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Author: ptheland Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121319  
Subject: Re: Return of excess contributions Date: 6/14/2008 1:24 PM
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You've got a couple more issues there.

Do you know when the 2004 return was originally filed? If it was filed on time and without an extension, the statute of limitations has expired on that year. It would have run on 4/15/08. But if the original return was on extension or filed late, the statute might still be open. All that means is that the IRS may not be able to assess additional tax for 2004.

Next, this distribution was reported on a 1099. So the IRS knows about it and their computers should typically have run their matching routines on it. Which means they may have already caught this error and sent the taxpayer a bill. I've found that a lot of people will not question these bills and just pay them if the bill is fairly small. So another possibility is that the IRS caught the missing income in 2004, sent them a bill, and they paid it.

However, in that scenario, the IRS would not have changed the 2005 return with the extra income.

So I'd give some consideration to taking the income off the 2005 return and NOT changing the 2004 return.

--Peter
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