Letter from IRS.....

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills.
Post Reply
Topic Author
tbradnc
Posts: 1532
Joined: Wed Apr 02, 2008 8:30 am

Letter from IRS.....

Post by tbradnc »

I received a friendly letter from the IRS today.

It says, in part:

"We have received your income tax return and are in the process of conducting a thorough review of your return information. This review is part of an ongoing program the IRS conducts to ensure the accuracy of return information.

Your return was selected because we are reviewing one or more of the following:

- Income you reported on your return
- Income tax withholding amounts you reported on your return
- Claims for tax credits you made on your return
- Business income you reported on your return."


Anything I should be concerned about here? To the best of my knowledge all the information I've given the IRS is correct. My income is ~$235k per year with $135k of that being brought over from business return (s-corp).

I did overpay my estimated taxes and am due a $43k refund - I actually did this on purpose by overpaying the 4th quarter estimate - I wanted to get $5k in I-bonds and another $38k by way of a refund. (I had a good reason for doing that...)
jebmke
Posts: 25271
Joined: Thu Apr 05, 2007 2:44 pm
Location: Delmarva Peninsula

Re: Letter from IRS.....

Post by jebmke »

tbradnc wrote:Anything I should be concerned about here?
Not if your tax return is correct. I'm on my second desk audit in a row (now on 2010). You may get a specific request for supporting docs for some part of your return. If so, it can get time consuming but not onerous to reply to their information requests.

Make sure you reply to their requests on time, even if you need more time to assemble material. Get a POD with every response for your records. They deal with a lot of paper and they sometimes lose it. Depending on the nature of their review and subsequent info requests, if any, this could take a while. My 2009 audit started in December of 2010 and was finally resolved in June of 2012 (although they moved my entire file from KC to Atlanta in mid-audit and promptly lost the entire file - that accounted for some of the time).

Finally, with very few exceptions I have found the people I have dealt with at the IRS to be reasonable and practical. I prepare/review around 500 returns a year and whenever I speak with someone there, they are generally willing to help. They don't always have the expertise in some areas but I've had good success finally referring to someone who does have the background.
Stay hydrated; don't sweat the small stuff
Calm Man
Posts: 2917
Joined: Wed Sep 19, 2012 9:35 am

Re: Letter from IRS.....

Post by Calm Man »

I really hate that this happens to people. [Rant removed by admin LadyGeek] Sorry for the rant.
billern
Posts: 1079
Joined: Fri Dec 07, 2007 3:08 pm

Re: Letter from IRS.....

Post by billern »

This is going to sound obvious but keep all your records relating to the period under audit and start getting anything you may not have saved (such as bank statements for each month). You never know what may be useful for your case and it can be a lot harder to get the information later when you need it.
Topic Author
tbradnc
Posts: 1532
Joined: Wed Apr 02, 2008 8:30 am

Re: Letter from IRS.....

Post by tbradnc »

Is there a difference between an audit and a review?

The letter goes on to say that I don't need to do anything this time and that it could take up to 60 days to complete the review.
kitteh
Posts: 194
Joined: Fri Mar 15, 2013 12:13 pm

Re: Letter from IRS.....

Post by kitteh »

If you have all the supporting documentation, I wouldn't worry about it. I live for the IRS doing an audit because I have every last scrap of documentation.
Topic Author
tbradnc
Posts: 1532
Joined: Wed Apr 02, 2008 8:30 am

Re: Letter from IRS.....

Post by tbradnc »

For sure. I definitely didn't make anything up or fudge any of the numbers. I didn't even do a backdoor Roth this year.

I also know that I'm responsible for what's on the return even though I didn't prepare it.
User avatar
Raybo
Posts: 2243
Joined: Tue Feb 20, 2007 10:02 am
Location: San Francisco
Contact:

Re: Letter from IRS.....

Post by Raybo »

It makes sense that whenever someone is asking for a huge refund that the IRS takes a closer look to make sure everything is done to the absolute limit of the law.

I would never recommend that someone do what you've done as the IRS has a serious ($43K) incentive to "find" additional taxes on your return. If you were only due a refund about the size of your previous years' refunds, the IRS probably wouldn't bother.

Don't be surprised if some or all of your refund get challenged and then you have to fight to get what you thought was yours all along. One man I knew, upon finding out his accountant had forced him to pay thousands more taxes than he should have due to depreciation errors was forced to pay more than his requested refund when the IRS fine-tooth combed his return and assessed him even more taxes.

I view the IRS as a sleeping dog that shouldn't be kicked.

