Fed Tax E-File Rejected - An Update

[Disappointed]

I received a letter from the IRS yesterday, March 11th, the letter was dated March 08th. The letter was mailed to my address which I used to file for more than 20 years.

The letter stated that IRS received my 2015 return but did not say when the IRS received the return so I can't tell whether it was mine or the one filed by the thief? Had it provided the date I would have been able to tell if it was mine or not. My E File through TurboTax was rejected twice on March 7th. I called IRS, the rep was unable to tell me if the letter referred to a fraudulent return or mine, though he did see the system rejected the two attempts made by me that failed.

Was this letter sent because I called the FRAUD hot line on the 7th, or did the IRS suspect there was fraud going on? The letter was mailed to the correct address. Did the thief use my address but used his/her own bank account number? I have been using the same account number for more than 20 years?

The IRS letter asks if I filed that particular return? I do not know which return the IRS referred to, no date of acceptance provided.

The IRS is also requesting (in case I confirm that it was my return)

Copy of the first and second page of my 1040
Dates and amounts of my estimated tax paid
Documents showing incomes and witholdings

Did the IRS catch the fraudulent return? Was it triggered by my call the fraud department? The rep that I spoke to was new and while trying to help me had to referred to his supervisor many times. I called the IRS twice, the wait time for both calls were 15 minutes and 18 minutes. Note that if you get cut off during the call, there is no way to call the same person back and the rep has no way of calling you back.

The rep that I spoke to suggested that I send in the form with all the requested documents even though we don't know which return the letter was referring to. Meanwhile I sent in a complete paper return with the ID Theft Affidavit Form, it reached the IRS on the same day I received this letter. This could cause a confusion. I did include a letter explaining my situation with the return. Also included a letter when I responded to the letter yesterday. I also had to file my State Tax Return the old fashion way and TurboTax won't E File a State Return without Fed Return accepted by the IRS firs.

 

[Sunset]

What a disaster the IRS creates.

The rep just wants the issue solved even if it's solved wrong. That's why they say send in the form.

I think you did correct by sending in the complete return with a theft affidavit form. They need to figure out which is correct, not you, you sent yours in.

We need a new system:
You do your return, the IRS validates it, and then sends you a bill for the total taxes for the year, and you pay it to the one address for entire country.
No refunds needed. No $5 Billion/yr scammers.

 

[Walt34]

We need a new system:
You do your return, the IRS validates it, and then sends you a bill for the total taxes for the year, and you pay it to the one address for entire country.
No refunds needed. No $5 Billion/yr scammers.

While that could work for some people I doubt it would work for most of the population since they're all up to their eyeballs in debt and don't have two nickels in savings. Where are they going to come up with the money to pay an income tax bill?

I'd wager that's why the whole withholding thing started - so many people couldn't pay their taxes unless the money was involuntarily withheld during the year.

 

[Gumby]

How about going back to paper filing only? With any refund delivered by paper check in the mail only. It won't totally eliminate the scammers, but they'll have to work harder at it. And maybe some will be dissuaded.

I went to the post office yesterday and certified mailed my returns, as I have done for the past 40 years. I'll continue to file on paper as long as that is possible.

 

[FI by 2024]

I'd wager that's why the whole withholding thing started - so many people couldn't pay their taxes unless the money was involuntarily withheld during the year.

I always assumed it was because the government gets an interest free loan by withholding. I wonder which reason is correct?

 

[MichaelB]

I would imagine that the government pays it's salaries and expenses on a monthly basis and would like to have as much income as possible on the same schedule. What is screwy is the substantial overpayment / refund that exists in the US.

While there are many things the IRS can to do to reduce theft, at the very least they should verify identity before sending out refunds.

 

[meierlde]

I always assumed it was because the government gets an interest free loan by withholding. I wonder which reason is correct?

Withholding started in 1943 during WWII as the government needed the money, and the old system of paying afterwords was leading to problems.

