IRS Foul-up Cost Taxpayers | USTaxAid

Diane Kennedy's Blog

IRS Foul-up Cost Taxpayers

Written by Diane Kennedy, CPA on October 11, 2011


Blame it on new hires with inadequate training or blame it on untested computer programs that went live too soon. Whatever the reason, the IRS is making some big mistakes these days.

Here are just a few of the ones that we’ve dealt with at US TaxAid Services this week:

    • One client had an IRS demand letter delivered to her home. It stated that they were going to begin to seize assets. The IRS had posted payroll taxes she paid to the wrong quarter. She followed up the phone conversation in writing. The IRS says the phone call never happened and they never received the letter. PROBLEM: She did not send the letter via return receipt requested. RESOLUTION: We’re talking to the IRS through the tax preparer hotline to stop the problem. In the future, we’ll make sure our clients always have plenty of notice to send anything to the IRS via return receipt requested.

    • Another client had one of his real estate property losses disallowed, for no apparent reason. The other losses were allowed. He’s clearly a real estate professional with material participation. That wasn’t even challenged. RESOLUTION: We’ll respond to the IRS via letter and provide more information. Hopefully they will realize it’s just a computer glitch on their end and get it fixed.

    • Another client got a notice stating that he paid his tax in late October and assessed penalties and interest. He paid September 20th and has proof of payment. RESOLUTION: We’ll send the proof of payment to the IRS.

    • And one more! Another client received a strange notice that some of his children were reported with wrong social security numbers. That was back in June. He provided copies of the cards and all was well…. That is until he got a demand notice. The original notice had tax due, penalties and interest. But it was wrong, so the IRS backed out the tax due and part of the interest. However, they didn’t back out the penalties and a few dollars of the interest and so are now demanding that. RESOLUTION: We’ll send another letter to the IRS pointing out that they should have reversed all of the tax, penalty and interest.

The problem is that taxpayers pay the price in headaches and CPA bills when the IRS makes mistakes like this. If the IRS asks for information, you’re much better sending them a letter than calling them. If you do call, follow up in writing. And when you write make sure you send your correspondence via U.S Mail Certified, return receipt requested. The IRS does not allow Priority mail as proof of mailing.

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