LDIJ and company, if you dont mind... (happy new year!!)

[Banned_Princess]

NY state is auditing my 2011 tax return.

They never sent me a refund, so its not like I owe them in this audit.

My records from my personal business are scattered and sketchy hand records and computer spreadsheets. I lost my hard copies of payments, and receipts for my expenses and stuff in the flood of my basement from Irene... my boss never filed a 1099 for me, and doesn't have copies of the checks he paid me, my other clients paid me monthly in cash, so basically that is the hold up. I am working on this and expect to get them the paperwork in the next few months.

Annnyyywayyyy...

So as tax season is almost upon us, NYS is disputing I made any money in 2011 (I assume...they also want paperwork on my daughter for my EIC and whatever other credit I get for her, that was the easy part.) , my business continued through 2012 as well as the 1099 work I did, which I am sure wont be filed again by my boss...

I am going to want to file 2012 before my 2011 tax audit is complete.

Is this audit going to hold up my 2012 Federal return? I have heard nothing from the IRS regarding this audit. (they sent me 2011's refund) also Is this audit going to hold up my state return this year? are they going to want to audit this year too, because I haven't got them any paperwork from 2011 yet??

What if they don't like my records, are they going to drop my credits, and claim I owe taxes on my income that they are disputing?

Would it be any easier if I concede with their suspicion of 0 income, so they will close their audit and I can move on to 2012? like I said, they didn't refund me, so I don't owe them anything from this, they owe me...


Thanks you guys.

 

[FlyingRon]

They never sent me a refund, so its not like I owe them in this audit.

What makes you think you don't owe them? If they determine you are underwithheld (or failed to make estimate tax payments), then you still owe them.

Is this audit going to hold up my 2012 Federal return?

A state audit will have no impact on your federal returns.
It very well may place a hold for what they assume you owe on your previous year on the subsequent state returns.

What if they don't like my records, are they going to drop my credits, and claim I owe taxes on my income that they are disputing?

Absolutely.

Would it be any easier if I concede with their suspicion of 0 income, so they will close their audit and I can move on to 2012? like I said, they didn't refund me, so I don't owe them anything from this, they owe me...

Understand again, that the amount of your "return" is IMMATERIAL. It's what they claim you owe versus what you paid. If there is a deficiency. They will come after you. You can't just stick your head in the sand or give up and assume it will go away.

 

[Banned_Princess]

I file my taxes yearly, and pay all required taxes on my income.

What makes you think you don't owe them? If they determine you are underwithheld (or failed to make estimate tax payments), then you still owe them.

How would I owe taxes on 0 income in 2011. ??

A state audit will have no impact on your federal returns.
It very well may place a hold for what they assume you owe on your previous year on the subsequent state returns.

I still don't know how I would owe them, if they claim I made 0 dollars in 2011. They can drop all the credits they want, if I made no income, then how are they going to claim I owe on that 0.

The income has to be the only thing in dispute, because my deductions and credits are easy to show. Is the state going to say, you failed to prove you had any income at all so you owe us on income you claimed but we dont believe you made, and we are removing all credits and deductions just because...

Understand again, that the amount of your "return" is IMMATERIAL. It's what they claim you owe versus what you paid. If there is a deficiency. They will come after you. You can't just stick your head in the sand or give up and assume it will go away.

They are not claiming I owe them any taxes, they are claiming they don't owe me, because my income was 0. which it wasn't. They want paper work, and I am working on it. I was told I had 3 years to get them these records, and I intend to. I know about the interest they may charge if they determine I owe them, but again, what is the tax rate on 0.

 

[OHRoadwarrior]

I would go with the Irene excuse you outlined, submit what proof you have and pay anything they feel you owe. The problem is if they start challenging other years returns and you cannot document those either.

 

[Banned_Princess]

Well, hopefully my records on my computer, the agreements outlining my services to the clients (signed by them), spreadsheets, detailed records of my income / expenses, and my bank records of deposits will satisfy them.

And as for the flood in the basement due to irene, thats where I kept my file cabinit, and where all my hard copies of all the years were stored. and no I did not see the flood coming, the cabinet was already elevated off the floor, just not high enough for hurricane "kill the electricity and cause flooding above and beyond normal"

I guess i will just spend January compiling and organizing my documents, send them, and then file in February.

 

[LdiJ]

Well, hopefully my records on my computer, the agreements outlining my services to the clients (signed by them), spreadsheets, detailed records of my income / expenses, and my bank records of deposits will satisfy them.

And as for the flood in the basement due to irene, thats where I kept my file cabinit, and where all my hard copies of all the years were stored. and no I did not see the flood coming, the cabinet was already elevated off the floor, just not high enough for hurricane "kill the electricity and cause flooding above and beyond normal"

I guess i will just spend January compiling and organizing my documents, send them, and then file in February.

Obviously this is primarily a state EIC audit, correct? Otherwise the state would have no reason to try to claim that you had no income.

Your bank statements would also be a significant indication of your income as they would show the deposits you made. If you don't have copies your bank can provide them. The more records you can provide the better.

This 2011 audit will not have any effect on your 2012 federal return, but it will delay any 2012 state refund and it could impact 2013's federal return, depending on what happens and what NY reports to the feds. I would not recommend rolling over and playing dead and saying that you had zero income unless you actually had zero income.

You will also need to provide birth certificates to prove that your children are your children, and independent information (school records showing your address, doctor's records showing your address, church records showing your address, etc) to prove that they primarily live with you.

 

[Banned_Princess]

Yes, it must be an EIC audit. And I have already collected my daughters info (BC SS card, MD records, school records, statements from my dad whom of wich I live with, my child support court info, and her medicaid card. ) its just compiling all the paperwork I can possibly collect (the more the better) and I have been slacking on this. So Im going to get right to it. Its alot of work, so I hope they are satisfied with what I provide, and dont audit any more years. lol

Thank you LDIJ, I am going to go ahead and file in feb, instead of waiting until I get this paperwork in.

Cheers all.