Posts Tagged ‘TurboTax’


Casual Merchants: Expect Underreporting Notices in the Mail

In Accounting & Finances,Business,Taxes on April 2, 2013 by Sufen Wang Tagged: , , , , , , ,

MH900104746The IRS Didn’t Forget about Casual Merchants: Expect Underreporting Notices in the Mail

Casual merchants might have some official ‘splainin’ to do. The IRS is taking a good, hard look at the gross receipts of food cart operators, mom-and-pop shops, swap meet participants, and sellers on online auction sites such as Ebay. If there appear to be any discrepancies, the agency will likely send out “soft letters” requesting additional information from those small business taxpayers.

$10 billsSpecifically, the IRS will be checking whether gross receipts – as reported by credit card companies and third-party networks – match up with income stated on tax returns. Since 2011, certain taxpayers have had credit, debit, and certain electronic transactions reported on Form(s) 1099-K, Merchant Card and Third Party Network Payments. A high amount of receipts that appears on this form, but not in income levels on the tax return, is obviously going to raise eyebrows.

MH900401126Thus, a soft letter means the taxpayer isn’t in trouble (yet), but the IRS wants answers. After all, the IRS knows there are legitimate reasons why a merchant’s numbers might not add up with the third parties’. For example, there could be a difference between parties’ calendar year versus fiscal year accounting systems. Or it could arise from the fact that Form 1099-K does not take into account on sales returns and refunds processed by the merchant, or a merchant’s cost of goods, or other legitimate deductions from gross income.

These valid excuses are exactly why the IRS plans to begin with soft letters of inquiry. If the taxpayer agrees with the assessment of underreporting, the IRS will request that they amend their returns. The goal is not punish taxpayers, but to increase voluntary compliance.

Sufen Wang, M.S.Accountancy

Wang Solutions, Long Beach, CA (562) 856-0793


Blaming TurboTax?!

In Accounting & Finances,Business,Taxes on October 1, 2012 by Sufen Wang Tagged: ,

Want to Use TurboTax as a Scapegoat?: It Won’t Work

Everybody knows that you shouldn’t blame other people – or things – for your own mistakes. Everybody except Bartlett apparently, who tried to blame TurboTax for her under reported income.

First, Bartlett under reported her taxable pension distributions not by $101, not $10,001, but by $101,998! Then she got caught. Then she went to court and tried to get out of it, by arguing that she used the TurboTax software program to prepare her taxes, so it must be the software’s fault. Well, the court did not buy “that” argument.  Tax Court Judge Julian Jacobs ruled against her, stating that the errors “were not computational…but were the result of Bartlett systematically under reporting her income.” (Bartlett v. Commissioner, T.C., No. 22669-10, T.C. Memo. 2012-254, 9/4/12.)

In other words, Bartlett couldn’t blame her “bad math” on a computer program: the software is only as good as the information entered into it. Garbage in, garbage out….. As a result, Bartlett was hit with a deficiency of $43,668 and an accuracy-related penalty of $8,734.

Maybe Bartlett just wasn’t good with numbers. More likely, she wanted to cheat the system and tried to get smart when she got caught. Either way, the moral of the story is to double-check your numbers if you’re using a tax program – or better yet, just hire a professional tax preparer to file for you.

On the Money, Sufen Wang, Wang Solutions


Is an IRS Notice Your Worst Nightmare?

In Accounting & Finances,Business,Taxes on May 11, 2012 by Sufen Wang Tagged: , , , , , , ,

It Shouldn’t Be…

You head out to your mailbox expecting to find this week’s issue of Forbes. Instead, you open the mailbox and see a notice from the IRS sitting on top. Don’t assume it’s going to be a hassle – most of these letters can be handled without having to call or visit an IRS office.The notice might order you to pay up, but often it will simply notify you of account changes. Whatever the problem, the letter will provide specific instructions about what you need to do.

Please read carefully. If you received a correction notice, compare it with the information on your tax return. If everything looks A-okay, there’s no need to reply – unless the notice tells you otherwise. If the correction looks incorrect, you’ll need to let the IRS know with a written explanation.

Just because you don’t need to contact the IRS, doesn’t mean you can’t. If you have a question, just call the telephone number in the upper right corner of the notice. Have your tax return handy when you call.

See, you’ll be relaxing and reading your magazine in no time – until the next IRS notice arrives in the mail.

On the Money,

Sufen Wang

Wang Solutions