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Tax Help Needed - IRA Distribution - CP2000 Notice from IRS. Don't take my money

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  • Tax Help Needed - IRA Distribution - CP2000 Notice from IRS. Don't take my money

    Hello Forum,

    Was thinking I need to hire a Tax Expert but thought I would throw this out to the group.

    I had 2 IRA Accounts that were set up about 12 years ago. Up until 2015 I had not touched these. They were started when I finished working a job between undergrad and med school.

    1. ROTH Rollover that had about $1900 (I believe the original funds for this were from a small retirement account with my job and I rolled them over to a ROTH)

    2. ROTH IRA that had $5300 (I think I initially put down like $2000 - after tax)

    My wife and I bought a house in 2015 (First time home buyers) and we read that you could use up $10000 from IRA penalty free and, we thought, tax free. So, we closed out both accounts and put the money to the purchase of our home. We did our taxes that year and completely forgot to address this issue.

    The IRS is now sending us a notice saying that we owe taxes on the full amount, equating to about $7900 extra on our taxable income, with a bill for $3412.

    I found the 1099-R forms. The Rollover has the taxable amount at around $1900. The taxable amount on the Roth shows an empty box, but it has checked on it "taxable amount not determined".

    What do I need to do from this point? What might I actually owe on? What forms do I fill out?

    I tried calling the IRS but I did not find it helpful.

  • #2
    You should have submitted a Form 8606 for the tax year of distribution indicating what the tax liability was and that is what you will have to do now.

    When did you do the rollovers in relation to the distributions? This will determine whether/how much of the distributions would be taxable.



    • #3
      The Rollover was done over 10 years ago. For the Roth, this account was also started at the same time.


      • #4
        The distribution was tax free. The problem is probably that you didn't file a 2015 Form 8606 Part III properly reporting the this as a qualified first-time homebuyer distribution with no taxable amount.

        If not, you will need to properly complete a 2015 Form 8606 and follow the instructions on the CP2000 notice to submit corrective information. If you don't feel comfortable doing this hire a tax professional.

        Whatever you do do not ignore this notice or exceed the date for response.