Good luck.
Last edited by Raybo on Wed Apr 03, 2013 1:26 pm, edited 1 time in total.
No matter how long the hill, if you keep pedaling you'll eventually get up to the top.
Topic Author
tbradnc
Posts: 1532
Joined: Wed Apr 02, 2008 8:30 am

Re: Letter from IRS.....

Post by tbradnc »

Well.... I don't know what they could find - like I said, I didn't make up anything and AFAIK 100% of the information I gave them was accurate.

For what it's worth for the past 4 years I've overpaid my 4th quarter estimate to get a refund this size (give or take a few thousand).
User avatar
Raybo
Posts: 2243
Joined: Tue Feb 20, 2007 10:02 am
Location: San Francisco
Contact:

Re: Letter from IRS.....

Post by Raybo »

Let us know how it goes.
No matter how long the hill, if you keep pedaling you'll eventually get up to the top.
Gill
Posts: 8221
Joined: Sun Mar 04, 2007 7:38 pm
Location: Florida

Re: Letter from IRS.....

Post by Gill »

I can't imagine a reason for overpaying Federal taxes to receive a refund that size. You can be fairly sure that triggered the audit. I'd just as soon not call attention to my return, however accurate, by having a huge refund.
Bruce
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal
RadAudit
Posts: 4384
Joined: Mon May 26, 2008 10:20 am
Location: Second star on the right and straight on 'til morning

Re: Letter from IRS.....

Post by RadAudit »

tbradnc wrote:My income is ~$235k per year with $135k of that being brought over from business return (s-corp).
Probably nothing to get too concerned about. But that income number and the source of more than 1/2 of it (s-corp) probably threw you in to a category that has a higher probability for a review than some others and your number just came up. Just one of the perks of a decent income.

Good luck.
FI is the best revenge. LBYM. Invest the rest. Stay the course. Die anyway. - PS: The cavalry isn't coming, kids. You are on your own.
johnubc
Posts: 870
Joined: Wed Jan 06, 2010 5:54 am

Re: Letter from IRS.....

Post by johnubc »

tbradnc wrote:Well.... I don't know what they could find - like I said, I didn't make up anything and AFAIK 100% of the information I gave them was accurate.

For what it's worth for the past 4 years I've overpaid my 4th quarter estimate to get a refund this size (give or take a few thousand).

can you clue us in to as to why one would want to do this?
User avatar
Taylor Larimore
Posts: 32839
Joined: Tue Feb 27, 2007 7:09 pm
Location: Miami FL

IRS employee audits?

Post by Taylor Larimore »

Calm Man wrote:I really hate that this happens to people. [Rant removed by admin LadyGeek] Sorry for the rant.
Calm Man:

When I went to work for the IRA, I had to undergo a 3-year audit to be hired. I have no idea if this is current policy.

Someone has to collect money to run the government. Taxpayer audits are necessary so that everyone pays their fair share.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
User avatar
Boglenaut
Posts: 3508
Joined: Mon Mar 23, 2009 7:41 pm

Re: IRS employee audits?

Post by Boglenaut »

Taylor Larimore wrote:
When I went to work for the IRA
:shock:

I thought we didn't get political here. ;)
THY4373
Posts: 2765
Joined: Thu Mar 22, 2012 3:17 pm

Re: Letter from IRS.....

Post by THY4373 »

MBMiner wrote:I can't imagine a reason for overpaying Federal taxes to receive a refund that size.
One reason folks do it (not me) is for credit card rewards. If you have say a 5% cashback credit card and you have to pay 2.5% in fees to pay your estimated taxes on said rewards card, you clear 2.5% of 40,000 in this case or $1000 for loaning $40k to the IRS for a few months. It has been a popular stratagem for this for years in certain circles.
Gill
Posts: 8221
Joined: Sun Mar 04, 2007 7:38 pm
Location: Florida

Re: Letter from IRS.....

Post by Gill »

THY4373 wrote:
MBMiner wrote:I can't imagine a reason for overpaying Federal taxes to receive a refund that size.
One reason folks do it (not me) is for credit card rewards. If you have say a 5% cashback credit card and you have to pay 2.5% in fees to pay your estimated taxes on said rewards card, you clear 2.5% of 40,000 in this case or $1000 for loaning $40k to the IRS for a few months. It has been a popular stratagem for this for years in certain circles.
Show me a credit card that gives you 5% cash back for charging your income tax. :o
Bruce
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal
THY4373
Posts: 2765
Joined: Thu Mar 22, 2012 3:17 pm

Re: Letter from IRS.....

