IRS Questioning My 2007 Return with 72(t)
L1: IRS Questioning My 2007 Return with 72(t)
I started a 72(t) from an IRA account in 2007. I received a 1099 for the 2007 payment coded such that I needed to fill out Form 5329 (no surprise), which I did. When I look up Form 5329 in my return I see the correct amount, and Line 2 is coded as 2Û, which sure seems correct to me. I do my own taxes in TurboTax.
Briefly, I just received a letter from the IRS which essentially informs me that they have examined my 2007 return, and are assessing the 10 percent early withdrawal penalty. I have 30 days to respond to this examination report.
Is it typical for the IRS to ignore the code on Line 2 of Form 5329?
Does anyone have any tips on how to respond? I know I should not try to give too little or too much information, but I’m not sure what they need to hear. I would feel sort of stupid telling them to look at Line 2.Thanks in advance for your thoughts.2008-12-04 13:50, By: jreb10, IP: [220.127.116.11]
L2: IRS Questioning My 2007 Return with 72(t)The problem is probably not your 5329 , code 02. The problem might be the 1099-R, box 7 code. If it is other than a code 1 or code 2, this could be the source of the IRS inquiry.Merely respond as to both of these items of info, and copies of both forms. I would first try to talk to someone at IRS over the phone, but lots of luck as to how long you’ll be on hold, and if the person you get can read, or understands the regulations.If you had used a “paid preparer”, he could handle this thru our special ” PRACTITIONER PRIORITY SERVICES” hotline.2008-12-04 14:03, By: dlzallestaxes, IP: [18.104.22.168]
L2: IRS Questioning My 2007 Return with 72(t)Hello jreb10:There seems to be no rhyme or reason as to how the IRS computers select people in your situation; e.g. 1099R with a “1” in box 7 coupled with the correct filing of Form 5329 to correct that coding. Some of you get a deficiency notice and some do not.Anyway, thje usual cure is a one page letter explaining that you are taking a SEPP plan compliant with IRC 72(t)(2)(A)(iv) and RR 2202-62; the particulars are ….. yada yada yada. Love you all; keep up the good work.I disagree with the other poster about calling the IRS. Call me old fashioned but I do not like attempting solve a problem orally with the IRS particularly when it stems from a deficiency notice. Further, thepeople you might talk to are insufficiently trained in this area to get it right / understand what is going on. A letter will (90% of the time) close the matter and the other 10% of the time your correspondence would most likely be transferred over to the Tax Exempt & Governmental Entities division for resolution.RegardsTheBadgerwjstecker@wispertel.net2008-12-04 15:22, By: TheBadger, IP: [22.214.171.124]
L2: IRS Questioning My 2007 Return with 72(t)I doubt that most people who prepare their own “simple” tax returns on Turbo Tax will have the ability to properly draft a letter to the IRS. While you and I might use that approach, I think that he might be able to get it resolved easier and faster by phone.I will often try to do it by phone first, because the time and cost for me to do it in writing may be more than the client is willing to spend to get it resolved that way. I have filed form 2848 (Power of Attorney) for all of my clients every year with the IRS. So I receive the same notice that they get, but I call the IRS immediately, and usually have the issue resolved by phone before the client even opens their mail. My clients love that approach.2008-12-04 20:17, By: dlzallestaxes, IP: [126.96.36.199]
L2: IRS Questioning My 2007 Return with 72(t)Hey, if a phone call gets the job done that’s great. Use what works. On the other hand, there is something to be said for a paper trail when dealing with the IRS.Although my wife and I do our own taxes and also use tax program software to make it less tedious, we haveonly hadtwo IRS problems in the past 30 years. Both issues were successfully resolved in our favor. It wasn’t quick to use letters but it was effective.Ed2008-12-04 22:37, By: Ed_B, IP: [188.8.131.52]
L2: IRS Questioning My 2007 Return with 72(t)
Thanks to everyone for the replies. I’ll be writing a polite letter, and hope it gets in front of someone who knows the tax code. I use TurboTax for convenience, but I make sure I understand every form that it uses, and why the form is being used.In this case, besides missing the point of my Form 5329, the IRS also missed the point of my Form 8606 to deal with my nondeductible IRA contributions from years ago. They want to apply the 10% penalty to the entire withdrawal. I’ll be including a copy of both forms from my return in my response.The situation begs the question of what type of training and decision support these people are getting. This is wasting their time as well as mine. Now multiply this by a large number of returns and the productivity impact is……?2008-12-07 06:34, By: jreb10, IP: [184.108.40.206]