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Beware the Ides of April April 18, 2009

Posted by Merrilee in Annoyance.

(This posting is likely to be long and more than a little ranty, so consider yourself warned!)

I think we have finally wrapped up our ordeal with the IRS over our 2006 taxes. Ordeal is probably an overly dramatic way to characterize our experience, but it has caused quite a bit of stress (and some sleepless nights for me) and took way too much time to resolve. And, until I see the check, it’s not over, so this may be a signpost along the way with more to come!

It all started (maybe) when we didn’t file our 2006 taxes on time. 2006 was an exciting year for us. My employer, RLG, merged with another company and on July 1, I had a new employer, OCLC. So, two W-2s. Not so complicated. Then a baby at the end of the year, so state disability payments. And a disorganized household. In April of 2007, I was back at work fulltime and trying to figure out how to run a household and manage a small person in the evenings. Since Keith and I have been living together, I have been the person who prepares and files taxes, but was too snowed under to worry about it that year. Keith pointed out that we would most likely get  a refund, so why sweat it? If you don’t owe, you don’t have to file on time (at least there’s no penalty). So I let it go, and kind of worried about it the whole year.

In April 2008, I got my (our) act together and filed for 2006 and 2007. It was a pain — doing two returns at once is twice as much work, and I was more distant from 2006 details. Before a child! So long ago! I couldn’t use TurboTax online, but instead had to get the software for 2006. I couldn’t E-file 2006 because it was late (and it turned out I couldn’t E-file for 2007 because I hadn’t filed in 2006). We owed for 2007, so it was a good thing I was filing on time. But at least we had a small refund due for 2006, and also a stimulus check coming (I thought) so it would all balance out. I waited for our 2006 refund and 2007 stimulus and waited, and waited…

In July 2008 we got a notice from the IRS. We owed $9,000! After spending some time on the phone with an IRS rep, we figured out the discrepancy. They were missing my RLG W-2 and a piece of documentation for Keith’s daughter Anne. We sent both in via registered mail with a detailed explanation. Another letter came, this time more threatening. We called the IRS. They had received our documentation and the person wasn’t sure why it hadn’t been straightened out but assured us it was in the system. They put a hold on the letters. 90 days later, another letter. We now owed $8,000. Another phone call revealed that they had credited us for Anne’s deduction, but still hadn’t acknowledged my W-2. Another copy of the W-2 (actually, all the W-2s) went off to Fresno via registered mail. More threatening notes to us. More phone calls to them. We discovered that the best time to reach the IRS was around 9 pm Pacific — we were usually speaking to someone based on the east coast. The mystery continued.

Keith discovered the IRS field office in Walnut Creek and spend hours reviewing documentation with a field agent. The agent could see the paperwork in the computer — all of our letters and paperwork had been received and scanned. No one could say why the W-2 was a problem, but at this point the agent tried to match the employer ID with the name of the employer on the W-2. It didn’t match. Keith offered some variations on the company name — RLG or Research Libraries Group, Inc. didn’t work either, nor did OCLC or the Online Computer Library Center. The agent would never say what the employer ID was, but he said it had nothing to do with libraries. Since the company had folded up it’s tent, the agent theorized I would need to bring in some other form of documentation for my withholdings. And this is the interesting thing — since the IRS had never received my W-2, they didn’t have a record of my income or withholdings. They were happy to accept my undocumented income, but never would accept that I had had taxes withheld on that income. We should have just filed an amended return without the W-2, but that seemed like a bad idea.

Things heated up last month. I was working from home and received a phone call from the IRS. We were moving into collections, which is where they can go after your wages, property, etc. The agent was really aggressive and said some kind of inappropriate things like “your copy of your W-2 is just a piece of paper to us.” She encouraged me to find other documentation, like copies of paystubs. Well, in 2007, I had moved to a new office and in downsizing had shredded my paystubs — I had my W-2s, which I considered a more complete form of documentation. I figured that the old company records were inaccessible. My bank records showed deposits that combined income and reimbursements. I was starting to feel like I was in a Kafka story.

I asked my sainted boss Jim to help, and he moved into gear to see if he could get documentation from the company that produced payroll records for RLG. They had moved to a new system, so it would take them awhile to get at older records. I finally thought to contact OCLC (at Jim’s suggestion) and found that they had my complete payroll records for 2006 — something I had thought was unlikely. Someone in our payroll department helpfully supplied a statement of income and withholdings for the RLG portion of 2006. I had bank records for the year, plus all the other documentation. We took our collection notice and all our our mounds of paper back to the IRS field office. On the way there we discussed our options. Requesting a hearing for our case, definitely — this was offered to us as part of the collections process. Would we eventually need a lawyer? This seemed like a very long and very dark tunnel.

On April 17th the IRS field office was almost deserted. We waited no more than 15 minutes before being called by field agent John Johnson. He looked at our paperwork and said, “I can help you.” We had heard this before, so I was not that encouraged. He stared at his computer, looked at my W-2 (and never asked for the bank records and additional documentation we hauled along). He used his desktop calculator. He got out his official IRS stamp, stamped “received” on our paperwork, and handed it back. “You should get a check in about 3 weeks,” he said, “with interest. I’m sorry this has taken so long.” We thanked him profusely and he said, “It’s nice to do something good for people.”

He also looked at our 2007 records. Mysteriously, the IRS had never received our paperwork, even though they had received and cashed our check. Not willing to let a good thing pass us by, we drove home, got our copies of 2007 1040 and W-2s, signed them, and returned them to John Johnson’s desk the same afternoon. He got to use his IRS stamp for us again.

I am really sorry that I didn’t filed on time in the first place. If I had, I would had still had access to paystubs, and an on time return might have received less scrutiny. I’ll believe it when I see the check, but it seems like we might be coming out of the woods on this one…



1. Jerome McDonough - April 20, 2009

Oh man. 100% pure suckage. Sorry for your pain and suffering.

If working for the IT department of a medical insurance company taught me anything, it’s that *any* variation from an institution’s expectations with regards to when/where/how/what paperwork comes through the door is an invitation to Kafka-land. Companies simply don’t handle exceptions well, and the first person handling the exception when it comes through the door is typically a low-pay/low-status employee with little training who’s as likely to make things worse than not by trying to process the exception without bugging their supervisor and finding out what really ought to be done.

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