 

[pb4uski]

I would think that there are some reasonably common sense things that the IRS can do to reduce these fraudulent returns. For example, if the bank the refund goes to has changed from prior returns and/or the address has changed, then verify certain information on the return to payor filings (W-2, 1099, etc) before sending out a refund or hold the refund until further verification can be done. I have no idea why they do not do this given the problems that have been experienced.

 

[audreyh1]

While that could work for some people I doubt it would work for most of the population since they're all up to their eyeballs in debt and don't have two nickels in savings. Where are they going to come up with the money to pay an income tax bill?

I'd wager that's why the whole withholding thing started - so many people couldn't pay their taxes unless the money was involuntarily withheld during the year.

That's what I think too - major hardship for many folks as most would not set aside funds for paying taxes, and then be in trouble when taxes are due.

And taxes are owed quarterly, not annually. Don't want to have to file quarterly and get a quarterly bill, do we?

 

[pb4uski]

I always assumed it was because the government gets an interest free loan by withholding. ....

Not if you do your withholding correctly... but most people don't.

 

[FI by 2024]

Not if you do your withholding correctly... but most people don't.

Precisely. In fact, many people love getting a juicy refund after they file. I know one person who considers it a reward the government "gives" her. Sigh.

 

[VFK57]

I would think that there are some reasonably common sense things that the IRS can do to reduce these fraudulent returns. For example, if the bank the refund goes to has changed from prior returns and/or the address has changed, then verify certain information on the return to payor filings (W-2, 1099, etc) before sending out a refund or hold the refund until further verification can be done. I have no idea why they do not do this given the problems that have been experienced.

+1. If a Bank Account is different from the previous year filing, it would be common sense to mail the check refund to the address of the Taxpayer or at least make a call to the Tax payer to verify and confirm the change.

 

[travelover]

Precisely. In fact, many people love getting a juicy refund after they file. I know one person who considers it a reward the government "gives" her. Sigh.

Yup, the same reason that without SS, we'd literally have people starving in their "golden years".

 

[Texas Proud]

Precisely. In fact, many people love getting a juicy refund after they file. I know one person who considers it a reward the government "gives" her. Sigh.

I am going to be getting a big juicy refund this year.... and I do not care that they had my money... because it is almost all ACA subsidy... and since I got 1.5% cash back on my premiums I think I came out ahead....


But, when interest rates go back up, then it will become a wash and hopefully in the future something I will get each month...

BTW, I have only had one large refund before.... when I first got married and had a family of 4... did not calculate out how much my taxes were going to go down with all the credits etc. that I got.... only time I messed up....

 

[audreyh1]

Any refund just gets paid towards next year's estimated taxes, so it's a wash for me.

It's almost impossible for me to know until the end of Jan if I've hit the 90% of prior year's taxes paid. Many mutual funds don't report which dividends are qualified dividends until then, and that makes a huge difference to my taxes.

So, I usually end up paying a bit more in estimated taxes by Jan 15, and then when I file, I sometimes end up with a refund.

But that refund won't get to me before (or maybe a few weeks before) I have to pay the April 15 estimated taxes, so I just apply any refund to the next year's taxes.

 

[Walt34]

Precisely. In fact, many people love getting a juicy refund after they file. I know one person who considers it a reward the government "gives" her. Sigh.

One SIL does that deliberately to "save" for their yearly vacation. Apparently she's one of those who can't stand to see a dollar in the bank and I'm quite certain that had she been in the group for the marshmallow test she would have failed.

 

[sengsational]

I'm surprised there are so few laments about mandatory 20% withholding on IRA/401k withdrawals. I did great keeping my own money in the W2 days, but there seems to be no way out of the 20% thing.

 

[pb4uski]

I haven't experienced that 20% withholding since I have yet to take IRA withdrawals, but there is not withholding on Roth conversions so why couldn't one just do a Roth conversion and then withdraw from the Roth as a workaround?

