The Federal Government: An Object Lesson

Dear Sir or Madam,

I am writing about the above-referenced account for tax period 12-31-2008, form 1040.

We figured our 2008 taxes using Turbo Tax. According to Turbo Tax, our total tax liability for 2008 was $xxxxx. Between withholdings and a check we mailed with our return, we met our tax obligation by the April 15, 2008 deadline.

In mid-June, 2009, we received a check from the IRS in the amount of $4795.53. No explanation for this refund was included with the check. We made some efforts to contact the IRS about this check, however, the phone wait times were excessively long and we had a hard time reaching an actual person. So, we actually concluded that the IRS had detected an error in our favor and had been good enough to send a refund. (Yea! It’s great to be an American!)

At the end of August, 2009 we received two cryptic form letters from the IRS, stating we owe a total of $4852.71 on our 2008 taxes. Subtracting the penalty and interest included in this demand for payment, the amount due turns out to be the exact amount of the refund we received in June.

In trying to understand this situation, we spent two full days on hold, being transferred among various IRS departments, talking to various agents, faxing our tax information to the IRS (didn’t we already send it once, back in April?), calling back for status updates, etc. The many different agents we spoke to all claimed the IRS had sent two previous letters that included explanations about this request for repayment. (As God-fearing, hard-working, tax-paying Americans, I assure you, we NEVER received ANY previous communication from this IRS about this matter.)

Over the phone, two different agents indicated we "probably" would not owe the requested amount. Finally, however, we received a follow-up letter from a Ms. xxxxxxxxxx last week. She indicated we do owe $4795.53 (before penalty and interest) because it was an IRS error that resulted in the June payment by the IRS to us. With penalty and interest, the amount the IRS is requesting comes to $4852.71.

My first comment is this: My wife and I both have MBA’s from top schools. We work hard, we keep good records and we are honest people. It’s hard enough for us to figure our taxes (Read: it takes many, many hours and considerable effort to complete our return.).

That said, it’s incomprehensible to us that the IRS code is so complicated and tortuous that the IRS can’t even seem to figure it out. Why was a refund sent to us in June? Why was it so hard to make contact with a person who could provide an explanation? Why didn’t we receive an explanation for the refund, or an explanation for the demand of payment? Why did it take many individuals, several IRS departments, a fax, high anxiety and hours on the phone to get to the bottom of this IRS error? Given all of the varying information we have received, how can we truly know that we truly owe this money? There is something very wrong with this picture!

My second comment is this: Given the fact that this comedy of errors (which would, indeed, be funny if it wasn’t so sad) is due entirely to IRS error, poor communication and inability to administer its own tax code….doesn’t it seem over the top for the IRS to ask us to pay a penalty of $23.95 and interest of $33.23?

I am enclosing a check in the amount of $4795.53. This is the amount of the payment that the IRS sent to us in mid-June, 2009. This payment does not include the requested penalty and interest charges. It doesn’t seem reasonable to expect us to pay these charges.

We would appreciate a personal response to this matter. Unless your agency specifically explains that the penalty and interest are required, and how it is justifiable that these funds are required, we will assume the matter regarding the penalty and interest is resolved, and we are not expected to make payment.

Very truly yours,

David B. and Lora M. Howlett


cc: IRS Commissioner Douglas Shulman
Congresswoman Betsy Markey
Senator Mark Udall
Senator Bill Bennett
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