Tax question, IRS is trying to tax me on entire amount I pulled from investment account rather than the interest earned

[Janeway]

I am sure there must just be a form I am missing. I cleared up the stock option issue I mentioned perviously. But they are saying I also owe for money I pulled out of my own account. I pulled $8000 from my account that year. It was 2014. They say, and the tax forms says, the interest earned was $2000. But the IRS is saying I owe taxes on the full $8000. I am sure it must be an issue similar to the stock option issue where I am missing a form. If I pay taxes on that money now, and I paid taxes on that money the year I put it in, then I will be double taxed which isn't right. Does anyone have any idea as to which tax form I might be missing here?

 

edited to add: maybe an 8949 or a schedule D?

Edited June 3, 2017 by Janeway

[kitten18]

I am sure there must just be a form I am missing. I cleared up the stock option issue I mentioned perviously. But they are saying I also owe for money I pulled out of my own account. I pulled $8000 from my account that year. It was 2014. They say, and the tax forms says, the interest earned was $2000. But the IRS is saying I owe taxes on the full $8000. I am sure it must be an issue similar to the stock option issue where I am missing a form. If I pay taxes on that money now, and I paid taxes on that money the year I put it in, then I will be double taxed which isn't right. Does anyone have any idea as to which tax form I might be missing here?

What kinds of account? You had already paid income tax on it?

[Janeway]

What kinds of account? You had already paid income tax on it?

Some year, do not recall which, I put money in to a mutual fund. It may have been over a course of a few years. Then, in 2014, I cashed out $8000. Now the IRS is trying to tax me on the full $8000 in 2014, even though I would have paid tax on the principal that I put in originally back whenever it was that the money was earned in the first place. But it was a mutual fund.

[Tenaj]

You have to prove what your basis was in that money in the mutual fund. Usually the company who held the mutual fund would be able to help you with that. Basically, your basis is your original investment but it can be trickier than that with mutual funds but it is your responsibility to find that basis otherwise the IRS can tax you on the entire amount.

[ChocolateReignRemix]

Some year, do not recall which, I put money in to a mutual fund. It may have been over a course of a few years. Then, in 2014, I cashed out $8000. Now the IRS is trying to tax me on the full $8000 in 2014, even though I would have paid tax on the principal that I put in originally back whenever it was that the money was earned in the first place. But it was a mutual fund.

Sounds like it is being viewed as an IRA withdraw.

[poppy]

Yes, my question is, was this an IRA or 401K or 529 or some other type of tax shelter?  Or was it a taxable account - maybe called a joint account or individual account?

[MommyLiberty5013]

Was the mutual fund inside a retirement account? If so, then what type of IRA?

 

If not a retirement account and just a separate investment, then they may be able to tax you on the full "income" you earned by de-investing that money. It sounds like they may be taxing you a Capital Gains Tax.

[forty-two]

If it's a traditional IRA, the taxable amount is figured on an 8606 (according to my mom).

[Janeway]

Yes, my question is, was this an IRA or 401K or 529 or some other type of tax shelter?  Or was it a taxable account - maybe called a joint account or individual account?

No, it was not in the IRA or otherwise. Just a regular mutual fund.

[Lawyer&Mom]

It's possible that the mutual fund reported a zero basis on the investment. The IRS would then tax the entire amount as gain.

 

Or the IRS made some other mistake. Happens all the time.

 

I assume you got a letter of some kind. Call them. There are people on the other side who just want to get to the right answer.

[Janeway]

It's possible that the mutual fund reported a zero basis on the investment. The IRS would then tax the entire amount as gain.

 

Or the IRS made some other mistake. Happens all the time.

 

I assume you got a letter of some kind. Call them. There are people on the other side who just want to get to the right answer.

I have been working on it for months. I came and posted here because I already got $3000 taken off what the IRS thought I owed them because of stock options that year because I did not file a new form that I did not need to file in the past. 

[Lanny]

Did you file your tax return that year with a Tax filing service like TaxAct? Their websites​ should prevent something like this. If so log onto their website and ask for help


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Edited June 4, 2017 by Lanny

[Lawyer&Mom]

I have been working on it for months. I came and posted here because I already got $3000 taken off what the IRS thought I owed them because of stock options that year because I did not file a new form that I did not need to file in the past.

In that case, keep up the good work. I know it's a bureaucratic slog, but in my experience taxpayers who persist eventually get their issues resolved. Eventually... (The farther you go in the process, the higher the pay grade of the people you are talking to. It gets better!)

[ChocolateReignRemix]

No, it was not in the IRA or otherwise. Just a regular mutual fund.

 

If it is a regular mutual fund, start with the company you purchased through, not the IRS.  It is possible that somehow something was recorded incorrectly, in which case the IRS will be difficult to deal with until you can show them otherwise.

 

If you get a confirmation that the account information was reported correctly, you then simply escalate through IRS customer service as needed.

[Janeway]

Did you file your tax return that year with a Tax filing service like TaxAct? Their websites​ should prevent something like this. If so log onto their website and ask for help

 

 

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I did call them. But I found people here on this board to help much more than the people at Turbotax.

[Lanny]

My impression of TurboTax is not good and I have never used TurboTax. It's the most expensive. I wonder about the possibility of you filing an Amended return for that tax year but it is probably too late for that and someone upthread indicated you are probably close to a resolution to this issue. And I believe filing an Amended return increases Audit risk and your return has already been screened so probably best to continue on the path you are on now.

 

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[JFSinIL]

When I was in grad school one year the IRS sent a letter informing me I had underpaid my taxes. I had made (I think) about $14,000. IRS said my taxes were...$14,000. Exact same amount. I made the IRS lady laugh when I called and pointed out that possibly there might be a teeny mistake on their part. Not getting mad about it got her to quickly help straighten it out.