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Have An IRS Horror Story ?
Old 09-21-2015, 09:56 PM   #1
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Have An IRS Horror Story ?

In late October 2010, I received a letter from the IRS saying that I needed to pay an additional $1500 plus a $150 penalty/interest charge for an error on my 2008 tax return.

To avoid additional penalties/interest, I needed to have this payment to them by November 8th.
So I only had about 10 days to try and figure it out. I do my own taxes using TurboTax and always burn a copy to DVD when I'm done. I immediately got out the DVD for that tax year and went over it. I couldn't see any mistakes.

To make matters worse, I was working nights at the time. 6 PM to 6 AM

The next morning I stayed up till 7 AM and called the IRS
I was on hold an hour and 10 minutes. I tried again the next morning, but the result was the same.

On the morning of October 4 I decided to try it one more time. If I couldn't get through I had resigned myself to sending them a check. Luckily for me after about 49 minutes and IRS rep finally answered.

She asked me for my Social Security number and a couple other items for identification, then I told her the problem. She said "could you please hold on a minute. I said sure. She came back about 15 seconds later and said, "I'm sorry, that was just an oversight on our part, you don't owe us anything"

Of course I was relieved and happy, but I asked myself this question. If I had just ignored the notice and not sent in a check, would they eventually have sent me a letter saying it was an oversight on their part and it was fine that I didn't pay them ?

I highly doubt it.
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Old 09-21-2015, 10:03 PM   #2
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It is strange that they did not tell you what the error was.

I got a similar letter one year when I omitted the interest on an I-bond that I redeemed a year or two earlier. If they sent out a 1099 form, perhaps it was lost in the mail, and I forgot all about that bond at tax time. As they told me exactly what my error was, there was nothing for me to do other than to send in the extra tax. There was no fine, but there might have been some interest.

Then, they also told my state about it, who came after me next. This time, I explained that the extra income was an I-bond which was state-tax-free, and that was that.
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Old 09-21-2015, 11:25 PM   #3
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It is strange that they did not tell you what the error was.

I got a similar letter one year when I omitted the interest on an I-bond that I redeemed a year or two earlier. If they sent out a 1099 form, perhaps it was lost in the mail, and I forgot all about that bond at tax time. As they told me exactly what my error was, there was nothing for me to do other than to send in the extra tax. There was no fine, but there might have been some interest.

Then, they also told my state about it, who came after me next. This time, I explained that the extra income was an I-bond which was state-tax-free, and that was that.
I have a story somewhat similar to yours.

The year I graduated from college, 1985, I began working full-time and filed a federal and state income tax return. However, I also worked in early 1985 while I still in college and for a change it was on the books. But when I filled out my W-4 form, I said I was a full-time student and was exempt from owing any income taxes, just as I did the previous summers when I had on-the-books summer jobs.

I filed federal and state income tax forms in early 1986 using the W-2 form I received from my new employer from my full-time job. But in 1987, I received a notice from the IRS claiming I owed income taxes for the few hundred dollars I earned in early 1985 but had no income taxes withheld. I never received a W-2 form from that employer (my college library) in early 1986 and forgot all about it and that I might owe income taxes on it. I have no idea if where that W-2 form got sent to (maybe my old dorm address?), if it got created and sent anywhere at all.

I owed some interest on the taxes owed but no penalties. It didn't amount to much, maybe $200 total. I never heard from my state tax department because I would have owed them some money, too.
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Old 09-22-2015, 08:24 AM   #4
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I quit trying to call them on such things (it has happened to me a few times). I write letters detailing everything I can with copies of the past returns. "So far" it's worked every time. However, it does take some time and can be pure agony waiting after receiving a threat of an additional 20k in taxes plus penalties.

I just don't trust the folks on the phone (come to think of it, I don't trust the folks in the back office either) but I want it documented.
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Old 09-22-2015, 08:43 AM   #5
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If I paid ever bill someone sent me, I would be broke. Its amazing how many of them are wrong.
Tax bills
Insurance bills
Hotel charges

I could go on and on
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Old 09-22-2015, 08:43 AM   #6
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A few years ago I received the letter from the IRS, claiming that I owned them more. The letter stated that line 31, my AGI was wrong, the last line on front side of 1040 long form, which is only a total of the lines above. I stated by checking math done by Turbo Tax, but nothing there. I finally called and was told that they had a 1099 for interest that I had not included in interest or dividend. Turns out it changed my tax bill by like $10 so I sent it off and closed that one.


Another time several years ago, I get a letter saying we owed a couple thousand. As the letter didn't clearly state what the problem was, I called and after some time finally got that since they didn't receive 1099R for my Army retirement and my DW Army retirement, we must not have paid any taxes on that. I had to ask how do you know that I got Army retirement check but don't know how much tax was held back, but the answer was it was my problem. I could send in another copy of my 1088Rs or send in some $. Sent it 1099Rs and closed that case.


