February 28, 2009

Expecting a Refund; Instead They Got a Tax Bill!

Recently we've had a number of readers send stories, here's another:

About a year ago, my husband and I received a notice from the IRS stating we owed them almost $2500 for unpaid taxes from the tax year 2006. It came as quite a shock to my husband and I, since we always paid our taxes on time, and actually almost always got a refund.

When I inquired as to why we owed so much for our taxes, the IRS stated I had earned over $30,000 in income in 2006. My jaw hit the floor. I only worked for about six months in the 2006 filing year. I left my job at the beginning of July to have a baby, and decided not to go back to work after he was born.

It took months to work out with the IRS. I sent them copies of my final paycheck, my employee separation agreement, dated for July 1, 2006, as well as final termination paperwork from my job from when I left. I mailed everything off within the allotted time frame, and received a letter back about two months later stating they needed to investigate further. I wondered what the heck they needed to investigate, as it was pretty clear that I only worked for six months, and in that time only grossed around $14,000.

I tried calling the IRS several times to find out the status of my case. I would be on hold for hours at a time, no exaggeration, and would be passed from one agent to another. It was extremely frustrating. The worst part of the whole ordeal is our ìeconomic stimulus checkî was withheld until the matter was cleared up.

After about four months without any resolution to my tax case, I received another letter, identical to the first letter I received, stating I owed $2500 plus interest and penalties. I was beyond frustrated at this point. I resent the identical information I sent the first time, thinking for sure I would end up paying $2500 that I didnít owe.

Fortunately, about a month after I re-sent my tax information to the IRS, I received a letter stating my case was closed and I did not, in fact, owe any further taxes. Thank goodness, because I would have lost my mind had I been forced to pay for money I did not earn!

RESPONSE:

This happens more often than you might think. When the IRS makes a mistake, it's you that has to jump through the hoops to have it corrected. And when it's all over the IRS leaves you feeling like you're the one who messed up. You won't even get an apology! This situation turned out well for the taxpayer, but it's best to consult a professional at the first sign of a problem with the IRS. Usually, what seems like a small issue, turns into a "mammoth" of a problem because you say or do the wrong thing and the IRS pounces on it. Don't give the IRS a chance to "get you." Let your Tax Attorney handle everything.