Yesterday our tax refund arrived into our checking account. We were expecting about thirty bucks. Instead, we got almost $20,000 (!).
Yeah, yeah- I know. Don’t spend it, just assume it’s a mistake. But the thing is, we’re moving out of the damn country in about a week and a half. We were actually going to close the account in about two weeks. My wife is studying for her CMA and is due to take the test on Tuesday, I’m working from home for my new company, *and *we’re packing for the move- dealing with this is *not *something we’d budgeted time for.
The truly painful thing is that we could really, really use that money for the move- it turns out that moving to Canada is a lot more expensive than you expect it to be. We’re going to go a bit more into debt just paying the various fees to get the visas.
So now we’ve got to tell our bank it was a mistake, and then contact the IRS and tell them they made a mistake, too. Apparently the IRS likes to charge people interest whenever they make an error like this, so we need to get this done immediately.
Last year I got a big, thick envelope from the IRS. I was nervous when I opened the envelope, more nervous still when the first page mentioned I owed them money. It took me a while to determine that they were coming after me for six dollars and change.
I took the papers to my accountant, who determined that in fact I did not owe the money. She made some phone calls and straightened everything out. Of course, having her do that cost me more than six dollars, but she pointed out that it was important to make things right.
A few weeks ago I got two letters at the same time from Social Security. The first said they were canceling my payments because I had not returned a “Proof of Life” letter they said they had sent me. (People who live overseas are supposed to send this in every couple of years. Of course, home mail delivery being non-existent in Panama, I never received it.) The second one said the matter had been resolved, and I would receive the payments.
I was startled until I checked the dates on the letters. They had actually been mailed a full year ago. I had already called Social Security and convinced them that I was still alive, which is why they resumed payments.
Where the letters were sitting for a full year, and how they finally got delivered to my door, is a mystery I probably will never resolve.
There is no such thing as an IRS error “in your favor”. The best case scenario for an error is that they give you more money than they should, or take less, and you figure it out and get the money to them before they start charging you interest, in which case you’re in exactly the same situation you would be without the error, but down the time and effort it took to straighten it out. The other options are that you don’t figure it out in time and pay them interest, or they don’t give you enough and (eventually) pay back the no-interest loan they took from you.
Many years ago, I got a letter from the IRS saying that I owed them a hundred bucks. Well, back then, a hundred bucks was about a hundred bucks more than I could afford, so I ignored it.
Then, a month later, I got another letter from them which said, “Sorry, our bad. You only owe us fifty bucks.” Again, this was fifty bucks more than I could afford, so I ignored it again.
A month after that letter, I got a final letter from them which said, “After a more thorough look at your taxes, it turns out we actually owe *you *a hundred bucks.” And they included a check, which I promptly cashed.
(The actual numbers are probably wrong. I suck at remembering numbers.)
Ever since then, I’ve kind of been a big fan of the IRS. Now, however, my support is wavering.
In other words, you loaned them $100 at a time when you could ill afford it, and they didn’t pay you interest, and also caused you stress over the mistaken claims that you owed them.
I think maybe a better way of putting it is I screwed up, and they didn’t punish me for doing so- and actually looked out for my interests. But that’s kind of irrelevant to the story at hand, isn’t it?
IRS do pay interest under many circumstances. I have received several years of interest on a a refund arising from a 1040X refiling to correct my own error.