Tax Error Letter

Dear Gary and Linda:

I noted several errors in your original 2009 federal income tax return, and I have prepared an amended 2008 federal income tax return, Form 1040X, on your behalf based on the information that you have provided. Please review the amended tax return carefully for any errors and/or omissions prior to signing and dating at the bottom of Form 1040X.

Your original return showed an overpayment of $11,869, and you have received a refund check for this amount. The amended tax return indicates a balance due of $3,819. As a result, you owe a total of $15,688 (the original erroneous $11,869 overpayment, plus the $3,819 amended balance due).

One copy of the amended return is for your files. Please file the second copy of your Form 1040X as soon as possible with the:

Department of the Treasury

Internal Revenue Service

Fresno, CA 93888-0422

I have also prepared a 2009 federal income tax return projection for you. This projection reflects the most current information available. Please inform me promptly if any of the information contained in the projection changes significantly during the year. I may need to adjust your tax withholding and/ or estimated tax payments.

I have attached below a list of the errors noted in your original 2008 tax return and an explanation of the corrections made.

TAXABLE WAGES

You have reported $247,017 of taxable wages. While this amount is correct for computing FICA wages, the wages subject to federal income tax are only $233,474. The difference in the two amounts is mostly attributed to the contribution to your pension plan. Contributions to pension plans are not subject to current income tax, but are subject to FICA tax.

INTEREST INCOME

You have reported $993 of taxable interest income. While this amount is your total interest income, your interest income subject to federal income tax is only $193. You incorrectly included $800 of interest from State of Iowa Bonds. State or municipal bond...