Best one was back in 1993 I think, my 1990 taxes were being audited. We had purchased a house and to prepare, we had a check sent from credit union for down payment and put it in a money market account for 2 months (remember when you could earn something from them). After we closed on the house we closed the account and I forgot all about it come tax time. It was only about $20 or $30. Well, they thought they had a live one. Full audit, every line on every form filed that year had to be documented with receipts, cancelled checks, detailed records or otherwise.
Took about 9 months to complete all the questions. Finally I get a letter saying after all the changes they made to my return (some in my favor), after all I owned them like $45 as I was searching for where to send the check and so happy to be done with this, I read below where it said that since it was less than $50 they wouldn't collect the extra $45. HAHA I can laugh about it today, but took 20 years to get over that frustration.
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Old 09-22-2015, 12:13 PM   #7
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A few years ago I received the letter from the IRS, claiming that I owned them more. The letter stated that line 31, my AGI was wrong, the last line on front side of 1040 long form, which is only a total of the lines above. I stated by checking math done by Turbo Tax, but nothing there. I finally called and was told that they had a 1099 for interest that I had not included in interest or dividend. Turns out it changed my tax bill by like $10 so I sent it off and closed that one.


Another time several years ago, I get a letter saying we owed a couple thousand. As the letter didn't clearly state what the problem was, I called and after some time finally got that since they didn't receive 1099R for my Army retirement and my DW Army retirement, we must not have paid any taxes on that. I had to ask how do you know that I got Army retirement check but don't know how much tax was held back, but the answer was it was my problem. I could send in another copy of my 1088Rs or send in some $. Sent it 1099Rs and closed that case.


Best one was back in 1993 I think, my 1990 taxes were being audited. We had purchased a house and to prepare, we had a check sent from credit union for down payment and put it in a money market account for 2 months (remember when you could earn something from them). After we closed on the house we closed the account and I forgot all about it come tax time. It was only about $20 or $30. Well, they thought they had a live one. Full audit, every line on every form filed that year had to be documented with receipts, cancelled checks, detailed records or otherwise.
Took about 9 months to complete all the questions. Finally I get a letter saying after all the changes they made to my return (some in my favor), after all I owned them like $45 as I was searching for where to send the check and so happy to be done with this, I read below where it said that since it was less than $50 they wouldn't collect the extra $45. HAHA I can laugh about it today, but took 20 years to get over that frustration.

On your audit.... it had nothing to do with your minor interest (even though you might think so).... there is ZERO chance they would do a full return audit for that amount....

You just so happened to be one of the lucky ones who get picked to go through a full return audit so they can see where people try and cheat... it was common back then.... not so much now...

When I was doing taxes, a return that I had prepared went through one of these audit... the taxpayer was RICH and had lots of tax issues... and to top it off he had died during the year, so we had to split his income pre-death and post-death..... the IRS guy was in our office full time for two months... he said it was the most complicated tax return he had ever audited... I was real proud when he came back with no changes....
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Old 09-22-2015, 12:39 PM   #8
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Decades ago got a ~$2.75 mil "late fee" for failing to file an S-corp return. When I called and they looked it up, they asked "what was the problem?" It was obvious they fat fingered a huge number instead of 3 for number of partners. Couple of months to sort it out. One of the partners nearly had a heart attack, but it has brought many good laughs to this day, for me. I saved the bill.
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Old 09-22-2015, 01:52 PM   #9
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I've had a couple of scary bills that turned out to be non-issues.

Once I forgot to include a mutual fund sale (back before downloads from brokerages were available). The proceeds got reported to the IRS, of course, and I got a bill for taxes on the "gain" with the gain calculated using a basis of zero. I filed a revised return with the actual basis and I owed taxes on a very small gain.

Last year I got a big bill because I'd rolled over a 401(k) from a previous employer to a brokerage account, carefully following the rules for a tax-free rollover. My employer supplied a form correctly tagging it as a tax-free rollover but the box labeled "Taxable amount" was left blank. The IRS decided that the entire amount was taxable. I sent a letter explaining it and they went away.

When I see commercials for accounting firms that include testimonials from people who got their IRS debt knocked down significantly, I wonder how many of them were cases like mine, where the initial demand was just plain wrong.
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Old 09-26-2015, 11:48 AM   #10
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When I see commercials for accounting firms that include testimonials from people who got their IRS debt knocked down significantly, I wonder how many of them were cases like mine, where the initial demand was just plain wrong.
I'm sure many of these situations are similar to yours. Since most people refuse to even try to do their own taxes (despite the math being fairly simple, and most tax returns also being fairly simple, and even spelled-out by the IRS on what to put where), I'm not surprised that if someone gets a notice by the IRS of "You owe $x,xxx", they simply freak out and call someone, and feel so good when they charge them several hundred or a few thousand to knock it down to almost nothing.
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Old 09-26-2015, 12:02 PM   #11
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Every state has a IRS Special Agent responsible for all criminal investigations. In the State of Tennessee, he was my next door neighbor.

My neighbor spent months and months in East Tennessee investigating and trying a traveling salesman tax evader in Federal Court in Greenville, TN. Despite having incredible proof against the plaintiff, the jury found him not guilty.

