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Received CP3219A after responding to CP2000 last year - no response from IRS on same issue
I'm seriously frustrated with the IRS right now. Back in August my husband and I received a CP2000 for 2021 because he took money from his IRA without filing Form 8606. According to that notice, we supposedly owed around $16k in taxes plus another $3k in penalties and interest. We filled out the 8606 form and I wrote a detailed letter explaining our mistake and showing that with the completed 8606, we actually only owed about $6,500. I sent everything to the address they provided and also faxed a copy to the number on the notice to be extra careful. Here's the problem - we never got ANY response from them. Not a single word. Now I just opened a CP3219A notice saying we have a deadline to file with Tax Court! The crazy part is it shows the EXACT same amount due as the original CP2000, with all the same numbers as if they completely ignored our response. The notice says if I want to resolve this with the IRS, I should submit information to the same exact address and fax number I already used the first time. Does the IRS just completely ignore responses to CP2000 notices sometimes? Do they at least normally tell you they disagree with your response instead of just sending a more serious notice? I'm so confused about what to do next since they clearly didn't even look at what I sent them before.
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Discovered my partner hasn't filed taxes in 17 years - What should we do?
So I'm getting married in a few months and was talking about combining finances with my partner. During our conversation, they casually mentioned they haven't filed federal or state tax returns since 2008! I was completely shocked. They've been working regular jobs this whole time, mostly small businesses that paid them in cash, but for the last 5 years they've been at a company with proper W-2s and everything. They said they never had issues because they always claimed "exempt" on their W-4 forms, so nothing was being withheld. When I asked why they never filed, they just shrugged and said "the system is complicated and I never got around to it." I'm really worried because we're planning to buy a house next year, and I know this tax situation will come back to haunt us. They probably owe tens of thousands in back taxes at this point. I don't even know where to start fixing this mess. Should they just file for the last few years? File for all 17 years? Get a lawyer? I'm concerned about potential penalties or even criminal charges. Has anyone dealt with a similar situation? What's the best way to handle this without making things worse?
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My sister went through this exact situation with her now-husband. One thing nobody's mentioned yet - if your partner had legitimate business expenses during those cash-payment years, they might actually owe a lot less than you think. Self-employed people can deduct business expenses, home office, mileage, etc. The biggest shock they got was actually from state taxes, not federal. Their state had much higher penalties than the IRS. Definitely look into your specific state's policies on late filing.
That's a really good point about business expenses! My partner definitely had work-related costs during those years, like tools and supplies. Do you know if they can still claim those deductions when filing so late? And did your sister's husband end up having to file for all the missing years?
Yes, they can still claim legitimate business deductions when filing late returns. The key is having some form of documentation or reasonable estimates that could be justified if questioned. Even if they don't have perfect records, they should make reasonable estimates of business expenses rather than filing as if they had none. My sister's husband ended up filing 7 years back (which was what the IRS requested when they contacted him). The IRS was primarily concerned with the most recent years and years where he had significant income. They worked out a payment plan and the whole process was less catastrophic than they initially feared.
Just FYI - claiming "exempt" on W-4 forms when you don't qualify is a big red flag to the IRS. It's not just "oops I forgot to file" but actively avoiding withholding. Your partner needs to stop doing this immediately! They should submit a new W-4 to their employer ASAP with the correct information. Also, you mentioned buying a house next year - that might be challenging with this tax situation hanging over you. Mortgage lenders typically require tax transcripts, and they'll see the unfiled years.
This is true but a bit alarmist. Yes, improperly claiming exempt is an issue, but the IRS distinguishes between tax avoidance (legal but aggressive) and tax evasion (illegal). Most cases like this end up as civil matters with penalties and interest, not criminal tax evasion charges.
Should my 17-year-old brother file his own tax return or be claimed as dependent? Made under $13k
My younger brother just turned 17 last September and he's a full-time high school junior. He got his first part-time job at the movie theater last year and made around $12,700 total - which I believe is under the IRS filing threshold of $13,850. My parents are trying to figure out what makes the most sense financially. They're leaning toward claiming him as a dependent on their taxes since it seems like they'd get a better tax benefit compared to him filing his own return. But now I'm worried - will my parents get in trouble with the IRS if they claim him as a dependent without him filing his own tax return? The last thing I want is for them to get flagged for an audit or something. Can someone please explain what the right approach is here? Thank you!
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Just to add something nobody mentioned - if your brother had ANY self-employment income (like mowing lawns, babysitting, etc that he got paid for directly, not through a company with a W-2), the filing threshold is much lower - only $400 for self-employment income! So if any of his income wasn't from a regular employer, different rules apply.
Oh that's interesting! He did do some weekend yard work for our neighbor and got paid about $300 cash throughout the summer. Does that count as self-employment? And would that change whether my parents can claim him?
The $300 from yard work would technically count as self-employment income, but since it's under the $400 threshold for self-employment tax, it doesn't trigger a required filing on its own. Your brother would add this to his total income though if he does file. This doesn't change your parents' ability to claim him as a dependent at all. The dependent qualification is based on age, relationship, residency, and support tests - not on whether the dependent files their own return or how much they made (within certain limits that your brother is well under).
Lots of great advice here but I want to add: even if your brother isn't required to file, having him file his own return is good practice for learning about taxes! My son started filing at 16 and now at 20 he's way more financially literate than I was at his age.
This is so true! I wish someone had taught me about taxes when I was younger. I was completely lost when I had to file on my own for the first time in college.