Post by THY4373 »

MBMiner wrote:
THY4373 wrote:
MBMiner wrote:I can't imagine a reason for overpaying Federal taxes to receive a refund that size.
One reason folks do it (not me) is for credit card rewards. If you have say a 5% cashback credit card and you have to pay 2.5% in fees to pay your estimated taxes on said rewards card, you clear 2.5% of 40,000 in this case or $1000 for loaning $40k to the IRS for a few months. It has been a popular stratagem for this for years in certain circles.
Show me a credit card that gives you 5% cash back for charging your income tax. :o
Bruce
I haven't kept up with them and there may not be one currently, but folks were doing it with the Chase AARP card and the intro 5% rate last year. Also this can be done for miles or other rewards too.
User avatar
archbish99
Posts: 1649
Joined: Fri Jun 10, 2011 6:02 pm

Re: Letter from IRS.....

Post by archbish99 »

tbradnc wrote:Is there a difference between an audit and a review?
I suspect, but don't know for sure, that a "review" means a computer has decided that a human needs to pull your return and all filed documents (1099s, W-2s, etc.) from other entities which relate to you, and make sure everything looks sensible. This human will then decide whether an audit is warranted, after having reviewed the paperwork. They're officially notifying you that there will be a delay while you're waiting for this human to get around to you, and then make a decision.

You move into "audit" mode if they start asking you to justify certain numbers on the return. The other possible outcome would be that the human decides nothing looks fishy and tells the computer to proceed with your refund.
I'm not a financial advisor, I just play one on the Internet.
Geologist
Posts: 3009
Joined: Fri Jan 02, 2009 6:35 pm

Re: Letter from IRS.....

Post by Geologist »

One year I had a very large deduction that resulted in a sizeable refund (although nothing close to 43k). I filed a paper return and attached a letter of explanation. Never heard from the IRS about it. That might have been wise in your case (or for others reading this and thinking about similar circumstances).
Calm Man
Posts: 2917
Joined: Wed Sep 19, 2012 9:35 am

Re: Letter from IRS.....

Post by Calm Man »

Everything I have read has indicated that the size of the refund does not trigger an audit. Whether you have a refund coming or owe doesn't affect the taxes. Am I incorrect here?
tomd37
Posts: 4097
Joined: Thu Mar 01, 2007 9:39 pm
Location: Middle Tennessee

Re: Letter from IRS.....

Post by tomd37 »

Taylor,

My ex daughter-in-law was recently hired to be an IRS Tax Compliance Officer and is currently undergoing the IRS' one-year training program. In a recent visit with us she mentioned that both she and her current husband had to undergo a detailed audit of their returns for several years. She had some unusual swings in AGI and she was able to completely satisfy the auditor.

So where is she going to be assigned when the training in complete? I guessed the group that audits the self-employed and business returns (Schedule C) and that's where she will go. :moneybag That seems to be an ever-growing area of concern lately, and in the future, for the IRS.

There was a slip of the finger in your post, as knowing you in this forum you did not work for the IRA.
Tom D.
Topic Author
tbradnc
Posts: 1532
Joined: Wed Apr 02, 2008 8:30 am

Re: Letter from IRS.....

Post by tbradnc »

I'll report back on how it goes. It's a bit of a pain because we are going to use a portion of the refund for a few home improvement projects and my wife is already charging up stuff at Home Depot. :(

I spent some time with Google last night and found several incidents of the exact same letter being sent to people who were expecting refunds as small as $600.
Topic Author
tbradnc
Posts: 1532
Joined: Wed Apr 02, 2008 8:30 am

Re: Letter from IRS.....

Post by tbradnc »

Meant to add that the letter I received is coded "4464c" - googling that turns up pages of people receiving the same letter.

As someone said above there appears to be something on my return that the computer 'decided' a human being needed to look at.
User avatar
Taylor Larimore
Posts: 32839
Joined: Tue Feb 27, 2007 7:09 pm
Location: Miami FL

Re: IRS employee audits?

Post by Taylor Larimore »

Boglenaut wrote:
Taylor Larimore wrote:
When I went to work for the IRA
:shock:

I thought we didn't get political here. ;)
Tom is correct. My finger slipped. :(

The "A" (IRA) is next to the "S" (IRS) on my keyboard.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
User avatar
grabiner
Advisory Board
Posts: 35265
Joined: Tue Feb 20, 2007 10:58 pm
Location: Columbia, MD

Re: Letter from IRS.....

