I’m not a tax professional or expert in any way. This is just a personal experience story. If you try to use this as professional guidance, you’re an idiot…especially since we are out more than $6000 even though we only really owed less than $100! This is just to see that yet someone else got screwed by the system. DON’T USE ME FOR GUIDANCE. Thanks. 😉
Our 2013 IRS Tax Battle
For anybody who has been following along, here is a synopsis of the crap we have been dealing with since March 2015:
- Mid-March 2015 – Received an official letter from the IRS saying that we didn’t disclose all of our Paypal income for 2013…and owed them $67,000!!! We responded with all of our documentation showing what we received and paid out and waited for them to reply.
- Mid-April 2015 – Received another official letter repeating themselves from March. Made an appointment with a tax lawyer.
- April 22, 2015 – Tax lawyer suggests calling and working it out with a real person instead of worrying about their automated letter system.
- May 2015 – Was told to send in an updated Schedule C for our online business that clearly denotes what we brought in and paid out through Paypal.
- July 2015 – Received a letter stating that we indeed didn’t owe $69,000…we just owed $28,000!!! Crap.
- August – October 2015 – Repeated our efforts to “show all of our work” and repeatedly waited 4-6 weeks to get crappy letters back that ignored everything.
- November 2015 – Paid $350 to have a local legal office and CPA redo our 2013 taxes and sent the whole shebang in again along with a $105 check that the CPA worked out that we actually owed. (Side note: Also paid another $350 to send in an official amended return for 2014 just to avoid all of this next year, and we received a $140 back from the IRS for 2014 a couple of months later for the 2014 stuff.)
- February 2016 – Despite the package making it to the IRS (we tracked it there), and the IRS depositing the $105 check and sending that receipt, they could not locate the amended 2013 return and officially told us to file for tax court or accept their judgment.
- One Day Later in February 2016 – We handed over a $5000 retainer to a tax lawyer to file for tax court.
- March 2016 – Received an official letter from the IRS saying they found our amended return and agree that we only owed them the $105 plus $4.50 in interest. We mailed back the $4.50 check and were hoping everything was done. NOPE.
- Late March 2016 – Informed by our tax lawyer that we would have been done, but we filed for tax court by the deadline, so now we have to re-open the whole mess with an arbitrator. But, that shouldn’t take very long, just 2-3 months and we should get the same result. (Side note: paid $600 to have our 2015 taxes officially done again and will probably be using a CPA forever since the IRS sucks.)
- July 18, 2016 – Received an email from our tax lawyer saying that the final decision documents were attached and done. We were receiving a $5.74 refund for 2013. Supposedly, the matter is resolved.
Now, I still need to go by our tax lawyer’s office sometime in August to see if any of our retainer is left. But at last update, they were down to $350 of our $5000, so I’m betting that he conveniently needed $350 worth of time for the final stuff. I’d be flabbergasted if we get more than $100 back…heck, I’m betting we get a $250 bill for an hour extra or something. Lawyers…
We are out $5000 for a lawyer, $700 for two amended returns, and will be out $600-$700 a year from here on out because the IRS are inefficient bullies that need to be handled by someone other than me. All because they lose paperwork for months at a time. ARGH!!!
My Top 5 Tips for Dealing with the IRS
- Keep stellar documentation. This made our amended returns possible.
- When in doubt, have professionals work up a complete amended return and submit that in response to any issues with past returns. That could end it before it gets bad. Several hundred dollars feeling wasted is better than several thousand dollars feeling wasted.
- Send all letters and packages by Certified Mail with a Signature Confirmation Receipt and a way to track your package. They will still lose something you send them but at least you will have proof you sent it.
- If the first 6 months of back and forth aren’t working even though you sent an amended return, start asking around your network or trusted friends for a tax lawyer who isn’t just in it for the money. I wouldn’t suggest going with a tax lawyer based only on a mention by your CPA.
- Drink heavily during the months spent working on this unless you are a recovering alcoholic, then find sweets or something. You’ll need it.
If you know how to help anybody else who will be reading this and looking for pointers, please leave them below!!!