IRS Agent Answers More Tax Questions

Posted by Madison on January 23, 2008

The tax clock is ticking! Congress straightened out the AMT and the VITA sites are open. Hopefully you are getting your paperwork organized and you’ve read about the free online efiling available to many people.

Question StampOf course it wouldn’t be tax time without questions! Here’s more answers to reader questions from our local IRS agent. If you didn’t get a chance, be sure to read the first set of questions in the interview with an IRS agent.

I am in the middle of an IRS audit. Does the IRS charge the taxpayer that is being audited a fee? If so what are the charges? – Submitted by Julia

We do not charge a fee for the audit. If we find that you owe additional taxes, we charge interest and sometimes penalties in addition to the taxes due. If you choose to pay those amounts by an installment agreement we have a fee for setting up an installment agreement.

I have an issue with an inheritance my husband and I received. My father-in-law had the money in an annuity that was transferred to my husband and his sister upon his death. We consulted an accountant before cashing it out, and he told us that we would only be responsible for paying taxes on the interest the annuity had earned since my father-in-law had put the money in. We got the tax form in the mail recently and it says the entire amount is taxable. Who’s right? The accountant or the form? Submitted by Lynnae at Being Frugal

Normally in a tax deferred annuity only the earnings are taxable since the principal was after tax money that was invested. If it was an IRA that was put in and a deduction taken then everything is taxable. There is probably a communication problem here. First thing I would do is call the bank and get an explanation of what the payment was and the facts.

Feel free to contact me if you have more tax questions you can’t find the answers to. I’ll do my best to track down the answer for you!



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Comments to IRS Agent Answers More Tax Questions

  1. from my understanding a business is service for compensation be it by trade barter or money. am i wrong with this?

    tb

  2. I have been on unemp. the whole year and was wondering cause I had no txs taken out how this would effect me come tax time I have 3 dependents myself and my husband he has no income

    rhoda

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