katiej_1958[at]yahoo.com (Katie) writes:

- quote -

Well, I've already copied the brokerage statements showing
the actual contributions and (since they did explicitly ask
for a breakdown by contribution) I think I'll send them
along with a summary in the cover letter. In case you
haven't seen it, note that the worksheet in this application
is truly an exercise in minimalism: you enter the amount of
the conversion that you are spreading over four years and
the amount of previously taxed contributions included in
that amount. You don't even use the section for "normal"
distributions/conversions where you would separately enter
the sums of past contributions and withdrawals, so very
little information is conveyed.

By coincidence, a friend of my mother mentioned to my mother
that she had recently received a similar notice for a
similar amount and had had a similar conversation about it.
She decided to agree to the assessment since her accountant
thinks it will be too much work to produce the requested
documentation. Of course, it's possible that the assessment
is correct in her case, especially if her accountant hasn't
been keeping track.

Dan Lanciani
ddl[at]danlan.*com

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"Dan Lanciani" <ddl[at]danlan.*com> wrote:
- quote -

That IS the supporting documentation. Of course I don't
file papers returns by hand, but every one I do by computer
always includes that worksheet when applicable.

--
David M. Woods, EA, ChFC, CLU
Woods Financial Services
Norwood, MA 02062
www.woods-financial.com

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Dan Lanciani wrote:
- quote -

Dan, if I were you I think I'd just send them the worksheet.
That will probably take care of it. If not, then you can
go back and photocopy all those old tax returns which,
fortunately, you have!

Katie in San Diego
The foregoing is intended for educational purposes only and
does not constitute legal or professional advice.

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dwoods[at]woods-financial.com (David Woods, EA, ChFC, CLU) writes:
- quote -

[...]
- quote -

The worksheet is a part of the instruction booklet; it is
not on Schedule X. I can't find any obvious indication that
you are supposed to file the worksheet with your return.
Naturally I still have the worksheet, and I suppose I can
send them a copy of it, but the question is what supporting
documentation should I include?

Dan Lanciani
ddl[at]danlan.*com

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"Dan Lanciani" <ddl[at]danlan.*com> wrote:

- quote -

Well as I recall, you need to indicate via a worksheet on
Schedule X what your total lifetime withdrawals and total
contributions are when you have a taxable IRA
distribution/Roth conversion. If this had been done on the
return as filed, I doubt this would have happened.

--
David M. Woods, EA, ChFC, CLU
Woods Financial Services
Norwood, MA 02062
www.woods-financial.com

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I today received a Massachusetts notice of intent to assess
with respect to a 2001 "taxable" IRA withdrawal. The notice
claims that Massachusetts has just completed the audit. (I
guess they don't tell you until it's over?) Anyway, this
withdrawal (which is actually the fourth installment of a
1998 four-year spread Roth conversion, not that that should
make a difference) is not Massachusetts taxable because I
still had after-Massachusetts-tax basis in my IRA/SEP in
excess of the withdrawal. (Massachusetts does not allow a
deduction for IRA/SEP contributions and does not tax
distributions until you exhaust your Massachusetts-taxed
contributions which come out first by definition.)

The notice offered the options to pay or to request a
settlement conference or such, but it also had a number to
call if you needed clarification. I called and (after
waiting on hold for 20 minutes) spoke to rep who looked up
the case and confirmed that they were assessing my "taxable"
withdrawal. I explained why it wasn't taxable for
Massachusetts purposes and she suggested that I send my
1099s to prove this. I pointed out that I didn't believe
there was anything on a 1099 that would prove it, so she
went off to see what kind of information they require in
cases like this.

The rep returned and confirmed that withdrawals are taxable
to the extent that they exceed contributions and said that I
should send a breakdown of all my contributions and
withdrawals along with my 1099s. At this point I wasn't
sure if she might just be using 1099 as a generic reference
to any tax reporting document so I again mentioned that I
didn't think a 1099 would show any contributions. I told
her that I do have copies of 1040's, brokerage statements,
cancelled checks (as applicable) and of course 5498's for as
far back as those have existed. She said to send whatever I
did have. I said that we were talking about 20+ years of
records occupying several full file drawers so it might be
nice to narrow it down a bit, but she didn't have any
suggestions.

So, any thoughts on what I should send. I believe I have
every record that it is possible to have since my very first
tax return, including every brokerage and bank statement
ever generated on my behalf. I can copy brokerage
statements to show contributions pre-5498, but I'm not sure
how I'll show a lack of withdrawals (if indeed I have to
show this). I wonder how this is typically handled,
especially by people who dump their records after three
years. I asked the rep if it comes up often and she said
that she hasn't seen such case in a long time, but that they
do come up.

Dan Lanciani
ddl[at]danlan.*com

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