Getting Personal: I lost an important document
IRS tax forms
Tess Vigeland: Alright, government shutdown or no government shutdown, you must pay the Tax Man. I do our taxes as soon as possible, early February. It's like ripping off a Band-Aid -- just get it over with already and get on with the year.
Others, well, they wait. And wait. 'Til the last possible minute. Usually because they're confused. Maybe have a question or concern.
So throughout the show today we're going to put some of those questions to Frank Degen. He is what's called an "enrolled agent," someone so well versed in the tax code the Treasury Department allows him to represent taxpayers before the IRS.
Frank Degen: I like to say that enrolled agents do CPR for tax payers. Consultation, preparation and representation.
Vigeland: Right, and hopefully keeping them from having a heart attack when they confront the IRS, right?
Degen: Absolutely. We want them to stay alive and pay their taxes.
Vigeland: So do you actually go in there, I mean, if somebody gets audited, you're the one who's helping them out?
Degen: Yes, absolutely. If you get a power of attorney from a client, we're authorized to do exactly that. We represent them in audits, with collections and appeals.
Vigeland: How scared should somebody if they get an audit?
Degen: Well, it depends on what their tax return, how it was prepared.
Vigeland: If you've been fraudulently filing, you should be terrified.
Degen: Yes, you have some problems. I mean, there are some tax payers who have some tax preparers who will push the envelope. And the IRS sometimes has legitimate questions. However, a tax payer who has taken deductions that satisfy the orders, there's nothing to fear. One of the big things your listeners should always do is keep records. Record-keeping is essentially, especially in an ordered situation. THat's very very important.
Vigeland: And whether you're using a tax preparation software or a shoe box, just be organized in some way that you can figure out yourself.
Degen: Exactly. Sometimes, you go back and scratch your head and you say, "Where did that number come from?" You don't want that to happen. You really want to be able to document things.
Vigeland: Alright, let's head to the phones. And Beth is with us from Oakland. Hi Beth.
Beth: Hi there.
Vigeland: Well, before we get to your exact question, do you usually do your own taxes or do you have someone do them for you?
Beth: I usually do my own. Sometimes electronically, and last year, I used pencil and paper.
Vigeland: Pencil and paper! Wow, that's old fashioned.
Degen: A Luddite amongst us!
Vigeland: Why did you choose to do that?
Beth: Because my taxes are very simple and I was going to pay some... I usually get money back federally and owe for my state, so it's about a wash. And I was going to have to pay to file the state and pay to pay, so I thought, "I'll just do this and mail it myself. Thanks."
Vigeland: Frank, isn't the IRS really trying to encourage people to do this online?
Degen: Oh yeah, absolutely. E-filing, they actually received the mandate from Congress to encourage people, to require people to e-file. Now, in Beth's case, she doesn't have any requirement. Tax preparers, people who prepare taxes for a fee are required now if they done 10 tax returns to e-file in the future.
Degen: There will be a significant increase, though individuals like Beth are under no requirement now. And I don't forsee that happening in the near future.
Vigeland: Alright, so pencil and paper it'll be for you Beth.
Beth: I guess so.
Vigeland: Well, what can we help you out with today with your tax question?
Beth: My tax question: I closed an IRA, an investment account, last year that was a retirement account. It was a 503(b). And had them mail me a check, which I then lost and I got them to mail me a second check and I received it in February 2011 and deposited it into a rollover IRA. But I have a 1099 for the year 2010 for that amount of money and I'm concerned that since I actually didn't get the check until 2011, that I'm going to get another 1099 in 2011, for these year's taxes. So I don't know if I should use this 1099 or not.
Vigeland: OK. So which year does this need to be in Frank?
Degen: Oh, definitely in 2010 from what I'm hearing. But Beth, let me ask you a question. Do you have the 1099 in front of you?
Beth: I have the 1099 in front of me.
Degen: What's in box 7, the code there?
Beth: Box 7, it says "G."
Degen: Alright, what you've done then is a trustee-to-trustee transfer. That's very helpful. If that would've been a check made out to you, I don't think you would've been eligible to do this rollover, because the 60 days would've evaporated. Because otherwise, tax payers would simply say "I lost my check," and use the money for a long period of time. So I would report the transaction on your 2010 tax return. If by any chance you get a duplicate for 2011, that will not change the fact that you have already recorded this and I would not be worried about it, because the code of G says to the IRS that you never touched the money. I think you're OK and I wouldn't give any worries, alright?
Beth: I've been worrying for ages!
Degen: Famous last words with the IRS!
Beth Yeah, I know.
Vigeland: So what happens if she finds the old check?
Beth: I actually -- I'm sorry -- did find the old check.
Vigeland: Oh you did?
Beth: I thought I never got it, but when I was checking my files, I found that I had carefully filed it away.
Tess, Frank and Beth laugh
Degen: She didn't want to lose it, that's what.
Vigeland: Right, exactly. You were too organized for your own good.
Vigeland: Alright, thanks for the question Beth.
Beth: Thank you.