Oh Nos! I Forgot to Report Income to the IRS!
Posted on June 16, 2008 by Her and tagged taxes
A few days ago I received a scary looking letter from the IRS. It said that I had not reported some income in 2006, and I owe back taxes plus interest totaling over $600. I am every bit the law-abiding citizen, and I'm a goody-two-shoes to boot, so I was completely horrified! My head spun as I pictured myself being hauled off to prison, possibly even put to work on a chain gang! My first reaction was to throw the letter under the couch and pretend I never saw it, but reason prevailed.
Him and I made our first ever visit to a tax professional this past weekend. I brought the letter plus all my 2006 tax paperwork (thank goodness I saved all that stuff). He quickly determined that yes, I had failed to report this income. It was a complete oversight. I think that what happened was that at the time I was preparing my taxes, I was not sure where to report the income, so I set it aside for later. Unfortunately I completely forgot about it and sent in the return without it. The good news is that our new tax guy feels that we can successfully argue that the IRS is classifying this forgotten income incorrectly, so we'll owe about $200 less than the letter stated. He suggested we write a letter explaining our case and attach a check for the amount we believe I owe.
I spent the past night writing that letter, and boy was that nerve-wracking. I feel like a criminal! Hopefully the IRS will accept my argument and the check and settle the matter quickly. Has anyone else ever forgotten to report any income?
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bunny | Jun 16, 2008
oh gosh.
i did this in 2003. i had sold one house in my career as a realtor that year. when tax time came around i was so happy to have my w-2s and telefile info on hand that i filed the day i got them in the mail, completely forgetting about the real estate gig.
last year the irs tracked me down. reading yr story, maybe i could have reduced what i owed, but i just paid it off with last year's tax return.
then, 2 weeks ago i got a letter from the georgia department of revenue that they had been informed of this same instance by the irs and i needed to pay them up. thankfully this amount was much smaller and i was able to pay it within the given time frame (only 2 weeks!) before they started adding interest to it.
so i would definitely talk to yr tax person about seeing what you owe to yr state's tax department so it doesn't sneak up on you.
Reggie, Another kid with good credit | Jun 16, 2008
Dang that sucks - good thing you have a tax guy though.
we did this one year where my wife was unemployed and collecting unemployment checks early in the year. she forgot that it had happened that year, and as such we didn't report the income. 2 years later we got a letter in the mail saying that we owed about $300 more in taxes. When we realized that it WAS our mistake, we quickly paid.
Emily @ Taking Charge | Jun 18, 2008
Well hey, look on the bright side -- at least our country doesn't have debtors' prisons anymore! That's where those who didn't pay their debts and taxes were sent, and they were notoriously dark and smelly. Yuck.
Maria @ Frugal Homesteading | Jun 18, 2008
I forgot to report some freelance writing income form a 1099 and had no idea what to do about it. Then my e-file was rejected because I mistyped a SSN on it. I corrected both mistakes and breathed a sigh of relief.
I think you are going to have a lot of company! I just read an article stating that the IRS wants their cut of income earned through sites like CraigsList and eBay.
http://www.denverpost.com/search/ci_9508677
I did this years ago, I got a $12,000 cheque from the government for money that I had already paid tax on so I didn't declare it. (Aussie tax/ super) I was so upset when I got the letter, worried I would end up in court. It did get sorted out and I had to pay over $3000 back but I get my tax done by an accountant now, much less stressful!
I found you blog while reading a reference to it in the Simple Dollar. I am adding you to my blogroll and am looking forward to reading more. Sorry about your IRS letter!
~Family Man
Jeff | Jul 28, 2008
Scary ... I tried to do my taxes on my own but was so confused that I decided not to try anymore. I've got my own tax guy now too.
Amber | Jun 16, 2008
The same thing happened to me a few years ago. It was the first year after my parents decided they would no longer pay for my taxes to be prepared. I neglected to check the back of an investment statement (oops!) and didn't report a chunk of income. I got the same scary letter, and halfway expected a SWAT team to swarm me at work and take me away. Luckily, I just sent the IRS a check and it wasn't a big deal.
The next year, I filled out the forms incorrectly AGAIN, and the IRS actually sent me a refund in October because I'd paid too much.
I now have a tax preparer.
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