Monday, April 4, 2011

How did that 8814 get in my return?

I normally fill-out my tax returns by hand and do the calculations using custom spreadsheets. But, this year, I decided to try e-filing options. The Massachusetts e-filing option worked well. The only hiccup was mediocre 1099-R instructions. But, the fix was easy and customer service communicated the fix to me quickly by email. There was a more serious issue with Federal e-filing. I used the free fillable forms provided by the Free File Alliance. A minor annoyance was that I had to use MS Windows to fill out the forms since the system uses Microsoft Silverlight. My return was "accepted" a few days after I submitted it. But, when checking status, I noticed that the IRS had changed my refund amount. I got my return about 3 weeks later with the modified refund amount. What was going on? I can't recall ever having my amount due/refund amount adjusted in 15+ years of filing Federal returns.

A phone call to the IRS didn't reveal much. After being transfered to a Schedule D specialist, he told me that I had to wait to receive a letter formally communicating the adjusted refund. I received the adjustment letter over the weekend and called again today. I learned that the IRS adjusted my Qualified Dividend amount because of the 8814 in my return. What? I had to have the IRS agent explain what he meant by "8814" as I had never heard of it. He said that an 8814 Form was included in my return indicating that my dividends were reported as child's dividends. Apparently, something went wrong between the Free Fillable Forms web site and the IRS processing center. The agent said that if I want the error to be fixed in less than 3 months (about how long a paper amended return would take to be fully processed), I would have to call back when I am ready to fax my correct 1040. I told him I could email it to him immediately since I have a scanner but no fax. He said the IRS doesn't accept such email due to "security concerns". Puh-lease. Why does "e-filing" have to be so frustrating?

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