The IRS has never audited me or actually even bothered me. I once got an unexpected refund from a state return a couple of years later when they caught a mistake I made. That made a nice impression on me.
But a little over a week ago, my relaxed relationship with the IRS came to a halt when I went to the mailbox and saw on official envelope from them. I opened the envelope with no trepidation, unaware that in less than sixty seconds my whole mood going into the weekend would be up-ended. Like casually telling you your son or daughter had been killed in combat, it notified me that income reported to them did not match what I put on my 2009 form 1040 and that if I agreed, please send them a check for $27,000.
By the end of the day, I was able to start pulling myself off of the ceiling and make some sense out of what happened. My new found wealth from mom’s death in 2008 was transferred over to an account that was set up for my by her broker at Smith Barney and throughout the year he continued to sell and buy all manner of securities as he had been doing. What I didn’t realize was that it was my responsibility now to not only report interest and dividends, but also the sales of all those stocks reconciled against their purchased price. In other words, capital gains.
Well, it wasn’t that I made all that much in capital gains. But because I didn’t report any of it on a Schedule D. So, the big IRS computer simply calculated that the total sale was my income. So, if a security was bought at $2,000 and sold at $2,025, my Schedule D would have told them I only made $25. Sans Schedule D, they assumed I made $2,025.
By one week later, I had gotten it all figured out in my head and prepared a Schedule D which I sent to them. What’s next remains to be seen: will I be asked to submit an amended form, will there still be penalties and interest billed to me? Probably so, but for now, it has been enough to make me feel there will be substantially less of a ding, perhaps even cancelled out by a valuable learning experience.
So why do I do my own taxes? When I was younger, I would always change the oil in my car. I knew how to do it, so why pay someone? Well, at a certain age, you finally will decide that the hour or more you waste on a Saturday under a hot car, skinning your knuckles and getting absolutely filthy doesn’t give you the satisfaction it used to so you pay an extra $10 and have a professional do it.
I’m not there with taxes yet. My dad was an accountant with a tobacco export company and as a teenager, I would hear him rail against dopes who would pay a tax preparer money to do your taxes. So when I started working, he sat down with me long before the days of TurboTax and showed me how to do the 1040. "Why I’ll be 95% of the customers H&R Block files for could be done on a 1040A," he growled with cigar clinched between his teeth.
Well, it’s funny how later in life you think you can shed the old-fashioned notions of your parents. But even after they are long in the grave, their distinctive voice is out there talking to you every step of the way. "Pay somebody else to do your taxes for you? What a racket!"
I do use TurboTax Online. But that’s mainly just to keep from going to the library to get the tax forms and making sure my Radio Shack calculator has batteries. If I can get past this run-in with the IRS and still hold my head high, I’ll continue to do my own taxes. Maybe one day the feel of hot, dirty oil dripping down my arms will lose its appeal. But not yet.
