Your taxes have been filed. You sit back and relax, and maybe even wait for an overpayment refund. All seems right with the world. But then you get something strange in the mail. A letter from the IRS but you think there must be some mistake: You owe them MORE; or, you get back less than you were expecting.
What should you do? Some might accept it as their unlucky situation, as if their tax return was a slot machine and it came up as three different symbols instead of the 3 lemons you were expecting. I suspect the IRS is banking on this. After all, they are the faceless, bureaucratic giant and you are the lowly person afraid that you’ll open Pandora’s Box of Audits if you say anything.
But you do have options if you don’t like what the IRS is dishing out. The IRS has a system in place for taxpayers to file appeals. It’s with the IRS Appeals office, which is a separate and independent office so you don’t have to deal directly with the people who worked on your return.
When appealing an IRS decision (including your refunds or other things like penalties, interest, trust fund recovery penalties, offers in compromise, liens and levies), you should pull together as much information as you can in order to support your case. And, when appealing, you can represent yourself or have representation from a tax attorney.
When you don’t pay your taxes, the IRS is on you like ants to a picnic. I know that because everyday I work with people whose tax problems are exacerbated by strong arm IRS tax collection techniques.
But what about people who overpay their taxes? It might seem hard to believe but the IRS had $1.3 billion sitting owed to 1.4 million people who did not file a tax return for tax year 2006. (You can read more about it at this IRS press release). This outstanding amount owed back to taxpayers happens because someone might pre-pay their tax based on quarterly estimates but then they fail to file a tax return at tax filing time.
The problem is, if you didn’t file your income tax within three years you generally forfeit your right to receive that refund. That means the money will not be leaving the U.S. Treasury, and Congress will be able spend it for its many “important” projects.
It doesn’t seem fair does it. The IRS gets a much longer time period to collect any money you owe them, but you get a much shorter time period to collect money from the the IRS that they owe you.
I guess Congress, who makes up these screwy rules thinks it’s fair, but that because it benefits them.
They fix the rules in their favor.
Americans face 4 very different kinds of stresses during tax season. I call them the “April 14 stress”, “April 15 stress”, “April 16 stress”, and “April 17 stress”.
April 14 tax stress
In the weeks and months leading up to the April 15 tax deadline, you (and most other Americans) will be facing the stress of tax preparation. There’s the effort of gathering paperwork, pouring through difficult-to-understand tax forms, juggling paper and a calculator, and hoping desperately that you don’t have to pay taxes this year. The stress comes from finding the time to do taxes and then from trying to figure out each separate line in your tax return.
April 15 tax stress
No sooner is that stress over then the next stressor appears: April 15 is tax deadline day. Most Americans just barely squeak their tax returns in on time and the stress of trying to get it done and rushing through those last minute calculations feels rushed. Did you get everything? What if you didn’t do something correctly? You vow to do your taxes earlier next year (but who has the time?)
April 16 tax stress
Fortunately, not everyone feels this stress, but many people do. If you owe tax and you have to pay it, guess what: your bank account may be drained on this day to cover the check you wrote for your taxes. That’s stressful as you watch your tiny nest egg now devoured. Goodbye to that new sofabed you were hoping for.
April 17 tax stress
Have you ever played roulette and hoped desperately that the ball lands on your number? April 17 tax stress is the opposite: It’s audit stress. You hope desperate that you don’t get picked for the probing and invasive procedure known as the tax audit. And realistically, this stress doesn’t go away on April 18; it hangs over us like a cloud every single day.
If you’re facing these stresses, you’ll find some good advice for handling the April 14 and April 17 tax stress in this article at CNN Money called “A guide to avoid an IRS tax audit“. And if you want to avoid the April 16 stress, give our office a call.
Nothing makes me more proud of our current tax system than to see it efficiently and intelligently use the tax dollars we Americans pay into it. After all, we’ve sweated for every hard earned dollar and we believe in what America stands for so we are happy to contribute to it.
The article describes how Detroit defense lawyer James Howarth received a bill in November indicating that he owed the IRS $0.05. That’s a nickel. One shiny, round nickel. The letter sternly warned that he could face penalties and interest if he did not pay his nickel.
That’s stupid enough on its own. After all, the IRS easily paid 10 times that amount to send him the letter. (I’m calculating a discounted rate of about $0.35 for the stamp, $0.02 for the paper, $0.05 for the envelope, $0.03 for the ink, and $0.05 for the wage of the low-paid intern who licked the envelope and put it in the “outgoing mail” stack). And in an effort to further stupefy everyone, they will want him to send the money to the IRS by mail. That’s a stamp. An envelope. And they don’t take cash so you have to write a check.
Are you done slamming your head against the wall from the nonsense?
Well just wait, it gets better!
Later, the same article reports, the IRS sent Mr. Howarth a letter telling him that he is the lucky recipient of a $0.04 refund. That’s right: 4 pennies! 4 little, tiny, round coppers can go back to his account!
The irony is, since the refund is below the IRS’ $1 threshold, he has to request it if he wants it. Mr Howarth’s frustration is clear when he points out that the IRS demands immediate payment of even the smallest amount, but they make him jump through hoops when they have to pay him back his own money.
The article then relates that Mr. Howarth called the toll-free number to clear up the issue, as any concerned citizen would, and finally gave up after being on hold for so long. If he ever does get through to anyone, it will cost several dollars in wages and time to correct the issue.
Does this make sense to anyone? This is another great example of our tax dollars being wasted by the IRS. A few simple procedures which can be automated by a computer would have solved this problem.