Come to find out, the hill folk of East Tennessee don't like "revenuers", and it's about impossible for any tax evader to be convicted by a jury trial in that region.
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Old 09-26-2015, 12:49 PM   #12
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^^ I don't have any horror stories as a taxpayer. As a former Revenue Officer (for less than a year 40years ago) I might still remember one or two....
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Old 09-26-2015, 02:17 PM   #13
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The state tax board can be a PITA, but the IRS has always been easy to work with. Every few years there seems to be a goof up in our taxes, but it's easily straightened out. Last year we had badly overpayed due to our CPA's estimated tax overcalculation. Since our refund was so huge, we got a polite letter from the IRS within 3-4 days of e-filing stating that they would need additional information and that it would take 60 days to review the return. We had the CPA fire off the info and 50-some days later there was our check. Easy-peasy.

The worst time that I had was when a contractor made off with our deposit money. Since we had paid with a credit card, we got the money back through the credit card company, but the contractor listed us as one of his collectibles and we used to get registerd letters from the IRS warning us to pay them instead of the contractor. I'm glad that I didn't actually work with the guy because I'm sure that paying the IRS could have resulted in a lien against the house.
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Old 09-26-2015, 10:22 PM   #14
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Several years ago I got a call from an IRS agent that upon review of my return I'd neglected to claim a deduction I was entitled to and my refund would consequently be larger than I had expected. The horror!
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Old 09-26-2015, 10:45 PM   #15
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Got a letter from the IRS in late August that we're among the 300,000+ taxpayers whose tax information was accessed through the IRS website. Haven't had any ID theft or related fraud yet, but unfortunately that type of info is could cause trouble for years. Oh well...
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Old 09-27-2015, 07:19 AM   #16
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A few decades ago I was sent a letter from the IRS that I was to be audited. I was surprised since my income was very low in the lowest tax bracket. I handled it through the mail and it turned out to be their mistake. For these most recent 20+ years of filing standard deduction I'm just not concerned with them anymore. I'd be happy to go with a "Fair Tax" and get rid of the IRS blood suckers and the high cost of supporting so many of those government jobs.

Cheers!
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Old 09-27-2015, 08:24 AM   #17
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Not really an IRS horror story but a tax story nonetheless. Recently a neighbor received a letter from the IRS saying he owed money on unreported income. He knew that I had worked for Block at one time as well as a VITA volunteer and asked me to read the letter and explain it to him. Basically the VITA/TCE site that prepared his taxes did not file a schedule D for a stock sale. The IRS got the 1099B and naturally did not calculate any basis on the sale and count all proceeds as income. After looking at the return and doing some calculation on the back of an envelope, I told him he will not owe anything and he needed to complete an amended return with the schedule D and offered to do it for him. He said he really didn't want to bother me with it and asked if he could go to a Block office and have them do it. I gave him the number for the HRB office that is open during the off season. They prepared the amended return, charged him $150 and told him he still owed the IRS $220. He paid up and was glad to put it behind him. A month later he stops by and tells me the IRS sent him a letter telling him he didn't owe anything and would be getting a check back for his $220. The moral here is the IRS can be wrong as well as the people who prepare your return. As convoluted as the tax code can be, for most people it is pretty straightforward and it pays to have a decent understanding of how to complete a tax return. However most people don't want to expend the time and effort to do so, kind of like those who think investing is complicated and best trusted to someone else.
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Old 09-27-2015, 08:30 AM   #18
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I received a letter from IRS in May challenging my 2013 return. Claimed I owed large additional tax due to insufficient withholding and non-reported K1 earnings. It took 3 letters and a phone call to get them to realize they were wrong, as they failed to recognize the withholding on my IRA distributions and fact that my K-1s were exempt from tax
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Old 09-27-2015, 10:15 AM   #19
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A few decades ago I was sent a letter from the IRS that I was to be audited. I was surprised since my income was very low in the lowest tax bracket. I handled it through the mail and it turned out to be their mistake. For these most recent 20+ years of filing standard deduction I'm just not concerned with them anymore. I'd be happy to go with a "Fair Tax" and get rid of the IRS blood suckers and the high cost of supporting so many of those government jobs.

Cheers!

I know that there are a lot of people who think the IRS are 'blood suckers' and even worse.... but really

Sounds to me like you had one contact with the IRS and it turned out in your favor...

Most people in the US NEVER have any contact with them.... so are they really 'blood suckers'?


BTW, the people who I think are not as fair are the property tax appraisers.... and I have had more dealings with them than the IRS (excluding when I had dealings with the IRS for other people)... I had one guy who refused to reprice my house based on the sales price that I paid for it!!! You cannot get a better market price than an arms length sale....
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Old 09-27-2015, 10:39 AM   #20
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Got a letter from the IRS in late August that we're among the 300,000+ taxpayers whose tax information was accessed through the IRS website. Haven't had any ID theft or related fraud yet, but unfortunately that type of info is could cause trouble for years. Oh well...
You too?

I got my letter in early Sept.

Additional 220,000 IRS Tax Records Stolen through Get Transcript


The good news, if any for me, is I haven't seen where any current credit accounts are used or new ones opened.
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