IRS-recharacterization

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IRS-recharacterization

Postby 2beachcombers » Sun Sep 01, 2013 10:26 am

SEPT 9 update

Was audited for 2010 tax in 2012 on subject A(recharacterization)- resubmitted same data as original and IRS agreed, therefore no additional tax.
(I guess they liked the copy of the original data better than the original ???)

Was audited for 2010 tax in Feb 2013 on subject B(boat donation)--resubmitted same data as original With 30 day requirement.

IRS received this info and sent letter replying they would reply by March 21.
april--nada
may--nada
June 14, IRS letter apologizing for not replying by Mar 21 and said they would reply by July 14.
July 29, IRS letter apologizing for not replying by July 14 and said they would reply by Aug 18.
Aug-nada
Ok--it is now Sept.

Update--Sept 9. New letter from IRS--We are pleased to tell you we did not make any changes to the tax reported on your return.

I think this means I am finally done with my 2010 Taxes??????

Questions
1 At what point does this become harassment? :annoyed

2 Part of the original Roth conversions was due to the Boat donation. I expect when the IRS gets its act together they will accept my original return but if they don't,;--- What are the odds of my requesting to re-characterize the equivalent boat donation after the alloted time period for rechar has passed?

3 Should I start working with a tax advocate?
Last edited by 2beachcombers on Mon Sep 09, 2013 4:37 pm, edited 1 time in total.
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Re: IRS-recharacterization

Postby BolderBoy » Sun Sep 01, 2013 2:07 pm

Yes. Call the IRS ombudsman's office and start an investigation.
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Re: IRS-recharacterization

Postby BolderBoy » Sun Sep 01, 2013 2:09 pm

or, No. Do nothing. When April 16, 2014 rolls around (presuming you filed on time in 2011) the statute of limitations will have run out for them assessing additional tax and you can ignore them forever thereafter (on that return).
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Re: IRS-recharacterization

Postby Alan S. » Sun Sep 01, 2013 11:12 pm

Are you saying that if the IRS disllows your charitable contribution, you would recharacterize more to keep the conversion out of a higher bracket? If this happens after the extended due date, there is such a thing as a "super extended due date" to address problems like this one. Problem is that is takes a PLR request to secure permission and these are expensive and time consuming. Rather than paying for a PLR, you might try to convince the IRS to let you recharacterize more by asking the staffer who disallows your boat donation, explaining that you would not have converted the amount you did without the donation to reduce your marginal rate.
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Re: IRS-recharacterization

Postby 2beachcombers » Mon Sep 02, 2013 8:22 am

Alan S. wrote:Are you saying that if the IRS disllows your charitable contribution, you would recharacterize more to keep the conversion out of a higher bracket? If this happens after the extended due date, there is such a thing as a "super extended due date" to address problems like this one. Problem is that is takes a PLR request to secure permission and these are expensive and time consuming. Rather than paying for a PLR, you might try to convince the IRS to let you recharacterize more by asking the staffer who disallows your boat donation, explaining that you would not have converted the amount you did without the donation to reduce your marginal rate.



Boulderboy--I am aware of the 3 yr exclusion. But since this has already been flagged does the 3 yr still apply?

Alan--thanks, looks like I may have a few options. Yes, I would have recharacterized more without the boat deduction. However, I do expect the original filing to fly as everything was by the IRS requirements.

Jerry
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Re: IRS-recharacterization

Postby MarkNYC » Mon Sep 02, 2013 7:49 pm

2beachcombers wrote:[

Boulderboy--I am aware of the 3 yr exclusion. But since this has already been flagged does the 3 yr still apply?

Alan--thanks, looks like I may have a few options. Yes, I would have recharacterized more without the boat deduction. However, I do expect the original filing to fly as everything was by the IRS requirements.

Jerry

Jerry,

Are you sure you fully complied with the tax return filing requirements? Depending on the particular facts, the requirements can be somewhat complicated for a "qualified vehicle" donation, which includes boats. Assuming the donation was more than $500, the deduction is limited to the lesser of fair market value or the proceeds from the charity's sale of the boat. The charity was required to send you Form 1098-C and you were required to attach this form to your tax return, or if efiling, mail the form to the IRS along with Form 8453. In addition, Form 8283 should have been filed, and if the deduction was over $5K, then Section B should have been completed which requires a signature from a representative of the charity; and if FMV was used for the deduction than rather than sales proceeds, an appraisal was required and the appraiser is also required to sign and date Section B. Assuming the forms were properly completed and filed, and the deduction did not exceed the applicable AGI limits, there is no reason the deduction should be disallowed. However, if any of the filing requirements were not met, and you deducted more than is allowed, I doubt the IRS would allow you a late IRA recharacterization in order to offset your compliance error.

