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Experience:  over 40 years experience in tax matters
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I think Merrill Lynch is knowingly reporting Income to the

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I think Merrill Lynch is knowingly reporting Income to the IRS incorrectly. My husband sold securities through his Bank of America account. Since Bank of America acquired Merrill Lynch the sale was done by Merrill Lynch even though he bought the securities through Bank of America. The sale of the securities resulted in a $6,000+ loss, but Merrill Lynch just reported the sale as income to the IRS and they are now charging us $18,000+ as a tax increase including penalties and interest. The issue is that we filed the taxes through a Bank of America advertised version of Turbo Tax where Turbo Tax gets all the information from Bank of America itself. So if Merrill Lynch sold the securities at a loss, and we are using a program though its owner Bank of America, why is the IRS saying that we owe it money? We call Bank of America and it refuses to answer our questions saying it cannot access the Merrill Lynch account and that we need to call Merrill Lynch, never mind that Bank of America owns Merrill Lynch. The question wasn't about the Merrill Lynch account, in so much as why Turbo Tax didn't catch this and why Bank of America did not provide this information to Turbo Tax. Regardless, Bank of America owns Merrill Lynch, so whey the separation? We call Merrill Lynch and they say all of the information is disclosed and online. However, we have never received a copy of this information and what's more so we used software that was advertised by Merrill Lynch's parent company, Bank of America, to ensure that we would not miss anything. What seems sinister is that Merrill Lynch is reporting this as income that we didn't report, which is not the case, it was a loss, and we are not the only ones. What should be done? How do we get answers from Turbo Tax, Bank of America and Merrill Lynch? How can Merrill Lynch report securities they sold as a gain when they know it was a loss because the company that acquired the securities was their now parent Bank of America...

Welcome to Just Answer. I am here to help you resolve your tax and finance concerns. Please feel free to ask anytime you need extra help.

Bank of America/Merrill Lynch has not done this incorrectly. The problem lies in the fact that they are only required to report the sales proceeds to the IRS. They do not report the cost or the loss. That is all that is required of them. It also would appear that you may not have shown the sale and proceeds on your tax return. The loss would have tax benefits for you.

Since you seem to have erred in not showing the loss, the IRS has "corrected" the return for you. To get this matter resolved you will need to send the IRS a letter explaining what has happened and submit proof of your statements with that letter. Here is the letter I would send. It is brief, to the point, and will get the matter corrected.

IRS address


Dear Sirs:

We have received your letter of DATE with which we disagree. A copy of your letter is attached for your reference.

The reason for our disagreement is that, while we mistakenly failed to report the sales proceeds on our return, you have not taken our basis into account. I am attaching (DOCUMENTS) hereto to substantiate our position. Please update your records to correct this matter.

Very truly yours,


You should also consider filing amended Federal and state tax returns for the tax year involved since, on a joint tax return, the amount of the loss can be used to offset capital gains and an additional $3,000 can be used to offset other income. Any loss unused at that point can be carried forward to future years to reduce income there.

Customer: replied 4 years ago.
Thank you Mr Greiner. I need further information about two things:
1. If we had erred in reporting the loss, would we still be obliged to pay the IRS penalty of $2890 (which is on top of the proceeds + interest) ?
2. Would you suggest amending our 2010 and 2011 taxes through turbotax or a tax professional ? For your information, we filed our taxes for stated years through online-turbotax.

1. If you erred in reporting the loss, once it is reported the IRS will change the amount due to take the loss into account. If that is the only change they have made you will not owe the additional tax, interest or penalties. If you do not address the issue, the IRS will close the case using their numbers and then report this change to your state resulting in additional tax, interest, and penalties at the state level.

2.I would prepare the amended returns through TurboTax if you feel comfortable doing so. If not then you should seek professional assistance. The amendment process is not difficult and you should be able to handle it yourself. You also need to know that amended returns must be mailed in and cannot be submitted electronically.

Category: Tax
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Experience: over 40 years experience in tax matters
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