Post by grabiner »

Calm Man wrote:Everything I have read has indicated that the size of the refund does not trigger an audit. Whether you have a refund coming or owe doesn't affect the taxes. Am I incorrect here?
A large refund shouldn't be a trigger for an audit; people who pay a lot of estimated tax or overwithhold shouldn't be any more likely to compute the wrong amount of tax due. (The reason for the refund could be an audit trigger, if the refund is based on large deductions.)

However, a large refund could well be a trigger for review because many returns filed by identity thieves claim huge refunds. If you file a return with a W-2 attached, and the IRS hasn't yet processed the employer's copy of the W-2, the IRS is likely to process the return anyway and pay you the claimed refund, rather than forcing you to wait until your employer sends the W-2 in and the IRS can match it. But it is now popular for identity thieves to file forms claiming a lot of withholding in order to get a fraudulent refund, relying on the IRS not to hold up the refund until it gets (or in this case, decides it will never get) the employer's matching W-2.
Wiki David Grabiner
Topic Author
tbradnc
Posts: 1532
Joined: Wed Apr 02, 2008 8:30 am

Re: Letter from IRS.....

Post by tbradnc »

I spoke with the person who prepared my return today and she said these reviews usually go fairly quickly in her experience. She assured me my return was straightforward and that the information on my return was provable.

I'm not worried-worried like someone who did something wrong would worry - but it does cause me a bit of anxiety.
SeattleCPA
Posts: 456
Joined: Fri Jul 06, 2012 7:06 pm

Re: Letter from IRS.....

Post by SeattleCPA »

grabiner wrote:
Calm Man wrote:Everything I have read has indicated that the size of the refund does not trigger an audit. Whether you have a refund coming or owe doesn't affect the taxes. Am I incorrect here?
A large refund shouldn't be a trigger for an audit; people who pay a lot of estimated tax or overwithhold shouldn't be any more likely to compute the wrong amount of tax due. (The reason for the refund could be an audit trigger, if the refund is based on large deductions.)

However, a large refund could well be a trigger for review because...
In my experience as a tax practitioner (who does lots of returns with large refund requests), large refunds do trigger audits. But I don't think $43K is that large. In my experience, you get interesting to the IRS when you get several refund requests into the queue at the same time (amended returns) and ask for $50K several times in a row.

Also, asking for more than $100K seems to regularly trigger an exam.

Finally, asking for a seven figure refund seems to nearly always (and probably should in fairness) trigger a field examination.
Topic Author
tbradnc
Posts: 1532
Joined: Wed Apr 02, 2008 8:30 am

Re: Letter from IRS.....

Post by tbradnc »

Just wanted to followup on this...

I received notification that the review has been completed and have a date for the scheduled ACH into my account for the full amount of the refund due, less $5k which will be used to purchase savings bonds.

FWIW, I haven't lost a moment's sleep over this other than my wife spending the money on home improvements before the matter was resolved.
Chicago60
Posts: 516
Joined: Tue Jan 29, 2013 2:40 pm

Re: Letter from IRS.....

Post by Chicago60 »

tbr:

My situation was nearly identical to yours. I filed by mail my return in mid-February, had a large refund due, filed form 8888 for the I-Bond request, and received a letter from the IRS that my return was being delayed for review. The large refund of around the same amount as yours no doubt caused the delay because as some noted above a large refund might be fraudulent. I too was not concerned with the review because all of my income was properly reported (I called the IRS 3 different times and told them that if they had questions about the return, just ask me.....no substantive response), but I was frustrated because I wanted the I-Bond purchase before May 1's interest rate decrease.

My direct deposit hit my bank this week for the full amount....I did NOT receive the I-Bonds requested on form 8888. I contacted the IRS yesterday without any resolution. I have an address to send a letter to, which I will send today, but my guess is that because of the delay based on the review, once the IRS determined my refund was accurate, they simply processed it and did not realize I had also filed form 8888. Hopefully this error will not also happen to you.
Topic Author
tbradnc
Posts: 1532
Joined: Wed Apr 02, 2008 8:30 am

Re: Letter from IRS.....

Post by tbradnc »

Chicago60, here is the info as per the "Where's my refund?" page:

You requested that part or all of your refund be used for a US Savings Bond(s) purchase.

It may take up to three weeks from the date your refund was sent for your Savings Bonds to arrive in the mail. The Bureau of the Public Debt will mail your bonds to the address shown on your tax return.

If you do not receive the savings bond(s) you should contact Treasury Retail Securities in Minneapolis at 1-800-553-2663.
The amount not used to purchase bonds is scheduled to be refunded on May 15, 2013.
If you do not receive the refund by May 20, 2013, please contact us again. We are unable to take any action until then.


