Wilmington NC CPA and Accounting Firm discusses IRS Transcripts

Sometimes you need copies of your information from the IRS. The first thing that comes to mind is, probably, exact copies of past returns. Which they can provide if you request it; use tax Form 4506 BTW.

But more often, an IRS transcript of the information they have on file for you is more appropriate. These are available by tax year. If we’re working a back tax case, for example, where the taxpayer hasn’t filed returns, original documentation is often missing. And gathering it from original issuers is time consuming. Sometimes we can’t rely on the taxpayer to even know all the sources of original documentation. So, after authorization from the client, in the approved IRS manner, we obtain transcripts to see what the IRS has on file.

IRS transcripts aren’t complete. They include most sources of income, like W-2s from employers, Form 1099-INT from banks, Form 1099-MISC, etc. Plus things like Form 1098 reporting your mortgage interest paid for the year, information from Health Savings Accounts, Educational Expenses paid, Student Loan interest paid, etc. Let’s look at an example. If you receive a Form 1099-MISC for income received as a subcontractor, the IRS also receives a copy. This is part of their revenue matching program that helps close the tax gap; what the IRS calculates America makes as income and what taxpayers actually report as income. You’re legally obligated to report the income on the Form 1099-MISC and pay taxes on it. And it would be on the IRS transcript. But you also have the right to claim associated business expenses, to offset the Income on the Form 1099-MISC, and only pay taxes on the remainder or profit. IRS transcripts only report the 1099-MISC (Income) but usually have no information for the associated expenses.

IRS transcripts are available online, as least to CPAs enrolled with the IRS e-Services program. They are released after proper authorization from the client, of course. The local IRS office here in Wilmington, off Randall Parkway, can print them off on demand. They’ve always been quick and friendly when I’ve been there. They can also be mailed to you.

If you’d like a free initial consult, please consider calling us at 399-2705. We’re a Wilmington NC CPA firm offering a wide variety of services with a friendly mix of CPA expertise and customer service.