Roger shares a recent story about his difficulties in sorting out a small error with the IRS over 1099 reporting. I think the story is instructive of greater difficulties to come, when the IRS is gathering “all account data” from Foreign Financial Insitutions (FFIs) plus foreign governments. Remember, this is not just “income related data” like the 1099.
We now see FATCA has expanded to 3 various models, FATCA Direct, FATCA Model I for 5 EU countries, and FATCA Model II for Switzerland and Japan. More models to come? So, reflect on Roger’s story below, and ask yourself, “So what could possibly go wrong?” :) Ah, she’ll be ‘right, Mate! Trust us! LOL
I have spent the last several days on the phone trying to straighten out an IRS error. They failed to give me credit for $159 in taxes withheld on dividends and interest. Last May 14th, I sent in documentation with of copies of the form 1099s which show both the income from these dividends and the interest, but they ignored the tax withheld at the source. So I got another bill for $165 including interest and penalties. It included a phone number, so I called it.
(Just Me Note: This is the beginnings of the automatic tax system that Shulman lusts after. Under this program, the IRS will just validate against 3rd party data and calculate your taxes for you. They send you a bill if you are wrong.)
The automated answering gave me 8 choices. The choice which seemed to describe my problem was #5, so that is what I punched in. Then I was asked to enter my pin number. Since I have no IRS pin number that I am aware of, I hung up and dialed in again to re-listen to the choices. Maybe I had punched in the wrong number. Choice 5 was correct. So, I punched it in again and got the same “enter your pin number” recording. There was no alternative selection to be able to access a live person, so I took a chance and punched in zero.
This brought a strong rebuke “YOU HAVE PRESSED A WRONG SELECTION!” It then repeated the choices. Nothing else even came close to what I wanted to talk to them about.
So I called the Tax Advocate toll-free number. I waited in line for 25 minutes, but was connected to a live person who listened attentively and asked a number of questions. She then asked me if I would like her to connect me with a live person at the IRS who could address my concerns? I quickly replied “yes!” She dialed up another number where I got a recording that all customer service persons were busy attending other customers. It urged me to wait on the line, because calls would be answered in the order received. The estimated wait time from the recording was “in excess of ten minutes.” So I just waited, and waited and after 26 minutes I was connected with a Ms. Agent A, who gave me her IRS ID number.
(Just Me note: They spit those Agent ID numbers out very quickly right at the beginning of the call, before waiting to acknowledge greetings or that you are ready to copy. You need to have your pencil ready at hand to write it down fast, or you will irritate them by asking to have it repeated. I have learned this lesson from lots of calls from overseas! On my dime, btw.)
She checked to make sure I was really who I said I was, (lots of additional security questions) and then I explained my problem to her. She went into my tax return and after considerable digging told me that this withholding had been reported on computer page one in my record, but for some reason it had not been carried forward to the computer page two from which the automatic calculations of my tax were made. She kept checking. I was on the line about 30 minutes with her. Various times she said she would have to put me on hold again to check things, but she always came back with new information. She confirmed that there was indeed an IRS error. I did not owe anything additional!
Relief, but not done yet!
“Unfortunately”, she said, she could not correct it! She would be glad to connect me to the IRS department which could make the correction. She told me she had added a detailed explanation of what she had found in the record, so the “Reconsideration Department” would see it. Meanwhile, she said, she had put a hold on the billing. I should not receive any additional bills or additional penalties.
She then transferred me to the “Reconsideration Department”, where my call was answered on the first ring by Mr. Agent B, who also supplied his ID number. (Remember, be ready. It is spit out quickly!) After going through the ritual of questions and answers to confirm who I said I was, (guess he did not trust the previous agent) he opened the record. He saw and studied what Ms. Agent A had added.
He said that “unfortunately” this open subject had been closed by the IRS. In order to have it reopened, I would have to address a letter and send it to the IRS “Reconsideration Department”, complete with all of the evidence to support my request. (I guess the notes from previous agent in the computer would not be enough!) He said I should also include a copy of everything I had previously sent in on May 14th that led to the claim having been closed. (Who knows where those records were now!)
I did not ask him for a mailing address, but instead asked him if I could send it by fax. He said I could. That would be good, because it would be acted upon more rapidly. In response to my question as to whether I should send it to his attention or the attention of some other person, he said no. Just fax it to the “Reconsideration Department”.
By this time I had spent about 3 hours continuously on the phone. Fortunately for me, this was done with toll-free numbers, thank heavens! I was not running up a big long distance bill. I hate to think what it would have cost if I was calling from Brazil, Mozambique or some other remote place on the face of the earth, and trying to sort out a FATCA problem with my account data and not just minor interest and dividend income error!
Today I finalized the letter requesting that the case be reopened. I faxed the 19 pages in total to the Fax number of the “Reconsideration Department”. It was transmitted and confirmed as ‘Fax received’. I recorded the fax number in my fax directory in case I might need it in the future.
Before sending it I had my daughter in Washington, who is an international corporate tax specialist with one of the BIG Accounting firms, review it. She made some minor corrections. She helps me prepare my tax return every year. She is the person who had led me through this. I am blessed to have such a daughter. She works in their Washington office where there are numerous employees who in prior administrations have had important jobs in the IRS and Treasury Department.
So that is what I have been doing for the past two days. It would have been easier and less stressful to just send them a check for the $164, but it was a matter of principle for me. My daughter also said I should not pay it, but call the IRS and insist that they correct their error. It was very clear they were wrong. I should not allow them to require me to pay anything that was not due. She was very firm in stating “Dad, don’t pay them! You do not owe them anything. You must absolutely insist that they correct their error.”
Both Ms. Agent A and Mr Agent B sounded like mature persons, and I was encouraged by being able to talk to someone who obviously was very experienced. They seemed to know what they were doing. But as they say, “it is not over until the fat lady sings.”
I will take no further action until I get a clean bill of health from the IRS. If I get another bill or anything other than notice that no additional funds are due, I will be back on the phone with The Taxpayer Advocate. I sure hope that will not be necessary
How long it will take to get this resolved? I have no idea. I hope it is during my lifetime! Meanwhile I am taking care of my wife as usual.
Just Me note:
End of story? Time will tell.
The lesson I take as it relates to the coming FATCA account data reporting, or automatic data exchanges, is this. We live in a human world and a data error prone environment. We also have lots of recent examples of data theft on supposedly secure banking computer systems. You have to wonder, with the GATCA which is being created, what could possibly go wrong? What will be the resolution mechanisms for long distance problem solving? Valid concerns I think. I hope they come up with systems that are easier than trying to get your name off the No Fly List. I hope GATCA doesn’t give them another data base to use as a means of adding your name to that dark list! But, that is another post for another time.:)