Can't the IRS get its story straight?
I had a difficult recent experience with the IRS. In Fall of last year (September, 2013, I believe), I received a letter from the IRS claiming that I had underpaid on my 2009 tax filing, and that therefore I owed an additional amount (something like $300 + interest and penalties for failure to file timely -- which came out to a total of nearly $500).
I went back and looked at my filing and determined that their claim was totally incorrect in every way. In the first place, I had filed my return and had done so timely, and secondly that I did not underpay. Their letter also demanded that I send them a copy of my 2009 return.
I sat on it for a few weeks, but then I received a second letter informing me of their intention to levy my bank account if I didn't pay or respond immediately. This intimidating letter very nearly had the intended effect, and I was ready to pay in full to get them to leave me alone; but my father (who is a tax attorney) counseled me to remain calm and let him handle it.
Well, we complied in sending a copy of my 2009 return, but I also sent a letter (drafted by my father) disputing their claim that I had not filed timely, and disputing underpayment. About a month went by before I received another letter from the IRS -- this time from a different office -- informing me that they had received my letter and were reviewing the situation. The letter informed me that they would have another response within 45 days.
About 45 days passed and I received another IRS letter arrived -- again, from a different office --informing me that they needed another 45 days of analysis.
After about another 45 days, I received yet another letter -- yet again, from a different IRS office -- informing me that they had thoroughly analyzed the case and had determined to basically do me a "favor" and waive the penalty for failure to file timely as a one time act of beneficience because I had always filed timely and correctly in the past. But that I still owed something like $294 due to underpayment and interest that they could not waive due to federal statute. And it was due by March 17. Gee, thank you very much Sir, may I have another please?
Then, within about a week, I received another letter -- yet again from a different IRS office -- asserting that I owed about $287, due by April 10.
This didn't make any sense. I had two separate tax bills claimed by two separate offices of the IRS, with two different amounts due, with the interest calculated to different dates -- yet the amount for the earlier compliance date in March was higher than for the later compliance date in April.
I sent them a letter asking for an explanation along with a photo copy of both letters expressing my frustration and confusion, along with my sentiments that I still didn't think I owed anything and my perplexity at the fact that different offices of the IRS were apparently not even in agreement with themselves about how this amount had been calculated and what exactly I owed. Which tax bill is the one I should pay, if the IRS itself cannot even tell me consistently what exactly I supposedly owe?
Then, about a month later, I received yet another IRS letter -- as you might guess by now, from a totally different office -- tersely informing me that they had analyzed my information and determined that I actually owed... $0.00.
Now why do I think this story is important enough to warrant retelling to others, besides the fact that it happened to me and is therefore personally significant? A couple of reasons.
First of all, the amount they claimed I owed was only a few hundred dollars, and I'm an average citizen. I'm not earning millions or billions. So I shouldn't be a high priority target for IRS scrutiny. Yet they came after me anyway, for a trifling sum. In truth, it probably cost the IRS more in salaried man-hours to try to shake me down than they ever would have recovered from me. That's your tax dollars at work there... ultimately wasted for nothing.
But I think this is a tactic of the IRS. When they go after a millionaire or billionaire, those people have legions of attorneys, CPAs and others to fight it. If they go after the "Little Guy" who doesn't have legal counsel on retainer or clever tax specialists on the payroll, the IRS is basically hunting in a target rich environment of people they can easily intimidate. And as long as they are only trying to gouge a few hundred bucks, probably most people will just quietly pay it without much complaint. I think that's a strategy on the part of IRS.
Secondly, I think my case illustrates that the IRS is using intimidation tactics to squeeze average taxpayers for more than they really owe. I don't believe this was an isolated or accidental situation.
No, I myself was initially very intimidated and ready to pay whatever they claimed I owed. But how many other average taxpayers get hit with these types of notices and are so intimidated that they simply pay to make it go away? I bet a lot of people do