We came home Thursday to a big package from the IRS saying we didn't report some of our income last year and we owe a big chunk of back taxes and interest.
Last year, I filed my taxes through the government's Free File program, using eSmart Tax by Liberty Tax Service. Maybe they should call it eDumb tax. Apparently, it didn't include any of my 1099s when it totaled up my taxes.
Now, some people (including my husband) say that I should have realized that our wages and various incomes (a grand prize cash win among them) added up to more than the total on line 1. However, I worked two jobs for two months, I got a substantial raise at job #1, when I did my taxes I realized that job #2 had been paying me less than I was supposed to be paid, my husband went full time at his job for the first time. The final total was much more than the previous year, so it sounded right to me. I suck at math.
And besides: if I have to sit down with all the paperwork and add it up manually, why should I take the time to plug it all into the software? It's supposed to do it for me and get it right!
We went back to the Liberty Tax Service and looked at last year's returns, and I see in Step 6 where I filled out all the 1099 information. The software just didn't add it in.
Obviously we have to pay it; at least we still have some of the big win in the bank to cover it. I do plan to include a letter of explanations with printouts from the Liberty Tax site, and I also plan to send copies to Liberty Tax explaining just how much their "free" service ended up costing me. I've been told they have a guarantee and should cover the penalties, which makes me feel a little better.