Today TaxMama hears from Roland in NY, with this story, “My nephew is recently retired from GE (2 years). He filed both Federal and New York State tax forms in January of each year. Last week New York State sent him a form demanding over $4,000.00 in taxes for the 2003 filing season. They claim, that he did not report over $50,000 in income for 2003. There is no way he received any income other than what he reported. What can he do?”
Well that’s a real kick in the pants!
Have him get the specifics of what income they claim he has not reported. The NY folks should be able to provide a copy of the 1099 information.
Have your nephew follow up with the company that reported it. Often, it is something that is already on his return, simply in the wrong place – or, since he recently retired, it could be his pension plan distribution that he rolled over to another account?
OR…and this is probably what it is…your nephew borrowed $50,000 from his 401(k). That amount is the maximum loan allowable, so…this could be the problem. Before he left his job, he would have had to pay back that loan to his 401(k) account. If he didn’t, it’s taxed as income to him. It’s a phantom income for the year, since, obviously, he didn’t get a check during the year. But, the odds are, that’s what he’s going to learn when he digs into it. So, NYS may be correct. He’s apt to owe their tax. And lots of money to IRS, if this is the source of the $50,000.
On the other hand….it could simply be an error.
And, as it turns out – when nephew followed TaxMama’s advice and just got brave enough to call the tax authorities, it turns out that it was simply a printing error on one of their reports. The NY agent laughed. Nephew, after re-starting his heart, didn’t think it was nearly as funny.
And, remember, you’ll find answers to questions about tax notices and other tax issues, free. Where? Where else? At TaxMama.com
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