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IRS got 1099 on a Gift Trust I cashed in. Taxes were paid on interest but 1099 includes principal. What's up? |
My parents put in $200 a month in a "Gift Trust" with American Century Investments for 10 years. When it matured, I cashed it in and filed a schedule K-1 with my taxes. Now, I year later, IRS sends me a notice that I owe them about $6,000 in tax and $2,000 in interest and penalties because American Century sent in a 1099-B stating I had earning from sale of stock for over $26,000. The tax on gains was paid during the find and the rest was the principal which was a gift. What can I do to show IRS I don't owe them because the amount I received is within the allowable amount for a gift? Because you received a 1099-B, this income should have been reported on a Schedule D. The amount indicated on the 1099-B, would have been the sales proceeds amount. The cost of the investment should have been included on the Schedule D as well. That cost would be 200 x 12 x 10. You should be effectively paying taxes on the different, at long term rates. The letter you received from IRS had a toll free phone number for you to call about any questions. Call it. |
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