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We have been going to the same cpa for about 7 or 8 years.

Customer Question
Hi, we have been...

Hi, we have been going to the same cpa for about 7 or 8 years. no problems. got a letter from the irs a month ago and they wanted 1124.00, in back taxes. when we went to get our taxes one for 17' we were told that we owed anothe 2,000. dollars. is it not the job of a cpa to do your taxes and to look to the future, so you dont come up against things like this.

Accountant's Assistant: What state are you in? It matters because laws vary by location.

New york,, i evidently didnt have taxes taken out of the unemployment that i received for a short period of time

Accountant's Assistant: What steps have you taken so far?

None you are the first person we are asking

Accountant's Assistant: Anything else you want the lawyer to know before I connect you?

Just that we owe about 3500.oo in back taxes and we dont know why. thanks wwe are both collecting ss and the cpa said that it was all taxed cause we earned too muh money.

Submitted: 20 days ago.Category: Tax
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Answered in 8 hours by:
3/31/2018
Tax Professional: taxmanrog, Certified Public Accountant (CPA) replied 19 days ago
taxmanrog
taxmanrog, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 1,022
Experience: Licensed CPA, MA, MST with 31 years' experience. Teach Accounting and Tax courses at Masters level.
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Welcome to Just Answer! Thank you for giving me the opportunity to assist you! I will do my best to help!

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Tax Professional: taxmanrog, Certified Public Accountant (CPA) replied 19 days ago

As a CPA myself, who has been practicing for over 33 years, let me say that your situation is a difficult one. I cannot answer as to why you owe taxes from a prior year. It is entirely possible that the IRS is incorrect. If an item of income was omitted, they simply look at the missing piece and assess tax, with no consideration for basis or other credits.

For example, I had one where a client forgot that he had a small brokerage account that he closed early in the year. So we did not report the stock sales. He sold the stock at a loss. The IRS simply saw that there were proceeds from a stock sale, and assessed tax on the proceeds. Once I saw this, and added the basis to the form, the amount due went away and the taxpayer actually got a refund.

Another taxpayer failed to tell me that he converted a traditional IRA to a Roth IRA. He thought IRA to IRA, he never got cash, so he did not tell me. The IRS caught it and assessed tax. It turns out that the taxpayer earned this IRA while working overseas, and was able to use his excess foreign tax credits to offset this. Again, it went away.

Most of the times that there is tax due from a prior year, it is because a client did not bring all of the documentation to the tax preparer, or the documents from the broker have changed (happens all the time). Sometimes, but not often, it is because the tax preparer was unfamiliar with the particular transaction, and handled it incorrectly, resulting in additional tax.

So without knowing the details I cannot say why you owe additional tax. I will say that even if the preparer made a mistake, he can often get the penalties reduced or removed if he works with the IRS.

As far as the current year, I have to ask you how often you communicate with your CPA. If you did not tell him that you were receiving unemployment without any withholding tax, it is impossible for him to make adjustments to reduce the tax effect of this. Similarly, if you make a larger amount of income than in a prior year, and you don't let him know, he cannot make recommendations for withholding adjustments or for estimated payments.

As much as we try to give great service to our clients, we are not mind readers and cannot force our clients to perform in accordance with our will.

I just dealt with a client who was not happy with a large balance due that she had on her return. In the prior year, she had owed as well, and I had prepared quarterly estimated tax payments. When talking to her, she told me that she had not made any of the estimated tax payments because she did not think that she would owe this year. I am not sure why, because her income has been growing. But hey, I guess I prepare these estimated payment vouchers for my own enjoyment. Had she made the payments as I had instructed, she would have had a small refund and had no tax penalty. I could not force her to make the payments, but they wre there.

If you are able to tell me what the prior tax balances were due to, I can look to see if there is anything that can be done to remove them. You can upload the documents here if you would like me to review them.

Now, as for the current year, if you did communicate with your CPA, as many of my clients do, he should have been able to prepare projections for you based on the information that you give him. I am often fairly close when given the proper information from clients. If you made "too much money" then he should have prepared estimates for you, or at least done a projection to warn you.

I hope that this has answered your question. If you have any more, please feel free to ask and I will be happy to answer.

Thanks! Have a great weekend!

Roger

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Customer reply replied 19 days ago
we got your answer I don’t know what to tell you but our only income is our paychecks and social security checks we are senior citizens. I didnt know I had to have taxes taken out of my unemployment money or social security checks so now I owe the government money. Thanks rhona gorman
Tax Professional: taxmanrog, Certified Public Accountant (CPA) replied 19 days ago

Unemployment has always been taxable. And, it adds to your income, so when you calculate the taxable portion of Social Security, this taxable portion increases when you receive additional income, such as unemployment, dividends, interest, pensions, etc.

And, since most people to not have tax withheld from their Social Security if you don't have tax withheld from your unemployment, you get hit twice. The first time is when the unemployment is taxed. The second time is when more of your Social Security becomes taxed. And since you don't have withholding on either of these, you now owe a bundle!

If you don't talk to your CPA when you start collecting unemployment (UE), there is no way he can know to warn you. When I have had clients tell me that they are collecting UE I usually warn them. And a good CPA does not necessarily need to be told directly. I have had clients call to ask what happens when someone pulls out retirement because they lost a job, or ask what happens if they cash in CDs because of unemployment. Then I can warn them. But those that don't communicate anything to me I am unable to help.

My offer stands - if you would like me to look at your notices I would be happy to. The IRS is often wrong.

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Customer reply replied 19 days ago
thanks but we have to talk this over first.
Tax Professional: taxmanrog, Certified Public Accountant (CPA) replied 19 days ago

OK. I would not charge to look this over if that is your concern.

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