I am so screwed (IRS rant)

The BBQ Pit
1

Actually I am so screwed I don’t even have the energy or will left to rant.

Early in 2006, I started looking at new houses. While going through all the pre-financing shit I found out that a tax lien filed by the IRS years and years before…had never been released. This for for some money they thought I owed them, I thought differently, and it went through various channels (the amount getting higher all the time) until I finally figured out that I would need to pay a tax lawyer $250/hr for approximately 10 hours, or I could just send the IRS the money that I didn’t really think they owed. (I did not come to this realization independently but with the consultation of a tax lawyer who said, yeah, you shouldn’t owe it, but in order to prove it you’d have to blah-blah-blah…and you might still owe it). So I paid them. I paid them. And they never released their goddamned lien until last spring, when I sent them all the proof that we had paid all the money, years before, so they did, finally, send a release of the goddamned lien, but about two weeks too late for us to get the house we wanted and the interest rate we wanted.

Okay. You win some, you lose some.

But then, having pricked their interest, I got a thing in August saying I had failed to report some $80,000 in income and they wanted something like $26,500 in back taxes, penalties, interest, etc. I freaked out, of course–and then, clueless person that I am, I started thinking, What if there really is an extra $80,000 out there that I didn’t report, hey, maybe I can find it, in which case I wouldn’t mind paying the IRS…

Clueless, and hopelessly optimistic. Of course there was no extra 80K.

Once again I sought professional help to get through the mire. Hired a CPA. My husband talked to him, including how much he’d charge, and my husband told him to limit his attention to this matter to $1000. We gave him the stuff in October–POA to deal with the IRS, and all relevant records.

In February, yes a mere two months ago, he called requesting a bit of additional information. In March, yes, a mere month ago, he finished the thing up. He added that he’d talked to the IRS and they would like this by March 26 and oh, by the way, I only owed them an extra $3000, but unfortunately it took him longer than he originally anticipated and so I now owed him $1750. We had to wait a week until my husband got paid to get him the $1750, and before that happened we got another letter from the IRS, and this time it said we owed $36,500.

Now I thought that the CPA had called them off. He had a signed POA allowing him to deal with the IRS on our behalf and that’s what he was supposed to be doing, up to $1000, at which point…

Hell, I don’t even know.

I cannot talk to the people at the IRS. We are talking basic meltdown here. They can’t hear me, I can’t hear them, and I’m afraid I might threaten to blow up their offices. Please note that in real life I know nothing about explosives and am a coward, so that wouldn’t happen, but I could certainly threaten it.

(It is telling that my husband, who is not normally afraid of me, spent more than a week screwing up the courage to tell me about this after he opened the letter.)

But–why are they doing this to me!!! I don’t make a lot of money. My husband doesn’t make a lot of money. We don’t have secret bank accounts in the Caymans, or secret sources of income, or vast stashes (or even unvast stashes) of cash. We don’t have a lot of outstanding debt, but we don’t have a lot of income, either. So, why are they doing this to me?

And how come I can’t hire a professional who can get me out of it?

My guess is that now it would take the $250/hour lawyer (who by now is probably a $350/hour lawyer) approximately 100 hours to sort this out.

At this point I foresee…no new house, no new anything ever, and total financial ruin.

Je m’en fu.

2

Gawdalmighty.

What’s the extra $10K for? Penalties and interest? Did your CPA file an amended return for you?

Ask your CPA what he did and to explain what he found – how he determined that you owed $3K and not $26,500 or $36,500. Make him write it down. Take it to your local IRS office, sit down with them and make them explain why they think you owe so much more.

Somewhere there’s a pig with wings, because I’ve had to deal with IRS twice and both times they were helpful and understanding.

3

Last fall when this happened, my husband spoke to an IRS representative who was helpful and understanding. A few days later, when we got the official letter, it turned out the guy had either understood nothing, or my husband had misunderstood everything. It basically outlined our so-called payment plan…

4

Fight this every step of the way. Somewhere an IRS agent is trying to make points by screwing with you. They get rewarded for finding “additional revenue” and your name came up as a likely target for a shake-down. Get everything the IRS says in writing and let the legal professionals fight it out. Then sue if possible.

