All Things Tax

All Things Tax

Like the title says, from the filing process and tax questions to tax policy and reform, you can search and share All Things Tax here. This is the place to find answers to all your general questions that don't fall under the other categories. And just a reminder: questions about software or online filing should be posted in DIY Products.

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Valued Pioneer
Posts: 4
Registered: ‎10-05-2017
Accepted Solution

IRS says I owe back taxes for CA State return?

The IRS sent me a letter saying that for 2015 I owe taxes on my CA State return amount for 2014(they say it was reported on a 1099, does that seem right?), does this seem correct to anyone? I have done my taxes online with H&R Block the same way since 2011, so Im just stumped as to why this would happen- even if you are supposed to pay federal taxes on a state return why it wouldnt be reported by H&R Block. 

Any help is greatly appreciated!

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Tax Pro
Posts: 5,777
Registered: ‎02-23-2016

Re: IRS says I owe back taxes for CA State return?

Hi W_Jenny67,

 

 

Welcome to the H&R Block community.

 

The first thing that I noticed here is that you said that the IRS sent you this letter.  There's a problem with that because the IRS and the state of California are two completely separate taxing authorities, which means that only the California department of revenue can send you a letter for taxes due to California.

 

However, if there was a 1099-MISC, a 1099-R, or some other 1099 form missing from your federal return then it's possible that you owe both federal and state taxes.  If that's what's going on then the IRS would have sent you a letter for your federal tax return.  If you earned more than $600 doing work as an independent contractor (you weren't treated as an employee for payroll purposes) then you would have received a 1099-MISC for that job.

 

As I mentioned in an earlier post, when you get an IRS letter you should ask yourself if it's an issue that you know the IRS is correct about, for example that you did not enter your identity protection PIN number.  If the answer is no then don't reply to the letter until you discuss the situation with a tax professional or verify the letter by speaking with an IRS agent at 1-800-829-1040.  On the one hand one of the more recent IRS-related scams involves fake CP2000 IRS letters that say you owe so much money and request payment of the past due tax.  On the other hand, if there is an error on your tax return that caused the excess tax then chances are 99% that it can be corrected with a simple amendment to your tax return.

 

You can review your tax return with a tax professional for free at any H&R Block office.  Just request a second look review.  Also, make sure you bring the letter with you.

 

 

If you have any other questions I'll be glad to help.

 

Louis,

Senior Tax Advisor (Tampa, FL)

Valued Pioneer
Posts: 4
Registered: ‎10-05-2017

Re: IRS says I owe back taxes for CA State return?

[ Edited ]

Hi Louis, 

Thanks for the quick reply- it is indeed from the IRS, saying that I owe federal taxes on the amount I was refunded in CA for the prior year. It references a 1099-G (sorry I should've been more specific before), so does that mean that HR Block maybe just didnt report that income properly?

 

Thanks

Jenny

Tax Pro
Posts: 5,777
Registered: ‎02-23-2016

Re: IRS says I owe back taxes for CA State return?

Hi W_Jenny67,

 

 

You're welcome.

 

This makes more sense now.  If you deducted state taxes on your Schedule A then the refund you received from the state is taxable income at the federal level on your federal return for the year following the year for which you took the deduction to the extent that it provided a tax benefit.  In other words, if you completed Schedule A in 2015 and deducted your state taxes for that year then your state refund amount shown on Form 1099-G should have been included on Line 10 of your federal Form 1040 for 2016.

 

You should look at line 10 on your 1040 return to see if this was included.  If it wasn't included then this can be fixed easily with an amendment to include the state refund on Line 10.  Form 1040X should be completed to amend your federal tax return.

 

The good news here is that unless you received a significant refund from the state, such as one in the thousands of dollars, the difference in your tax due won't be that much and it may not be as much as the IRS currently says it is.  Once you've completed the amendment that will show the IRS what the tax due should actually be, if anything.  So make sure you do that and before you pay the IRS anything.

 

If you haven't done an amendment before I can guide you through it.  However, you may also consider seeking the help of a tax professional in your area.

 

Of course if you did not deduct your state taxes on Schedule A or if you're not sure then you'll want to show that letter to a tax professional and/or review your return with them.

 

 

Louis

Valued Pioneer
Posts: 4
Registered: ‎10-05-2017

Re: IRS says I owe back taxes for CA State return?

So I went back and looked through every year(back to 2011) and there is nothing on line 10 in ANY year. On schedule A, item 5a (State and local income taxes) IS checked...so is this an ongoing error by HRB? My taxes are VERY simple and if they are screwing this up, thats pretty frustrating. So based on the above, should I do a 1040x as you mentioned? 

Thanks again for your help!

Tax Pro
Posts: 5,777
Registered: ‎02-23-2016

Re: IRS says I owe back taxes for CA State return?

Jenny,

 

 

Yes, you should complete the 1040X for the year that's in question.  I'll provide you a link to a printable 1040X below so that you can use it if you need to.

 

Going based on the information you've just provided the software did deduct your state taxes for all of those years.  However, the other thing you have to look at is if you ended up taking the standard deduction.  For any year that you took the standard deduction the Schedule A wasn't actually used (you can only do one or the other) and therefore there isn't anything wrong with years for which the standard deduction was taken.  If the standard deduction amount is larger than your total Schedule A deductions then the software will go with the standard deduction automatically.

 

FORM 1040X (Amended Tax Return)