Dealing with the IRS

Someone I know only from a message board is having trouble with the IRS. S/he didn’t get a tax refund, or a Stimulus Rebate. When s/he finally called to ask why, the IRS agent claimed s/he hadn’t filed income taxes this year. Or any other year this millennium. My message board friend freaked out. Because I only know this person from a message board, I’m not sure what steps s/he has taken since then to clear up this mess. But I do know that anybody who has this kind of phone chat with the IRS needs to take action, and fast, because the IRS won’t. In fact, with the seasonal crush of returns to process, the IRS is only now responding to queries sent to them months ago.

It’s common to freak out when the IRS says you haven’t paid your taxes. For years, the IRS cultivated a reaction of fear from the American public, clearly believing that fear alone would ensure that citizens would pay their taxes. Arbitrary audits, punitive audits, ridiculous red tape, and long-delayed or nonexistent responses to taxpayers’ letters were all in the IRS repertoire. And it worked very well, except for one thing. The IRS was wasting taxpayer money in the campaign to terrify ordinary citizens who didn’t owe them anything much in the first place. A few dollars here or there. And the big tax cheaters were still getting away with it. A few years ago, the IRS was forced to make significant changes, including reducing the number of audits. But ordinary Americans do not believe that anything has changed. Ordinary Americans talk to the IRS with fear in their hearts, and open any letter from the IRS with dread.

In my volunteer work as a tax preparer, I see the result of that fear. Many people to whom the IRS owes a refund don’t file, for one reason or another including the difficulty of filling out a tax form. Then they become increasingly terrified, expecting to be horribly punished for not filing. And they could be, because unpaid taxes accrue interest and penalties until they are paid and despite their stated policy, the IRS often does not inform taxpayers when such fees are still accruing. The first time you might know about them is when you don’t get an expected refund because the IRS has diverted it to pay back taxes, interest, and penalties. Not the kind of surprise you want.

Taxpayers only have three years in which to claim a refund, and they often forfeit it. People just barely making enough income to scrape by are afraid that filing will make them owe money, money they can’t pay. The labyrinthine rules for filing a tax return don’t help the situation. Even tax experts find these constantly-changing rules difficult to follow. Plenty of people hate the idea of taxes so much and live such chaotic lives that they try to ignore the IRS completely. But sooner or later, the IRS catches up with them. Some people have said that the Stimulus Rebate was actually the government’s sneaky way of finding people who otherwise weren’t bothering to file or pay taxes. It definitely turned up some elderly people who owed taxes even though they thought they didn’t. Not a victory worth trumpeting about. Especially if the IRS ends up taking back Social Security or government retirement benefits that the government itself paid to people. What’s the point?

Citizens have a duty to pay their taxes and to file their income taxes each year, but the IRS also has a duty to properly handle these filings. The advent of computers has improved the IRS’s efficiency. It is now possible to phone and find out important pieces of information directly, because the IRS agent can call up a computer file. It might not be a fully accurate file, but it’s a beginning. The problem is that the IRS still sends mystifying form letters to people, and then a phone call does not reveal why those letters were generated, or who did it. Take the letter to an elderly lady of 93 that stated the IRS had reason to believe that she had recently served in a combat zone. Oh, really?

What to do for my Internet message board friend? I had a lot of suggestions. If you are having trouble with any aspect of your income taxes, these might help you, too:

1. Call the IRS about your situation and make sure they have your Social Security number correct and that nobody else is using it. Ask them for whatever facts they have, like your address of record, names of employers, and more. Take notes. Call back if you don’t understand any part of it or if you’ve forgotten any part of it. You don’t have to talk to the same agent.
2. Call the IRS again, once you understand what the problem is, and ask them what steps they want you to take to fix it or that you can take to fix it. There may be some forms you’ll have to fill out. You can get those forms at www.irs.gov, but you need to know their numbers and names. You also can do a lot via the IRS automated phone system, including requesting copies of your prior returns and W-2s. If you got burned out or flooded out or all your papers were lost in a move, you can reconstruct your records by asking the IRS for theirs. (You can also ask your state tax departments.)
3. Write the IRS, return receipt requested, stating your position and asking for whatever action you want it to take. If you are writing at the height of tax filing season, don’t expect even a form reply for six weeks. And don’t expect a real reply for another six weeks or more.
4. If the matter is urgent, call your Federal congressional representative, outline your problem, and ask for help.
5. If you e-filed, go back to whatever agency did the e-file or sold you the software, and ask for help. But don’t pay for it.
6. If you need verification that you earned income in a certain year and the IRS doesn’t have it, check with the Social Security Administration. They keep records back many years.
7. If the deck seems stacked against you and you can’t seem to make any headway, call a local radio, newspaper, or television action line and ask for help.
8. If the situation warrants it, hire an attorney experienced in dealing with the IRS. Don’t get that name from a television ad, but from your local bar association.
9. Breathe.

Dealing with the IRS requires patience. It can take half an hour on hold just to talk to a live person on the phone. It can take three months to get an answer to a letter. And the IRS still manages somehow not to receive some letters that you send. That has happened to me. But persistence does pay off with the IRS. Turn your energy to improving your situation. Make the informational phone calls, and take notes. Seek assistance from any and all persons and agencies that can help you. The IRS has a person called the Taxpayer Advocate, but you’ll have go several rounds with lower level agents before you are allowed to take your case to that person. Getting that far can take many months or even years. Even so, if you make the effort, you can clear up any problem with the IRS. And you’ll sleep the better for having done so.