When I was a kid, my grandparents would give my brother and I checks for every holiday and birthday towards a mutual fund they opened in our names. My mom always told us we could not access the money until we were 25. A few years ago, I asked her about it and she told me the mutual funds investments had gone bankrupt and there was nothing left in the accounts.

Fast forward to Thursday. My dad got a letter from the IRS addressed to me, I asked him to open it as I live in Canada now and shipping could take a while. In it, the IRS demanded the tax(between 3 and 4 hundred) for around $3,600 withdrawn from the account. I was blown away as I had never accessed the account before, I didn't even know my account number or anything of the sort.

I called the company that held the account and they told me the account had been cashed out in August 2013. The check had been overnighted to my mother's house in FL. They informed me it was not fraud as my motheris the custodian of the account, and it was assumed the money would be for my benefit. However I was living in Canada by then, and never knew or saw a penny of that money. She did not fill out the 1099B that came with it and so it lapsed under my SS#.

Whats my next step? Could I sue her for the original $3,600? Honestly she is a broke crack addict and I never hope to get that money back. She also stole my inheritance from my grandparents and about 5k in US savings bonds from me prior to this. Right now I am mostly concerned that I do not want to pay the IRS for having been stolen from. How do I approach or dispute this with the IRS? After finding out, I also had my brother see his account history with them - same story, 2.5k withdrawn at the same time as my account. The IRS has not contacted him yet. Should he pre-emptively contact them or wait to get a demand letter as well? Is the mutual fund in any way liable? I think the answer is no but feel it should be asked.

I am still currently temporary resident in Ontario, US citizen. Brother lives in TX, mom now lives in VA, the account was set up and cashed out in FL. I'm feeling lost and betrayed and any help would be appreciated. Thanks in advance.