Jan
07
2012

  Doozy of a Year

What a great start 2012 is off to! Both T and I have colds, I STILL have pink eye (that started New Year's Eve), and now it's that time of the month, too.

And we just got a notice in the mail that the IRS is auditing our 2010 tax returns.

Whooo!

I am feeling so lousy that T took the kids this afternoon so I could rest. Of course, he did drop the IRS letter in my lap at the same time, so it wasn't truly restful. But at least I could lie in bed while going through the documents, which is better than chasing those boys around. The bright side here is that although both T and I have been completely out of commission ALL WEEK, the boys are both healthy. Max's pink eye was gone in a few days with the eye drops.

I actually knew after I filed the 2010 returns that we were a high audit risk, but I thought they'd just ask for documentation for the charitable contributions. We still give at the about the same level we did when T was working, but now that our income is drastically reduced, our donations are a sizable percentage of our income. My goal is to tithe 10% over the course of our lifetimes, so while we fell way short during the boom years, as long as we keep up in the lean years then it'll even out in the long run. Plus I think T will feel comfortable giving away more after we've paid for college, etc. and we're closer to traditional retirement age. If we have any money left over by then! I think we've both realized that our current retirement might not be permanent and one or both of us will have to go back to work at some point in the future. We can live with that.

But the audit is not about the deductions-- it appears that I did under-report some income. One of our brokerage accounts did not import into TurboTax, so I didn't report the proceeds of one trade and $58 worth of interest income. There is also some discrepancy between the amount we rolled into our Roth IRA and the amount reported, which I noticed at the time I filed the return, but since I didn't know why the brokerage was reporting amount X when we only received amount Y, I just put in amount Y and figured I'd deal with it if they asked about it in the audit. So it's time to pay the piper. Regardless, even if they make all the adjustments, I'm pretty sure we still don't owe any income tax so there won't be any penalties or interest. But since they don't have the cost basis for that single trade, they don't know that, so it's their job to follow up. A few pages of photocopied brokerage statements, a letter apologizing for my oversight in missing that trade, and I'll be able to put this one to bed.

I wonder how many audits I've dealt with over the years? I thought it was just one or two, but I think when I was going through old tax returns I saw IRS notices in bunches of them. Sometimes the "audit" is just clarification of a line or two (much like this one), so I don't remember them years later.