If you omit 1099b on 2015 return and IRS is enquiring on this, should you file an amendment on 2015 return? Or just send clarifying answer to IRS? Assume that there is no tax as a result of adding 1099b.

[LudwigVan_fan · Accepted solution]

In my opinion, don't file an amended return at this point.  If there is no tax change as a result of adding a 1099B, an amended return would not be needed.  Also, throwing an amendment into the works at this point would only cause processing delays and delays in handling the inquiry.

If IRS is making an inquiry; answer the inquiry. 

Send a clarifying answer, all with copies of appropriate documents.  Send return receipt requested to make sure you have proof of response.

If anything needs to be adjusted, one way or the other, the IRS will probably do the adjusting as a result of the inquiry.

Just stay in touch with the IRS and answer promptly and within the time frames.

[shashi4]

It looks like there is a non-qualified 529 distribution. Is only part of the earnings (that is non qualified) taxed or the part of principal which is part of non-qualified 529 distribution is also taxed? What is the 10% penalty applied to? Since this is 2015 return, where can I check if Turbotax already took care of this?

[LudwigVan_fan]

Part of the distribution is taxed...the earnings part.  Only the distributed earnings are subject to the penalty.

Do you mean did TurboTax take care of it on the original 2015 return?    Look on lines 59 or 62 of the 2015 1040.  If no entries there, then the additional 10% tax on non-qualified distribution was not paid.  Which maybe then also wasn't included in taxable income.

Look at lines 15, 16, and 21 for any entries and what they might be.  If blank, then it probably wasn't included in income.

[shashi4]

1099-B doesn't show cost basis. How to respond to IRS inquiry to illustrate cost basis is different than what is shown on 1099-B? Will just an explanation be good enough?

[LudwigVan_fan]

Make a copy of the computations you did to compute the cost basis and include that copy in your response.

If you used a schedule that was attached to the Sch K-1; include a copy that statement

Your explanation  should be clear as to how:
1. You included the sale and basis in the filed return
2. Where it appears in the filed return
3.  How you computed the basis

I would mail the response return receipt requested for proof of response.

[shashi4]

Thanks! Appreciate your help.