Paul asked:


I got a letter in the mail from the IRS stating that I owed $10k from my 2005 tax return (with interest and penalties). Turns out that there was a reporting error from my bank which caused this problem. Apparently, I had some stocks that the bank sold in favor of more favorable stocks, but the purchase of the new stocks was never reporeted by my bank. So, in a nutshell, I was supposed to have paid taxes on the full amount of the sale - not the cost basis.

I contacted my bank and they are able to furnish the documents to me to fight this rediculous bill. So, back to my original question: How do I fight the interest and penalties??

Thank you from the bottom of my wallet! Additional Info…

Thank you all for your great responces. I just wanted to address the comment that it wasnt my banks fault but my own.

The stocks are held in an account by my bank and they have the authority to buy/sell stocks when favorable to me. Since the bank sold my stocks and didnt not report that new stocks were purchased witht he proceeds - it was not my fault. The bank admitted this error to me.

In any case, I simply need to get the original price of the stocks and see what the were sold for. It is the difference between these two that I may owe some $ on.