I just got a nice greeting the mail from the IRS saying they want me to send in my receipts and mileage log for my 2003 return. Only problem is, I have no idea where they went, I cant even find my 04 return. I had H and r block do m return and all my info, receipts logs were verified through my preparer. What the expletive am I gonna do. If i give them nothing ill lose my itemized deductions for that year and they will adjust that return, meaning ill end up owing them money plus a nice penalty plus interest


I took the letter I received from the IRS to H&R block. Its that my employee non reimbursed expenses were higher in 03 than 02 and 04. Ive been able to come up with the locations I worked at during 03, for my mileage log. But as for my tool and clothing expenses I dont have my receipts that I used in 03. When the tax specialist at H&R block looked at the letter she quickly looked at me and said, they just want an explanation, some kind of proof or anything that can back it up.
I did find one problem though, the lady that did my taxes at H&R block messed my mileage up and put my total miles for 03 as my business miles. My business miles are always around 20-30thousand miles, she had me at 40k. She quickly realized that when when looked over everything for a couple of days. But guess what I didn't get the free and clear plan in 03 because i was never offered it. So its my fault even though i was 23 at the time, i should have looked everything over before she submitted it. So The IRS will most likely adjust the mileage and take away an expense that I have no receipts for and end up owing like 1200 for the underpayment, penalty and interest. Which I can take care of with my 05 tax return, which will be getting me back 3900. Still a nerve racking ordeal. I spent way to much time on the net these last 5 days reading horror stories about the IRS, but im sure all of those stories were twisted so that you would believe the person, instead of really knowing that the person screwed themselves and left the IRS with no other options than to collect the money owed to them by all their legal means necessary.

Anyone with any insight will help me out greatly, im on edge with nervousness right now.

 

SpaZilla,
I'll give this a go since nobody else is answering you. Some of your post isn't clear, like the "free and clear plan" isn't tax lingo and I'm not sure what you mean. Also proving deductions to the preparer means nothing to the IRS.
Here's my answer.
First, don't ignore the IRS letter or wait till the last minute.
Next, you don't have to have a log, but you need to have written records to show how much you drove for work. You can reconstruct your driving now if you kept a daily calendar or some other records back then.
Next, try to show your total and business mileage in a neat and orderly fashion, and legible. I would admit up front there was a mistake and tell them what your true business mileage was, backed up as best you can.
Next, you can't offset what you will owe them by your refund for 2005. BUT, if they come up with an amount you owe and they haven't sent you your 2005 refund, they will deduct what you owe them from your refund. So have your 2005 return ready to go, or file it ASAP.
Next, if you don't have receipts, but can recall what you bought, when and how much, they might give it to you. (I said might) If you bought uniforms, take a picure of yourself in it and send it along. (a long shot, but what will it hurt?)
Next, don't send them anything they don't ask for unless it pertains to the employee expense issue.
Last, if H&R screwed up, they don't owe the tax or interest, but you could ask them to pay the % of the penalty that pertains to their screwup.
Good luck.

 

thanx for the reply. I do recall all the places I worked during 03. I have exact addresses and approximate lengths of time i worked at each site. I can explain all my expenses such as clothing, tools, and other items.

I am on top of this and will send out my letter with all the info I can give them this week.

If they propose any changes and I owe them money, what kind of penalty am I looking at paying, I know they have different penalites. I know that i will have to pay Interest from the time the return was filed until now.

 

Penalties are based on the tax you owe. There could be late payment penalties, and negligence penalties etc, depends on the agent and the case. They can range, generally from 5-25%. If they hit you with all of them, pay them and then write a letter to the penalty abatement office where you file, and you might get some of it back. Depending on how much you owe, you might consider seeing a CPA recommended by friends. But only if you think you are getting screwed. (without justification)

 

i wrote my letter as well as all the supporting explanations i could for my tool and work clothing deductions. i know the burden of proof and explnantion of deductions is on me. I hope they will take into consideration my explanations.
Between my tools, clothes and miscallaneous expenses job expenses they total 4000.00 plus about 11,000 in business miles