How are taxes on realized stock gains calculated? Need help understanding trading implications
I'm trying to understand how stock taxes work and it's confusing me. From what I understand, you only pay taxes when you actually sell the stock position (realized gain), even if that money just sits in your brokerage account afterward. But this seems to make trading incredibly difficult mathematically. If I'm trading regularly, doesn't this create a major disadvantage? Every time I win $100 on a trade, I have to pay capital gains tax (let's say 20%), so I only keep $80. But when I lose $100, I lose the full amount. If that's correct, wouldn't I need to win significantly more than 50% of my trades at a 1:1 risk-reward ratio just to break even? Because my $100 wins only net me $80 after tax, while my $100 losses are still full $100 losses. Am I understanding this correctly or am I missing something about how trading and capital gains taxes work together? This seems to stack the odds against traders from the start.
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You might want to look into whether you qualify as a "trader" vs an "investor" for tax purposes. If you're doing enough volume and frequency of trades, you might be able to elect the "mark-to-market" accounting method which treats all your securities as if sold on the last day of the tax year. This gives you ordinary gain/loss treatment rather than capital gains and eliminates the wash sale rule concerns. But there are strict requirements and you need to make the election in advance. Worth talking to a tax professional about it.
How many trades do you need to do to qualify as a "trader" for the IRS? I do about 20-30 trades a month. Is that enough?
There's no specific number that automatically qualifies you. The IRS looks at several factors: trading frequency (daily is best), holding periods (shorter is better), time devoted to trading (more is better), and whether you depend on the income. Your 20-30 trades monthly might be enough if they're your primary activity and you hold positions briefly. The courts have generally supported trader status for those doing hundreds of trades annually, spending several hours daily on trading, and holding positions for very short periods. But it's a facts-and-circumstances test, not just a number threshold. I'd recommend consulting a tax pro who specializes in trader taxation since the benefits can be substantial but the requirements are strict.
Has anyone used TurboTax for reporting a lot of trades? My broker sent me a consolidated 1099 with like 200+ trades and I'm wondering if I need to enter each one manually or if there's a way to import them.
Most brokers can export your trades in a format TurboTax can import. Look for a .TXF file export option on your broker's tax documents page. If they don't offer that, you might be able to download your transactions as a CSV and convert it using a third-party tool.
Thanks for the tip! Just found the .TXF export option on my broker's website. That's going to save me hours of manual data entry. I was dreading having to type in all those trades one by one.
Can I avoid capital gains tax by transferring investment property title to my spouse?
Hey tax gurus! My wife and I are in a bit of a situation with an investment property we've owned for about 7 years. The market in our area has gone crazy and the value has basically doubled from what we paid ($289,000 to roughly $575,000 now). I'm the only one on the title and mortgage currently. We're thinking about selling next spring, but I'm really concerned about the capital gains hit since it's not our primary residence. Someone at work mentioned I might be able to transfer the title to my wife before selling, and somehow that would reduce or eliminate the capital gains tax we'd owe? This sounds too good to be true, but I figured I'd ask before meeting with our accountant. Would adding my wife to the title or transferring it completely to her name help us avoid some of the capital gains? We file taxes jointly if that matters. Any insight would be super helpful!
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Has anyone considered the mortgage implications of transferring title? If there's still a mortgage on the property, transferring title to a spouse might trigger a due-on-sale clause in your mortgage agreement, potentially making the entire loan balance due immediately.
Good point! But I believe transfers between spouses are usually exempt from due-on-sale clauses under the Garn-St. Germain Act. Still worth checking your specific mortgage terms though.
Just want to correct something I'm seeing in this thread. Adding your spouse to the title doesn't help with capital gains, but it CAN potentially help with STEP-UP BASIS if one spouse passes away. That's a completely different situation but important to understand for long-term planning. If the property is held jointly with rights of survivorship and one spouse dies, the surviving spouse often gets a stepped-up basis on the deceased spouse's portion of the property, which can reduce capital gains if they sell later.
Sean O'Donnell
Something similar happened to me, and I found out it was because I didn't include my SSN on every page of the documents I sent in. Apparently if they can't immediately identify who the paperwork belongs to, it sits in a pile somewhere. When you resend your documentation, make sure your SSN, the tax year, and the notice number appear on EVERY SINGLE PAGE. Also include a copy of the notice itself as the first page of your package. I learned this trick from my aunt who worked at the IRS for 20 years.
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Isabella Ferreira
AuthorThat's a great tip! I definitely didn't put my SSN on every page, just on the cover letter and the forms. Do you know if there's any specific format they prefer for this info? Like should it be in the header or just handwritten at the top?
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Sean O'Donnell
The IRS prefers it in the upper right corner of each page. You can handwrite it or type it, but make sure it's clear and includes both the SSN and the tax year in question. Something like "SSN: XXX-XX-XXXX Tax Year: 2021" is perfect. Also, don't staple anything! Use paper clips if you need to keep pages together. Staples slow down their processing because they have to remove them to scan everything.
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Zara Ahmed
Has anyone mentioned the Taxpayer Advocate Service yet? They can sometimes help in situations like this where there's been an obvious breakdown in normal IRS processes. They won't represent you like a tax attorney, but they can often cut through red tape and get someone at the IRS to actually look at your case. They're free to use and pretty effective for situations exactly like yours. Google "Taxpayer Advocate Service" + your state to find the contact info for your local office.
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StarStrider
TAS has been swamped since the pandemic. I tried using them last year and they told me they were only taking "hardship" cases where people were facing immediate financial harm. Worth a try though!
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