Tax panic

In the mail today was an envelope from the IRS. Not an unusual occurrence as they send me estimated payment vouchers and other unnecessary forms a couple times a year.

Then I opened it.

Leave it to the IRS to find a way to generate all the anxiety of an audit without actually using the word “audit.” After reading through the documents it appears that they are a bit confused by something. Apparently they think I have unreported income from 2003 to the tune of about twice what I make in any given year. They call this an “examination by mail.” What you or I would call an audit is an “examination in person.” Your government at work ladies and gentlemen.

At first glance this utterly terrified me. Mainly because I figured if they were sending me this then there really was something wrong. How did I screw this up? Did I leave out a 1099 or W-2? The worst part was the section at the end that explained I’d owe $5000 or 20% of the new tax amount as a penalty. Yikes.

I dragged out all my information from 2003 and couldn’t find a problem. What appears to have happened is that the IRS doesn’t understand their own rules for reporting stock option income. The income they said I didn’t report was on the FIRST LINE OF MY RETURN!!!!!! Fortunately I have copious documentation of all of this and bundled it up with a nice summary of the situation and mailed it off to them.

Then I sat down to try to figure out how this happened. I know I’m right so I’m not too worried about having to pay them any more money. Then again, it is the IRS and you just never can tell.

Then it hit me. E-file.

When you e-file you can’t include some of the extra documentation that would normally be helpful in explaining your return. I didn’t figure this would be a problem since 2003 was a comparatively simple tax year for me. Obviously not.

Needless to say, I’ll be mailing in a paper return (like I had to do this year for some reason) from now on.