Tax disaster help needed please

[Mickijune]

We went into HR Block this past weekend to get our taxes done. Neither my husband nor myself know what we are doing in regards to taxes so don’t judge.

After everything was entered, our deductions were a lot lower than last year, so we started to compare last year’s forms with this year. The difference was Private mortgage insurance. Last year we claimed a $5050 deduction for PMI, but our “tax professional” this year (different person from last year because the person from last year is no longer there) said according to our mortgage statement we don’t pay PMI. I called our mortgage company and sure enough, we don’t pay PMI because we have a VA loan.

My question is, now what the heck do we do?? HR Block messed up our taxes last year and we claimed more in deductions than we should have. I plan on going to a REAL tax professional with this information, but I was hoping I could get some guidance from the wide array of massively smarter people than myself on here as well. Shouldn’t HR Block fix this about-to-explode-in-our-face mess since we paid them to get it right in the first place?!? We have no idea where this person even got the deduction from!

Please, any help would be appreciated! I have already face-punched myself several times over and I feel like hitting one of those idiots with a baseball bat. I’m f-ing fuming!!

[dragoncar]

H&R Block will fix their mistake for free. Talk to a manager and have them get it sorted out. They have plenty of people working for them that have been doing taxes for many years and really know what they're doing, but unfortunately they also have many people that have been doing taxes for 2 months so you have to be careful who you get.

They'll "fix it" meaning file an amended return.  OP will still owe any taxes due.  I don't know if HR block will cover penalties.

[dandarc]

This same thing happened with my wife before we were married.  They claimed the "Plug-In Hybrid" tax credit for her 2009 Prius.  H&R Block covered the interest and penalties, but she did have to pay the back tax - the IRS caught this about 2 years after the original return was filed.

All the more reason to do your own taxes - my wife would have never claimed that tax credit if she had done this herself because she knows that her car is not a "Plug-In Hybrid".  The tax preparers at a lot of these places do no better a job than you could on your own.

As another person mentioned, you may not wind up owing - possible they deducted it on the wrong line, but whatever was deducted was legally deductible any way.  Either way, better to get this figured out sooner than later - if you owe, you'll want to know how much so you can take care of it and if not, the peace of mind would be good too.

[Edit]Looks like the VA Funding Fee that was mentioned is deductible as mortgage insurance - so H&R Block probably got this right any way.[/Edit]

[dragoncar]

This same thing happened with my wife before we were married.  They claimed the "Plug-In Hybrid" tax credit for her 2009 Prius.  H&R Block covered the interest and penalties, but she did have to pay the back tax - the IRS caught this about 2 years after the original return was filed.

All the more reason to do your own taxes - my wife would have never claimed that tax credit if she had done this herself because she knows that her car is not a "Plug-In Hybrid".  The tax preparers at a lot of these places do no better a job than you could on your own.

As another person mentioned, you may not wind up owing - possible they deducted it on the wrong line, but whatever was deducted was legally deductible any way.  Either way, better to get this figured out sooner than later - if you owe, you'll want to know how much so you can take care of it and if not, the peace of mind would be good too.

[Edit]Looks like the VA Funding Fee that was mentioned is deductible as mortgage insurance - so H&R Block probably got this right any way.[/Edit]

How did the IRS notice?  Random audit?  I think a lot of people use these services for "plausible deniability" and hope they squeak by the audit selection process.  Not that I personally think there is plausible deniability, since each taxpayer is supposed to review any information submitted.

[MissPeach]

Usually the IRS uses two things to find these issues. First is that something was reported to them on a form such as W-2, 1099, etc. that doesn't match what you put. The second is if there are areas that are frequently abused they will audit or send questionnaires for that area. Head of household is one in my state that will trigger a state audit (which is just a form to fill out - nothing too scary).

You would still have to pay the tax if it's amended but they should cover penalties and interest IMO. But as a PP mentioned they usually pull these numbers from somewhere so there is a good chance it came from some form.

I second learning enough to do your own taxes with a program at least if you taxes are pretty straightforward. Quite honestly, after you put all the numbers together on their forms, it's not much extra work to enter them.

[Mickijune]

Maigahane thank you so much!! We looked at the closing documents for the house, which we bought in 2012, and sure enough, the "funding fee" is the same number as the "PMI" listed on our taxes for 2012!

I wish I had this many smart people around me in real life!

[Shor]

This same thing happened with my wife before we were married.  They claimed the "Plug-In Hybrid" tax credit for her 2009 Prius.  H&R Block covered the interest and penalties, but she did have to pay the back tax - the IRS caught this about 2 years after the original return was filed.