 

[btdt22]

One SIL does that deliberately to "save" for their yearly vacation. Apparently she's one of those who can't stand to see a dollar in the bank and I'm quite certain that had she been in the group for the marshmallow test she would have failed.

Thanks for the 'marshmallow test' reference. Wikipedia has some very interesting info on this

 

[Gotadimple]

I'm surprised there are so few laments about mandatory 20% withholding on IRA/401k withdrawals. I did great keeping my own money in the W2 days, but there seems to be no way out of the 20% thing.

Why is it mandatory? I have been withdrawing from my IRA since 2010 and have declined to have Schwab withhold anything.

- Rita

 

[ejman]

Why is it mandatory? I have been withdrawing from my IRA since 2010 and have declined to have Schwab withhold anything.

- Rita

I don't see any reference to a mandatory 20% withholding on regular IRA withdrawals after retirement. I do see a 20% mandatory withholding on roll-overs that are paid directly to the account holder instead of being rolled over directly to another IRA custodian

 

[gauss]

I believe that 401k's have the required 20% withholding on distributions.

Here is an article that talks about the required 20% WH on 401ks that does not exist for IRAs.

http://www.figuide.com/how-to-bypass-mandatory-withholding-on-a-401k-distribution.html

-gauss

 

[Tadpole]

My husband has a retirement account at Fidelity. This is the beginning statement of the MRD (RMD) form.

Use this form to request a Minimum Required Distribution (MRD) for the current, deferred, or a missed year from your 401(a), 401(k), 403(b), or 457(b) governmental employer plan. Do NOT use this form to request an MRD for the current year if your plan has arranged with Fidelity to automatically pay MRDs.​

On the third page is a tax section which says:
​

5. Tax Withholding
II
If you are a u.s. person but do NOT make a federal tax selection below, the IRS requires us to withhold federal taxes - we will withhold at the rate for a married person with 3 dependents. For non-resident aliens, the minimum federal mandatory withholding rate of 30% will apply, unless the prevailing tax treaty rate applies because you have a valid IRS Form W-8BEN on file with Fidelity. Each state sets its own withholding
rates and requirements on taxable distributions. We apply these rates unless you, or state law, direct otherwise.

For residents of CT, NY, NM, NJ, ND, PA and RI, you must provide a dollar amount for state withholding if you would like it withheld ($10 minimum), otherwise no amount will be withheld.

Note that the amount of tax withheld will be calculated on, and subtracted from, the amount of your distribution. Amounts withheld may be less or more than what you actually owe in taxes. Taxes will not be withheld if the distribution amount is less than the federal or state tax with­holding threshold for your marital status and number of exemptions. For recurring payments, the withholding instructions you provide here will remain in effect for this account until you give us new instructions.

​

The remaining part of this section allows you to choose how you want to pay the taxes (percent, dollar amount, not-at-all). So you can arrange to receive the entire MRD (RMD) before tax. (Unless your employer set up your MRD for you?)​

Bolding above is my own.​

 

[OAG]

I'm surprised there are so few laments about mandatory 20% withholding on IRA/401k withdrawals. I did great keeping my own money in the W2 days, but there seems to be no way out of the 20% thing.

I take RMD on IRA and I am not subject to any percentage (much less 20%) withholding. I have an optional withholding but I do not elect to do so.

 

[harley]

One SIL does that deliberately to "save" for their yearly vacation. Apparently she's one of those who can't stand to see a dollar in the bank and I'm quite certain that had she been in the group for the marshmallow test she would have failed.

Interestingly, and totally off topic, I have discovered that DW is a first marshmallow eater. We hadn't watched any of the last season of Downton Abbey until recently. But we've been watching an episode every night or so recently. Tonight we watched the next to the last one, finishing at 10:30. I turned the TV off, planning to enjoy the final episode in a day or two. She insisted we finish the series tonight, she absolutely can't wait even though the show won't be over until midnight. Truthfully, I enjoyed it, although I'd have been fine with waiting for a day or so to reach the end. Just another interesting insights into the different personalities that exist in the world.