Using IRS transcripts for detective work:
Sometimes people are completely confused about where to begin the tax filing process. They can go for years without filing a return while this cloud of confusion persists.
Some may even have extreme difficulty obtaining their tax forms from employers, brokerages, and prior-year tax preparers.
This is where transcripts can help. The IRS saves forms filed in their database, and they can show important information.
For instance, we found for a recent client:
1) His 2019 tax return which he had misplaced, which was the foundation for our strategy going forward.
2) That none of the COVID stimulus payments had been paid to him.
2) An estimated tax payment for 2020 which wasn't necessary in the end, resulting in a refund on the not-yet filed 2020 tax return.
3) Brokerage account records, including capital gains and losses, interest and dividends.
4) W-2 wages and 1099-NEC self employment income
5) An old UGMA (Uniform gifts to minors) brokerage account, still not completely in his name.
We can now piece together his 2020, 2021 and 2022 returns based on all the data, in the best possible way.
If you aren't sure what is really in your records, this is a great way to figure things out. It's also worthwhile to check your transcripts from time to time, to ensure no identity theft is taking place.
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