5

I know I am on their sucker list. This is what I get for goddamn paying the scumsuckers instead of paying a lawyer.

How do I get off their list? I’m thinking name change, leave the country…

All this and I can’t even get drunk as it’s Sunday and the only booze in the house is some wine we’ll need later to cook the lamb and some banana liqueur.

I just don’t even know where to start.

6

I don’t understand. Do you have no idea of where this income is from? Did they just send you a letter saying “you have $80,000 of income from somewhere”, or do you actually know where it came from? I mean, is their claim completely made up, or does it have any basis in fact? I just don’t understand how, if it has any basis in fact, one forgets more than a few hundred in income. :confused:

7

Yes, they sent a letter saying “you have $80,000 of income you didn’t tell us about, but haha we found it anyway,” without telling us where they found it.

That is because they did not “find” this income, because it doesn’t exist.

The reason I first thought was that there could be, in fact, income I had but had not yet discovered, is that twice a year I get royalty checks from my agent. They are not usually in five figures. They are not even four figures. They are just about worth taking to the bank and depositing instead of throwing in the trash. But my novels might have become cult icons in the Czech Republic or somewhere, and the money just hadn’t made its way to me yet but had been reported to the IRS…Now this is a very hopeful scenario and extremely unlikely to happen, because if my agent suddenly received a large royalty check from one of my publishers she would let me know. I still wouldn’t get the royalty check for months, but I’d know. And I’d get the money eventually.

But alas. That is not what happened.

Not only do I have no idea where this “income” is from, it doesn’t exist.

It looks to me like they are taking a retirement account and charging the whole of it as income. That makes no sense, as it’s an IRA, has always been an IRA, nothing has changed, and anyway it’s less than $80K. But that should have been easy to clear up, and anyway the numbers don’t match.

In other words: They have different numbers than I have, and I don’t know where they got them. As far as I can tell, these numbers are completely made up.

So, which is more likely?

a. The IRS will screw Hilarity & spouse out of retirement account, causing them to have to continue to work into their 90s or until death, whichever comes first,

or

b. Hilarity will become a cult figure in the Czech Republic.

8

Well, the Czech do have excellent taste.

9

Mmm…hm. I won’t tell you about your business or what to do next (like, what happens if you ask “where did it come from”), all I can do is wish you luck. I have a “complicated” return I file each year, and even though I always err on the side of paying more taxes and taking fewer deductions than I might be allowed, I fear random, summary justice like you’re describing.

10

If you take the pessimistic view, you have nothing to lose by liquidating your retirement account and spending it on the best lawyers money can buy. Might as well; the IRS is going to take it anyway, and there is a better chance you can beat this thing if you go down swinging. And if you lose, you are no worse off than you would have been if you meekly let them sieze your assets. What’s the likelyhood of going to jail over something like this?

11

I trust you have good records of your bank accounts, IRAs, income, etc. Perhaps you could collect these, make an appointment with the IRS, and see if the amount of income they claim you didn’t report lines up with an IRA or something. We’ve never had any problems with them (and my wife is a writer also) and I’d hope they’d see fit to show you why they think you had this income. It doesn’t sound like your finances are all that complicated, and that $80,000 would fall through the cracks.

I also agree that you should get all the information your CPA found out. Has he told you why they think you owe the money? If he doesn’t understand after all this effort, he’s an idiot - or lazy, and would rather settle than figure it out.

If after all this you still don’t understand why they think you owe the money, I’d write to my Congresscritter. But it’s time you talk to the IRS directly, and not leave until you understand where they think the money came from, even if you don’t agree.