The 3 year statute of limitations will apply unless the IRS sends you a waiver to sign which will extend the statute to give them more time to finish their review. I think that's unlikely.
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Re: IRS-recharacterization

Postby 2beachcombers » Tue Sep 03, 2013 8:21 am

MarkNYC wrote:
2beachcombers wrote:[

Boulderboy--I am aware of the 3 yr exclusion. But since this has already been flagged does the 3 yr still apply?

Alan--thanks, looks like I may have a few options. Yes, I would have recharacterized more without the boat deduction. However, I do expect the original filing to fly as everything was by the IRS requirements.

Jerry

Jerry,

Are you sure you fully complied with the tax return filing requirements? Depending on the particular facts, the requirements can be somewhat complicated for a "qualified vehicle" donation, which includes boats. Assuming the donation was more than $500, the deduction is limited to the lesser of fair market value or the proceeds from the charity's sale of the boat. The charity was required to send you Form 1098-C and you were required to attach this form to your tax return, or if efiling, mail the form to the IRS along with Form 8453. In addition, Form 8283 should have been filed, and if the deduction was over $5K, then Section B should have been completed which requires a signature from a representative of the charity; and if FMV was used for the deduction than rather than sales proceeds, an appraisal was required and the appraiser is also required to sign and date Section B. Assuming the forms were properly completed and filed, and the deduction did not exceed the applicable AGI limits, there is no reason the deduction should be disallowed. However, if any of the filing requirements were not met, and you deducted more than is allowed, I doubt the IRS would allow you a late IRA recharacterization in order to offset your compliance error. Agree--but my question was IF all the requirements were met.

The 3 year statute of limitations will apply unless the IRS sends you a waiver to sign which will extend the statute to give them more time to finish their review. I think that's unlikely.


Thanks--and yes all the above was completed as you describe with all apraisals, forms, signatures, etc.
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Re: IRS-recharacterization

Postby 2beachcombers » Mon Sep 09, 2013 5:04 pm

2beachcombers wrote:SEPT 9 update

Was audited for 2010 tax in 2012 on subject A(recharacterization)- resubmitted same data as original and IRS agreed, therefore no additional tax.
(I guess they liked the copy of the original data better than the original ???)

Was audited for 2010 tax in Feb 2013 on subject B(boat donation)--resubmitted same data as original With 30 day requirement.

IRS received this info and sent letter replying they would reply by March 21.
april--nada
may--nada
June 14, IRS letter apologizing for not replying by Mar 21 and said they would reply by July 14.
July 29, IRS letter apologizing for not replying by July 14 and said they would reply by Aug 18.
Aug-nada
Ok--it is now Sept.

Update--Sept 9. New letter from IRS--We are pleased to tell you we did not make any changes to the tax reported on your return.

I think this means I am finally done with my 2010 Taxes??????

Questions
1 At what point does this become harassment? :annoyed

2 Part of the original Roth conversions was due to the Boat donation. I expect when the IRS gets its act together they will accept my original return but if they don't,;--- What are the odds of my requesting to re-characterize the equivalent boat donation after the alloted time period for rechar has passed?

3 Should I start working with a tax advocate?
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Re: IRS-recharacterization

Postby Alan S. » Mon Sep 09, 2013 6:55 pm

Yeah, it's typical IRS lingo that 2010 is done. They're "pleased to inform you", but you certainly are not happy with the process.

Unfortuneately, it is not at all unusal that people get letters that could easily have been avoided had the IRS simply read the original return. This takes a toll and also wastes millions of taxpayer funds. It's true that we have a tremendous tax gap from uncollected taxes, but the IRS swings and misses far too often.

Their handling of the ACA looms ominously............
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Re: IRS-recharacterization

Postby 2beachcombers » Tue Sep 10, 2013 9:04 am

Alan--You are correct about them looking at the original submission. In fact on this 2010 return, audited on two occasions on two different subjects, Both cases with resubmissions--both finally accepted with 2 yrs of limbo.

I have a new thought on our gvmt--The IRS job is to keep the Post Office employed by all the unnecessary mail. And yea, these guys to do the ACA?? :annoyed

And thanks for all your help in the past on this forum and on IRAhelp.

jerry
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Re: IRS-recharacterization

Postby Eric » Tue Sep 10, 2013 9:31 am

2beachcombers wrote:At what point does this become harassment?


I sympathize with your frustration. But there's an unfortunate cycle that works like this:

1. People hate the IRS.
2. Congress "punishes" the IRS by reducing its funding.
3. Reduced funding leaves the IRS understaffed, increasing caseloads for the workers who remain and damaging morale.
4. Harried, frustrated workers make mistakes, infuriating taxpayers.
5. Return to step 1.
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