Biggest tax refund of $21,000 instead of paying $17,000

I’m David from the Tax Shack and would like to share a success story with you.

We have a client who in the past has always self-prepared his return on-line.  Last year he purchased a home. In his transaction he withdrew $120,000.00 from his 401k.  Upon entering his information in the tax preparation program he realizes he owes the IRS $17,000.00.   He then call me at the Tax Shack in a panic. We do our due diligence and research and find out he purchased in a Disaster Relief area.  Thus resulting in the first $100,000.00 of the 401k funds are tax exempt. He then only owes tax on the remaining $20,000.00. When he withdrew the funds he had Federal Income Tax Withheld.  He then had a refund of $21,000.00 as opposed to having to pay approximately $17,000.00.

The moral of the story: “Friends Don’t Let Their Friends Do Their Own Taxes.