My IRS/State Tax Nightmare

[Scott P]

Our IRS/Colorado Department of Revenue nightmare:

I believe that every American should pay taxes. We have never cheated on our taxes and havealways paid.

In April, we got a tax bill from the State of Coloradosaying that we owed state taxes from 2008 (apparently it takes that long forthe IRS to report earnings). Afterseveral phone calls and review we found out that IRS reported to the state thatwe made an extra $14,000 more than our income.

After many phone calls, the IRS said that it was a clericalerror and that all we had to do was file Form 1040X with the same informationwe had before and it will fix the problem, but that it would take 8-12 weeks. We did so and assumed the problem was fixed.

[FONT=Calibri][SIZE=3][COLOR=#000000]Now, 12 weeks later we get an even bigger bill from theState of Colorado and a note that says it is going into collections. After several more phone calls, I find outthat instead of subtracting the $14,000 from our income, the IRS accidentallyADDED $14,000 to our income, making a total of $28,000 reported as income thatwe never made. The IRS apologized andpromises to fix it. This time they will

[BruteForce]

Well, considering the law (last I read) stipulates that Federal tax is voluntary (see the actual law below), I find it a bit funny that you can be jailed for ignoring/fouling-it-up/getting-it-wrong.

We've been audited 3 times in the past 15 years, and each time we've had a personal visit from the IRS declaring that they'd take possession of our household belongings (TV, cars, etc), put excessive liens on our home, for $1500 errors on our returns.

I think the system is totally screwed up!

Actual Law:

1. Contention: The filing of a tax return is voluntary.

Some taxpayers assert that they are not required to file federal tax returns because the filing of a tax return is voluntary. Proponents of this contention point to the fact that the IRS itself tells taxpayers in the Form 1040 instruction book that the tax system is voluntary. Additionally, these taxpayers frequently quote Flora v. United States, 362 U.S. 145, 176 (1960), for the proposition that "[o]ur system of taxation is based upon voluntary assessment and payment, not upon distraint."
The Law: The word “voluntary,” as used in Flora and in IRS publications, refers to our system of allowing taxpayers initially to determine the correct amount of tax and complete the appropriate returns, rather than have the government determine tax for them from the outset. The requirement to file an income tax return is not voluntary and is clearly set forth in sections 6011(a), 6012(a), et seq., and 6072(a) of the Internal Revenue Code. See also Treas. Reg.

[Byron]

And some people want bigger government. Just think of how much fun it will be when they're running health care...

[savanna3313]

I received a letter from the Utah State Tax Commission stating that I owed back taxes from 2008 - 2010. Funny part was (if there is a funny part) is that the amount they said I owed was more than the total amount of money that I earned during that time. It's been fun trying to get it all straightened out the past few weeks. :roll:

[Deathcricket]

Now what if they don't refund you the money they owe you on paying a bill you don't even owe? Dude I would not advise giving them more money when basically they have done the opposite of what they have said every time. Screw that!

[canyonphile]

What a nightmarish bunch of crap you are dealing with: repeated instances of government incompetence that has the potential to really wreck havoc with your life.

Here's what I would do if I were you:

1) Consult a tax attorney, immediately, to protect yourself. The IRS and local CO tax people don't give a damn about the fact their mistake and incompetence could have profound negative impacts on your life.

2) Write a letter to Senator Udall, explaining this situation: http://www.markudall.senate.gov/?p=serving_coloradans#menuitem-servmenu-sc_welcome|menuitem-servmenu_sub1-casework_welcome . This is something worthy of a congressional inquiry, and that's what part of what we elect these people to do. Someone needs to be held accountable for their "accounting mistake". Seriously, if you do nothing else, do this!

3) Consider supporting the Fair Tax Plan (http://www.fairtax.org/site/PageServer?pagename=HowFairTaxWorks), because if we had the Fair Tax in place, this wouldn't be an issue.

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On a somewhat related note, I got a similar letter from the CA tax people probably 4 years after I left the state in '97. They claimed that I owed something like $26K in back state taxes for '97 & '98, which was absolutely ludicrous, as I had only grossed about $30K on the salary I got as a 3rd year resident in '97, and wasn't even a resident of the state in '98! I didn't file a CA state tax return in '97, because I couldn't find the form, and then forgot about it.

So, I called, worried someone had stolen my SS# and reported income under it. Turns out, CA doesn't waste time with actual income reported: they projected what my income SHOULD have been, as a practicing podiatrist in the state of CA (probably one who was in practice for 20 years...not someone fresh out of residency :roll:), and told me I owed taxes on that...never mind that I hadn't filed IRS tax returns in CA for either of those years. Assholes.

It was just a reminder to what lengths the money-grubbing hands of the state will go to siphon off money. It's a liberal state, with lots of "have-nots" having lots of needs, so they have to suck everything they can from the working taxpayers of the state to fund all that. I was never so happy to move away from there. First place I've lived where there was a LOCAL income tax!

The funny (not) part of this story is that when I did send in the tax return for '97, they actually owed ME money. However, they somehow managed to create "fees" that were in the exact amount of my refund. Assholes.

Anyway, it pisses me off to read your post and see you, as a citizen, considered "guilty until you prove your innocence" to the state and IRS. That's a serious load of b/s :angryfire:!

[trackrunner]

I've been audited twice in the last 8 years. major pita but it was something I could handle all the paper work on my own. scott your sounds like you need a tax attorney because they are going to send you to collections and trash your credit. a tax attorney could get a judge to stop this.

[Byron]

Oh my...Sonja opening up a can of whoopass! Man, I'd hate to be the I.R.S auditor that shows up at your pad!

[Scott P]

Last night we got my letter from the IRS with the corrected numbers. From the IRS side, all corrections have been made.

Now we just hope that the Colorado Department of Revenue accepts the IRS trascript and takes care of this quickly.

[restrac2000]

Glad to hear it worked out, Scott. I had a 6 month long interaction with Colorado that was similar, but for much less money. Its amazing the level of stress such an interaction adds to one's life. I was worried that entire time that my soon to be wife would inherit the bungled nightmare.

Hope the refund comes quickly and they are out of your life.

[Scott P]

Glad to hear it worked at, Scott.

It's not over yet since I still have to wait for the State to review/approve the information to clear the tax bill.

Anyway, check out my ad from Bogley:

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