All the more reason to do your own taxes - my wife would have never claimed that tax credit if she had done this herself because she knows that her car is not a "Plug-In Hybrid".  The tax preparers at a lot of these places do no better a job than you could on your own.

As another person mentioned, you may not wind up owing - possible they deducted it on the wrong line, but whatever was deducted was legally deductible any way.  Either way, better to get this figured out sooner than later - if you owe, you'll want to know how much so you can take care of it and if not, the peace of mind would be good too.

[Edit]Looks like the VA Funding Fee that was mentioned is deductible as mortgage insurance - so H&R Block probably got this right any way.[/Edit]

How did the IRS notice?  Random audit?  I think a lot of people use these services for "plausible deniability" and hope they squeak by the audit selection process.  Not that I personally think there is plausible deniability, since each taxpayer is supposed to review any information submitted.

Also, the IRS has a fairly large backlog of ongoing items which are evaluated and ranked by complexity. Big ticket items go to more experienced workers, smaller ones go to the less experienced ones until they work their way up. A lot of times, the IRS doesn't catch things until they get around to it, and it usually can happen to be 1-2 years later.
Very large changes in your deductions \ income get flagged by the system for further investigation at a higher priority. The audit is a tool if they think you are trying to game the system on purpose and repeatedly.... or if you agitate the agent working on your case...

[dandarc]

This same thing happened with my wife before we were married.  They claimed the "Plug-In Hybrid" tax credit for her 2009 Prius.  H&R Block covered the interest and penalties, but she did have to pay the back tax - the IRS caught this about 2 years after the original return was filed.

All the more reason to do your own taxes - my wife would have never claimed that tax credit if she had done this herself because she knows that her car is not a "Plug-In Hybrid".  The tax preparers at a lot of these places do no better a job than you could on your own.

As another person mentioned, you may not wind up owing - possible they deducted it on the wrong line, but whatever was deducted was legally deductible any way.  Either way, better to get this figured out sooner than later - if you owe, you'll want to know how much so you can take care of it and if not, the peace of mind would be good too.

[Edit]Looks like the VA Funding Fee that was mentioned is deductible as mortgage insurance - so H&R Block probably got this right any way.[/Edit]

How did the IRS notice?  Random audit?  I think a lot of people use these services for "plausible deniability" and hope they squeak by the audit selection process.  Not that I personally think there is plausible deniability, since each taxpayer is supposed to review any information submitted.

I have no idea - one of the first pieces of mail she got after moving in with me was a letter from the IRS about this.  Couldn't have helped that she did not register the car correctly and had to take care of that after being pulled over for speeding, not having proof of insurance, and no registration at the same time. 

When she bought that car, she was overly reliant on her parents - listed their home as her address, so the dealership sent what turned out to be very important papers to that house.  Her parents ignored it, as they  often do (they are still dealing with a tax problem of their own from the '90s, for example).

[dragoncar]

This same thing happened with my wife before we were married.  They claimed the "Plug-In Hybrid" tax credit for her 2009 Prius.  H&R Block covered the interest and penalties, but she did have to pay the back tax - the IRS caught this about 2 years after the original return was filed.

All the more reason to do your own taxes - my wife would have never claimed that tax credit if she had done this herself because she knows that her car is not a "Plug-In Hybrid".  The tax preparers at a lot of these places do no better a job than you could on your own.

As another person mentioned, you may not wind up owing - possible they deducted it on the wrong line, but whatever was deducted was legally deductible any way.  Either way, better to get this figured out sooner than later - if you owe, you'll want to know how much so you can take care of it and if not, the peace of mind would be good too.

[Edit]Looks like the VA Funding Fee that was mentioned is deductible as mortgage insurance - so H&R Block probably got this right any way.[/Edit]

How did the IRS notice?  Random audit?  I think a lot of people use these services for "plausible deniability" and hope they squeak by the audit selection process.  Not that I personally think there is plausible deniability, since each taxpayer is supposed to review any information submitted.

Also, the IRS has a fairly large backlog of ongoing items which are evaluated and ranked by complexity. Big ticket items go to more experienced workers, smaller ones go to the less experienced ones until they work their way up. A lot of times, the IRS doesn't catch things until they get around to it, and it usually can happen to be 1-2 years later.
Very large changes in your deductions \ income get flagged by the system for further investigation at a higher priority. The audit is a tool if they think you are trying to game the system on purpose and repeatedly.... or if you agitate the agent working on your case...

Thanks... I should have known.  I've gotten an inquiry letter about my back door Roth before.