nascent Musician

My two year old daughter is showing a tremendous nascent interest in making music. She sings constantly . She uses her hands as percussion all the time on her knees, on the table, and anywhere else she can use them. She climbs up to our keyboard and attempts to play songs.

4 steps to undo a Roth IRA conversion

Follow these helpful hints to correctly recharacterize your Roth to a traditional IRA.

Should You Convert Your IRA To A Roth IRA?

Question: has anyone used a Purchase Money Security Interest from the IRS?

I never filed a past tax return and the IRS issued a federal lien against me for the amount the said I owed (20K). I recently applied for a mortgage and this lien came up and is preventing me from closing. I immediately filed the return which was for 1999 and paid the correct amount owed (3677). The process of having the lien removed takes between “6-8 weeks” according to the irs rep I have spoken to. I call every week for an update and amazingly they tell me “6-8 weeks” every time I call.

The problem is that my mortgage commitment expires in 2 weeks. If I cannot have this lien lifted and go to closing I will lose the house. Has anyone had this occur and found a way to close?

The IRS publication 785 talks the lender being able to file for a Purchase Money Security Interest that allows them to have priority over the IRS in regards to the mortgage.

Any feedback/help on this is greatly appreciated.

DO NOT CONTACT ME WITH FINANCING OFFERS.

Answer: Talk to a lawyer. There’s probably other routes to go to get this fixed quicker, or at least prevent your mortgage from falling through.

The IRS doesn’t care about you, and odds are neither does the bank. You need someone with power to be your voice, and that’s a lawyer.

Other than that, take all your paperwork to the bank, and show them that the lien is being taken care of and they may believe you.

Former IRS Agent Joe Banister and Ron Paul On CNBC

Question: Traditional IRA to Roth IRA recharacterization.?

I contributed 4000 to my traditional IRA (T-IRA) in oct 2007 for 2007 and then 5000 again for 2008. Now I want to recharacterize my 2007 contribution which is 4000 to Roth IRA.

I follow the IRS 590 publication I am unable to decide what will be my account opening balance and what would be my account closing balance.
Since I have made 2008 contribution of 5000, I am not sure how to find the earnings for my 2007 contribution of 4000. Can anyone help?
I have called my IRA manager byt they have asked me to calculate the earning, thats why I have posted it here.
i know the formula earnings= contribution x(account closing balance – account opening balance )/account opening balance
this works great if I did not put the 5000 for 2008. Now my problem is I have earnings from my 2008 contributions also

Answer: Couldn’t you just break this math problem down into multiple pieces and then total the results?

1. You contributed $4K in Oct 2007.
2. The balance immediately prior to (i.e., the day before) your $5K contribution in 2008 would be totally allocated to the $4K contribution, right? What is that amount?
3. Next add that total amount to your $5K contribution. What percent of the total is that prior amount? (i.e., what is the ratio?)
4. Any gains that you received from that point on, you should pro-rate (by that ratio) between your original $4K contribution and your final $5K contribution.
5. Add those pro-rated gains (allocatable to the $4K contribution) to #2 above. That should give you the total amount associated with your initial $4K contribution.

“Any problem can be made simple if you break it into small enough pieces.”
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New Roth retirement account options for 2010

When deciding whether to save for retirement using a traditional or Roth IRA, many people wrestle with the question, “When I retire, will my tax rate be higher or lower than it is today?”

dylan burns as michael jackson