Hopefully all will go well....
Leesbro63
Posts: 10581
Joined: Mon Nov 08, 2010 3:36 pm

Re: Letter from IRS.....

Post by Leesbro63 »

Would a large credit toward next year (versus a refund) trigger the same scrutiny? Sometimes I make a large estimated payment in January to also cover the first quarter of the following year via a credit.
Chicago60
Posts: 516
Joined: Tue Jan 29, 2013 2:40 pm

Re: Letter from IRS.....

Post by Chicago60 »

tbr: I will call the 800 number and report back, thanks.
Less: I have no idea. I had a large refund for 2011 and filed form 8888 then as well and had no issues (and no delay with my refund).
Jnick55
Posts: 58
Joined: Sun Oct 14, 2012 10:55 am

Re: Letter from IRS.....

Post by Jnick55 »

I received the same letter as you did this year. I was claiming a large refund (about $70,000). The letter arrived a few days after i filed my return. About four weeks of silence followed the letter. Then I received my refund check in the mail. Perhaps it is a manual review by the IRS triggered by large refund claims.
bsteiner
Posts: 9151
Joined: Sat Oct 20, 2012 9:39 pm
Location: NYC/NJ/FL

Re: Letter from IRS.....

Post by bsteiner »

With a few exceptions, before the IRS can issue a refund for more than $1 million, it's reviewed by the staff of the Joint [Congressional]Committee on Taxation. The staff of the Joint Committee is nonpartisan (they support Senators and Representatives on tax matters), and is well-respected.

As SeattleCPA points out, a $43,000 refund isn't particularly unusual. Many people make estimated tax payments based on the prior year's tax, and if their income varies from year to year, they can either owe a substantial amount or have a substantial overpayment.
Last edited by bsteiner on Sat May 11, 2013 9:33 pm, edited 1 time in total.
chrisjul
Posts: 294
Joined: Sun Jan 06, 2008 2:15 pm

Re: Letter from IRS.....

Post by chrisjul »

Yes, this should concern anyone........
Leesbro63
Posts: 10581
Joined: Mon Nov 08, 2010 3:36 pm

Re: Letter from IRS.....

Post by Leesbro63 »

Agreed it's good that they are taking a closer look at refunds as too many were fraudulent. That being said, a friendly "ENGLISH" (not IRSese) letter would be nice.

"Dear Taxpayer, we received your tax return and the $43,000 that you claimed for refund is probably legit. To protect against fraud we need to know a few more details. This is not an audit, just confirmation to protect against issuing a fraudulent refund. Upon receipt of that verifying information we will be happy to promptly process your tax return and send you the refund if appropriate. Love, IRS"
Topic Author
tbradnc
Posts: 1532
Joined: Wed Apr 02, 2008 8:30 am

Re: Letter from IRS.....

Post by tbradnc »

Dang dang dang.....

Checked my bank account this morning and the IRS deposited the full amount of my refund into our checking account so I guess that means no I-bonds for me despite the IRS website telling me the bonds are on the way. I guess in the overall scheme of things $5k worth of I-bonds is a drop in the bucket but still.

I do wish there was a way to get paper bonds. Dangit.
khh
Posts: 342
Joined: Sat Dec 27, 2008 9:31 pm

Re: Letter from IRS.....

Post by khh »

Do these reviews/audits normally involve your most current return? How often, if ever, do they review prior years?
jebmke
Posts: 25271
Joined: Thu Apr 05, 2007 2:44 pm
Location: Delmarva Peninsula

Re: Letter from IRS.....

Post by jebmke »

khh wrote:Do these reviews/audits normally involve your most current return? How often, if ever, do they review prior years?
Based on my experience, it is not uncommon for them to review prior years. Last summer, I closed out my 2009 audit (no assessment) and I am in the middle of my 2010 audit now. I would guess the 2010 one will be completed within this calendar year with no assessment.
Stay hydrated; don't sweat the small stuff
User avatar
archbish99
Posts: 1649
Joined: Fri Jun 10, 2011 6:02 pm

Re: Letter from IRS.....

Post by archbish99 »

tbradnc wrote:I do wish there was a way to get paper bonds. Dangit.
Maybe play dumb -- call the IRS, tell them you've received an excess refund (since your I-Bonds are on the way) and ask what you should do. And then ask when you should expect the I-Bonds.
I'm not a financial advisor, I just play one on the Internet.
Post Reply