3 ms·

I wonder by numbers how many of these people had ~no income, but had securities trades that with the cost basis ignored look like $400k of income? or other simi

by nullc 3y ago

I wonder by numbers how many of these people had ~no income, but had securities trades that with the cost basis ignored look like $400k of income? or other similar phantoms. Decades ago I was in that boat myself one year: I became very ill a few weeks ahead of tax day and was hospitalized through it until a couple weeks after. This resulted in totally spacing on filing my taxes. The next year I couldn't find my prior year paperwork but thought I just misplaced it and just filed that year normally. The next year after that I got a letter from the IRS "we computed your taxes for you, you owe a million dollars"-- quite a heart stopper! In reality I owed something like $1k, and much of that was just the penalty for failing to file.

deleted 3y ago
[deleted]
rychco 3y ago
How did you resolve this? I just realized today that I forgot to file two years ago & want to take care of it asap
- toomuchtodo 3y ago
  https://www.irs.gov/businesses/small-businesses-self-employed/filing-past-due-tax-returns https://www.irs.gov/businesses/small-businesses-self-employe...
- tekla 3y ago
  You file it and the IRS sends you a piece of mail that asks you to deal with it. I recently did it for a 13 yo company missing many years of taxes and it wasn't a huge deal.
- nullc 3y ago
  Just file it. You may end up underpaying the penalties and interest, if you do they'll send you a statement for the difference. The important thing is to comply with your obligations and get any underpayment down to a small amount ASAP. In my case I got a little fixated on exactly computing the penalties plus interest which delayed resolving it. While researching it I found a court case where the IRS was asking the court for permission to approximate the interest because it was too complicated to compute. 0_o. At that point I gave up trying to compute it myself, but immediately after they sent me another notice with updated values and that was enough to disambiguate the two competing readings of the tax code and I was able to pay it exactly. :P Almost two decades later I know better-- just put in a reasonable effort and let the IRS worry about it.
csomar 3y ago
The thing is, the way the tax system is structured, it's much better if you don't file and stay under the radar. The IRS knows that but they probably didn't pursue it due to it being a marginal phenomena and lack of abilities. Now that they need money (and maybe the size of these cheats is higher?) they are going after them. It is also possible that they are over-estimating the amounts owned and once they get to auditing they find out that these "millions of dollars" are just "$1Ks of dollars" and the audit doesn't turn that profitable after all.
teeray 3y ago
> I wonder by numbers how many of these people had ~no income, but had securities trades that with the cost basis ignored look like $400k of income? I think a common misconception is that these measures target fat cats rolling in $400k+ in personal ARR. However, if you’re a retiree and just sold the family farm to downsize, then you could easily have $400k in income for a tax year.
- jpollock 3y ago
  If someone just sold an asset and are reporting $400k in income, doesn't that mean they received $4 million in cash in the sale?
  - bombcar 3y ago
    Income is not income tax. Selling a property for $4 million is $4m in revenue which could be anything from negative to $4m in income.
- toomuchtodo 3y ago
  The real estate escrow closer would notify the seller(s) they are providing the IRS with the transaction information (Form 1099-S). It is straightforward to either pay taxes on the gains (Schedule D and Form 8949) or demonstrate primary residence tax exclusion ($250k individually, $500k as married couple). This is not burdensome to verify. https://www.irs.gov/taxtopics/tc701 https://www.irs.gov/taxtopics/tc701

by nullc 3y ago

deleted 3y ago

[deleted]

rychco 3y ago

How did you resolve this? I just realized today that I forgot to file two years ago & want to take care of it asap

toomuchtodo 3y ago
https://www.irs.gov/businesses/small-businesses-self-employed/filing-past-due-tax-returns https://www.irs.gov/businesses/small-businesses-self-employe...
tekla 3y ago
You file it and the IRS sends you a piece of mail that asks you to deal with it. I recently did it for a 13 yo company missing many years of taxes and it wasn't a huge deal.
nullc 3y ago
Just file it. You may end up underpaying the penalties and interest, if you do they'll send you a statement for the difference. The important thing is to comply with your obligations and get any underpayment down to a small amount ASAP. In my case I got a little fixated on exactly computing the penalties plus interest which delayed resolving it. While researching it I found a court case where the IRS was asking the court for permission to approximate the interest because it was too complicated to compute. 0_o. At that point I gave up trying to compute it myself, but immediately after they sent me another notice with updated values and that was enough to disambiguate the two competing readings of the tax code and I was able to pay it exactly. :P Almost two decades later I know better-- just put in a reasonable effort and let the IRS worry about it.

csomar 3y ago

The thing is, the way the tax system is structured, it's much better if you don't file and stay under the radar. The IRS knows that but they probably didn't pursue it due to it being a marginal phenomena and lack of abilities. Now that they need money (and maybe the size of these cheats is higher?) they are going after them. It is also possible that they are over-estimating the amounts owned and once they get to auditing they find out that these "millions of dollars" are just "$1Ks of dollars" and the audit doesn't turn that profitable after all.

teeray 3y ago

> I wonder by numbers how many of these people had ~no income, but had securities trades that with the cost basis ignored look like $400k of income? I think a common misconception is that these measures target fat cats rolling in $400k+ in personal ARR. However, if you’re a retiree and just sold the family farm to downsize, then you could easily have $400k in income for a tax year.

jpollock 3y ago
If someone just sold an asset and are reporting $400k in income, doesn't that mean they received $4 million in cash in the sale?
- bombcar 3y ago
  Income is not income tax. Selling a property for $4 million is $4m in revenue which could be anything from negative to $4m in income.
toomuchtodo 3y ago
The real estate escrow closer would notify the seller(s) they are providing the IRS with the transaction information (Form 1099-S). It is straightforward to either pay taxes on the gains (Schedule D and Form 8949) or demonstrate primary residence tax exclusion ($250k individually, $500k as married couple). This is not burdensome to verify. https://www.irs.gov/taxtopics/tc701 https://www.irs.gov/taxtopics/tc701