Not sure if this is the place to ask. My friend and I shared a house in Wisconsin. We live there for a one year and then sold it. Because we are not married they wrote two separate checks. Each of us at 80k equaling 160 total. When I filed my taxes I reported the full 160k. The full amount of the 160 was deposited into my account. Now the IRS is reporting that he made 80k which hurt his disability. Who can I contact at the IRS to make sure he is not responsible for the amount since I claimed the entire amount on my taxes already.
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What does this have to do with "double tax in Washington?" if you are in Wisconsin? Washington has no state income tax.
You say you "claimed the entire amount"---what entire amount? The amount from the sale of the house? The amount of mortgage interest/property taxes paid? Whose names were on the mortgage and/or deed?
@tagteam Thoughts?
You have several problems.
First, what are your capital gains? Your taxable capital gain from the sale of the home is not the cash you received, it is the difference between the cost basis and the selling price. Cost basis is what you paid plus any improvements and minus any adjustments for business use. If you owned the home less than 1 year, any gain is a short term capital gain taxed as ordinary interest. If you owned it more than one year, it is a long term capital gain taxed at a lower rate. What was your cost basis, what was the selling price, and did you report a taxable capital gain on your return?
Second, the selling agent evidently assumed that since you were co-owners, each of you owned a 50% share so you are each responsible for 50% of the capital gains. This will also be the IRS default assumption unless you have an ownership agreement that says otherwise. Did you buy the home together? Who paid for it, and if you bought the home alone, why was your partner listed as a co-owner?
Third, your partner evidently received a 1099-S and did not report the sale on their tax return. Depending on the amount of capital gains, the length of time you owned the home (more or less than 1 year), it might not have been taxable even if they fully reported it. (The $80K payment was almost certainly not the amount of the gain, although the real amount of gain might be more or less.) Because your partner didn't report it, the IRS is entitled to assume it was all taxable, even though it might not be taxable if properly reported. The solution there would be to file an amended return.
Fourth, depending on why you sold the home and move, you might be entitled to exclude the gain from your taxable income. You still have to file it on your returns (to show your work and put your claims in writing). See publication 523 for a discussion on capital gains and the partial exclusion.
https://www.irs.gov/forms-pubs/about-publication-523
Lastly, I can't really comment on the disability income issue, because I don't know how much of the payment would actually be taxable gain if it was properly reported. We would need to know more about the purchase price, selling price, and other factors.
I think you may need to see a tax pro in your area. Your partner can't just hide income if it legitimately belongs to them, just because it is more helpful to the disability to hide it. Just because you want to report all the gain yourself, doesn't mean that is correct or legal, you would have to explain why, under the circumstances, it was factually correct that all the profit belonged to you. Once you decide whether you can really report all the gain and exclude your partner completely, you would need to have your partner contact the IRS and explain to them that the gain was all reported by you under the circumstances. Or, you may decide that your partner should report and pay tax on their gain, in which case you can file an amended return to pay less.
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