1040-X problem

[Brent Gindelberger]

I am a volunteer for the AARP Tax Aide program. In 2022 (for 2021 taxes), a client filed a 1040-X because he received a 1099-DIV after we had filed his original return. He paid additional tax because of this, but the IRS sent him a letter that he hadn't paid enough. It didn't explain why, and we were dumfounded.

Turns out the late 1099-DIV contained Qualified Dividends and Capital Gains distributions. The software correctly used the QDCG worksheet, but the IRS used the straight Tax Table on all of the the additional AGI on the 1040-X, thus overstating the amount owed.

I am not sure whether the taxpayer sent in a copy of the late 1099-DIV showing the QD and CG. He's tried to get an understanding from the IRS, but all they'll say is that he owes.

Should we seek help from the Taxpayer Advocate, continue trying to find someone at the regular number to help us, or something else?

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[honda....@gmail.com]

Hi, I am a VITA "tax counselor." I have the same certifications as you. This is my fifth year in about 15 years doing this. Many at this forum are way more expert than I am.

For now, things to consider (if you have not already):

-- The IRS is supposed to receive all 1099-Divs, original and corrected, without the taxpayer having to submit them.

-- Do have the taxpayer get a copy of his "transcript" as described here: https://www.irs.gov/individuals/get-transcript . Some taxpayers find this laborious, but the transcript is often an invaluable tool for sleuthing.

-- The IRS bills interest. See for example https://www.irs.gov/newsroom/interest-rates-increase-for-the-first-quarter-of-2023. Have you checked for how much this interest is?

-- Many feel amending with Taxslayer is tricky. To try to get to the bottom of this, I would use a phony name in the 2021 Taxslayer software, training version or non-training version, and carefully work the 2021 taxes again, using the corrected 1099-Div. Then compare the originally submitted 2021 Form 1040 (and related forms) to the 1040 and related forms that the scratch file spews out. Suss out the differences. Compare to what the IRS say. And so on.

-- Once you feel certain that the IRS is mistaken, using the Taxpayer Advocate https://www.irs.gov/taxpayer-advocate is fine and may get results. But also consider contacting your state's U. S. Senators. Where I am, and regardless of one's political party, both Senators' staffs are incredibly effective at getting results in a timely fashion.

[Adam H. Kerman]

Brent Gindelberger <bginde...@gmail.com> wrote:

>I am a volunteer for the AARP Tax Aide program. In 2022 (for 2021
>taxes), a client filed a 1040-X because he received a 1099-DIV after we
>had filed his original return. He paid additional tax because of this,
>but the IRS sent him a letter that he hadn't paid enough. It didn't
>explain why, and we were dumfounded.

>Turns out the late 1099-DIV contained Qualified Dividends and Capital
>Gains distributions. The software correctly used the QDCG worksheet,
>but the IRS used the straight Tax Table on all of the the additional AGI
>on the 1040-X, thus overstating the amount owed.

When I filled out a 1040-X on behalf of someone else, I used the
Qualified Dividends and Capital Gain Tax Worksheet and was required to
put QDCGTW on the dotted line on Line 6. This was a paper form.

How does the tax software indicate this in the data sent to IRS?

>I am not sure whether the taxpayer sent in a copy of the late 1099-DIV
>showing the QD and CG. He's tried to get an understanding from the IRS,
>but all they'll say is that he owes.

>Should we seek help from the Taxpayer Advocate, continue trying to find
>someone at the regular number to help us, or something else?

I would reply in writing to that letter, stating all the facts, sending
it by certified mail to prove that the taxpayer replied on a timely
basis, and hope that it lands on someone's desk who will make the
correction on the IRS computer.