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Just got a letter from the IRS saying that they corrected our 1040, reducing the amount we're claiming as income and thus increasing our refund a bit. So, hooray! But here's the thing: the adjustment is for $450, which is exactly the amount we claimed for renting out our parking space for 3 months. We rented out that space from October 2010 - March 2014 and claimed the rental every year as income. Any idea why it wouldn't count this year? I've already checked the IRS website and come up empty; in fact, it specifically says that no amount is too small to claim as income (that was my only guess). Any idea what might be going on here? I do my own taxes every year because they're so simple, but this one has me stumped.
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I am guessing it is just an error on the IRS part. Either that or you had a miscalculation on your tax return that just happened to be $450. IRS does not reduce reported income.
I am a tax professional and since recent IRS cuts (in past few years) we have slews of incorrect IRS notices. Since we know what we are doing, usually the error is on the IRS part. For anyone who did their own tax return, there may be some higher percentage of user error. But I would probably put money on just some idiot at the IRS removing the $450 income from your tax return.
If you were my client (& I have had this happen with my clients), I would just say to keep the paperwork and have it ready to send back to the IRS when they later penalize you for under-reporting your income by $450. Which they may do in a year or two. It's a small enough amount that is all I would do. I would refuse to pay any penalties if they later ask for it back.
& this is a good reminder to never blindly cash in an unexpected IRS refund or to blindly pay a notice of tax due.
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