12

It might be preferable! Did I mention that I’m in my late 50s and my husband’s in his early 60s? In jail you get housing, food, and a minimum level of healthcare. Out of jail, let’s see, cardboard sign, plastic trash bags for shelter in case it rains…

13

I had employees from 1995 to 2004. Starting January 2005, I was officially an employee and no longer an employer, and wasn’t responsible for taxes on anyone. When I sent in my last 941 return, I sent a letter stating that I was no longer an employer, bla bla. I got something from Them a couple of months ago saying that I owe Them around $5,000 per quarter for employee taxes for 2 years. I immediately went to a lawyer. I am still in the process of getting it straightened out.

 Consumption tax, anyone?
14

Dumb question: Is it a Roth IRA (or do they think it’s one)? I am not a financial expert by any means, but I just opened a SEP IRA for myself, and in the Retirement 101 tutorial the financial planner gave me, if I understood correctly, Roth IRAs are taxable, with the benefit being that you don’t pay tax at retirement.

15

Request copies of your w-2’s for the years in question and any other proof of income they are claiming exists. IIRC they are required by law to provide this. Bring copies of those and the letters to your congressman. If they claim you have income that they have no w-2 for or proof of income derived by investigative teams, they are screwed.

The IRS has 48 hours to respond to a congressional inquiry and they better be able to defend their actions. More than a few heads have rolled at the IRS for not resolving something like this properly. This is the kind of thing that gets IRS upper management types fired.

One of my old bosses had a problem like this and it turned out to be someone using his identity in another state and paying little or no witholding.

16

I have also heard of cases where an illegal alien has used your SS number for themselves. Not identity theft in the way we usually think of it, they are not trying to get a credit card in your name. They need an SS# so they can work at a job, and they are using yours. They file a W-4 with 5 or 6 exemptions and not much gets withheld.
It might turn out that the IRS shows your income from writing and shows that you work at 4 different car washes. :eek:
I concur with going to your Congressman.

17

  1. Doubtful. :dubious:

  2. Total bullshit. IRS agents get not a nickel for “finding additional revenue”.

18

You’re lying. The IRS notice or report they sent you must- under law- specify their source. If it is from W-2s’ or 1099’s they actually specify the payer.

Amd your CPA has to know this and know what potential source they have.

Now, if you were a complete naif I could beleive that you just didn’t understand the rather convoluted bureaucratese the IRS writes its Deficiency notices in. I admit they are easy to misunderstand for a layperson and very scary. But you have a CPA. I showed this post to my Bro, an “Enrolled Agent” and he sez “you are full of shit” or you are too dumb to understand your CPA, too.

You have a CPA handling this, so let him do his job, and stop posting crap about which you don’t have the foggiest understanding.

But in any case, they can’t assess a Deficiency without you being allowed to go to Appeals (make sure your CPA tell them you want to Appeal) and then they have to file a “Statutory Notice of Deficiency” aka a “90 Day Letter” which allow you to go to Tax Court. Which you can do without a lawyer. And if an Appeals Officer also tells your that you owe,and a Tax Court Judge tell you that you owe- then Dudes- you *did *have unreported income.

And my Bro sez he routinely gets Liens fixed for $500 (after the proper amount is paid, of course!). He sez $500- $1000 is about right for a simple Lien (not $2500), and that so far $1750 for your CPA doesn’t sound too far off. But if you have had to pay a CPA $1750 and your CPA sez that you really do owe about $3000, then clearly you did have some income you failed to report.

19

The OPs* own *CPA sez that she really does owe around $3000 so it is clear that the IRS have shown the CPA their source docs (and since he has a POA, they can’t and won’t show it to directly to the OP, they rely upon the CPA to show it to his clients).

And thus that it is not a case of stolen ID.

20

*The OPs own CPA sez that she really does owe around $3000 so it is clear that the IRS have shown the CPA their source docs (and since he has a POA, they can’t and won’t show it to directly to the OP, they rely upon the CPA to show it to his clients).

And thus that it is not a case of stolen ID.
*

And if you write your Congressman while you have retained a CPA to handle this, he may well throw his hands up in disgust and drop you as a client.