Worst IRS stories

[dory36]

What are your worst IRS horror stories? (Just those that happened to you or to someone you know, not "I heard about...")

Mine:* I flew my own plane for work for a former employer. (This was Steve Jobs' old company, between his Apple stints.)* They went out of business. Shortly afterwards, I went to work in Saudi Arabia.

While there, I got an IRS letter, postmarked about 45 days earlier, saying they were challenging the use of the plane as a business expense, and I needed to respond within 30 days (15 days before I even got the letter) or else I would be deemed to have accepted their position. I responded with documentation within a few days, but obviously beyond their 30 day requirement. They refused to even look at my documentation, because it was late.

$200 or so in overseas phone calls were useless, as was a request to deal with the matter in the local embassy (which is customary), as my "failure" to respond within 30 days put the issue into some bizarre category where no one seemed to be able to do anything. I had to file for a tax court appearance in the USA to contest their position.

$3000 or so in travel costs later, I am in the USA waiting for court, when I get a call from the clerk for the IRS attorney, who said that the information I had submitted (in response to the original letter) was sufficient, and they were dropping the case.

So I was off the hook . . . and out some $3200 in phone and travel costs for an issue that could have been dealt with had they allowed their own employee in the embassy 2 miles from my house to deal with the matter.