Fun With the IRS - A Year Later

Last year (November of 2008) I wrote my first piece describing the humorous events which transpired when my wife and I made a mistake on our taxes (see Fun With the IRS).

In the end, I left the experience feeling the government owed me $2.00. Of course, I wasn't going to make a fuss over two bucks. It's hardly worth the time and effort on my part, nor worth the waste of over $2.00 of someone's time to get the money. Although my wife and I would joke around about "Where's my two bucks?" from time to time, we pretty much forgot about it. Until yesterday, that is.

Yesterday we received a check in the mail from the U.S. Government for $2.10. No letter of explanation was enclosed, just a check. Maybe they read my blog post from last year and decided to make right their error - along with interest?

Who knows? I just had to laugh, though. And, we'll need to remember to claim that ten cents as interest on this year's income tax - you know they'll be looking for it.

How Did They Get Away With Not Paying Their Fair Share?

This past November I described in this space my experience with the IRS. You can read of the whole affair here. The funniest part is, I think they still owe me $2.00.

So, the IRS came after me for just over $1000. It was an honest mistake on my part. But, it was no big deal and I paid it willingly.

So this brings to mind the question: How did 4 people appointed by President Obama to head some government department or another get away with not paying tens of thousands of dollars in back taxes? How is it that they all-of-the-sudden remembered they forgot to pay all this money to the IRS? How is it that the IRS was able to find the one thousand I owed them, but they couldn't find the tens of thousands these other people owed? They came after me for two dollars. Why didn't they go after these other folks for tens of thousands of dollars?

This all smacks of hypocrisy and favoritism to me. I wonder how many "regular folks" like me have been harassed by the IRS. I also wonder how many "politicos" have had their tax irregularities ignored.

If we want to talk about folks paying their fair share - lets start right now with elected and appointed government officials. Or is it that some are "more equal than others."

Fun with the IRS

We recently had some dealings with the IRS which is a great example of bureaucratic silliness and rather humorous. It all started about the time everyone started getting those tax "rebate" checks ...

We got our rebate check in the mail and happily put it into the bank thinking we might use it for a vacation or to purchase a freezer. Apparently, we weren't meant to keep it, for a day or two later we got a notice from the IRS that we owed them $200 more than the amount of the "rebate." I thought something was fishy, "Maybe this is the government's way of looking like they're giving out lots of money, but they really aren't because they take it right back." Although that would be an hilarious absurdity this wasn't the case.

We really did owe the government the money they asked for. A few years ago I settled an outstanding credit card debt with the bank which issued the card. I had heard that one needs to claim a debt forgiveness as income at tax time. Thinking the person at the bank with whom I was dealing would know a thing or two about such matters, I asked. He told me that if the forgiveness was considered income, I would get a W4 (or a W2 something) from the bank. Otherwise, he informed me, it wasn't.

I try to be an upright guy who strives to do the right thing, and paying taxes honestly is a Biblical command (Matthew 17:27, Matthew 22:15, Romans 13:6-7). Although I had no reason to distrust the person at the bank, I thought it best to ask around for another opinion. I consulted with a CPA and a couple other people I know who have some experience with the tax code, and they echoed the answer the person at the bank gave me. Satisfied, I waited to see what would happen come January.

When it was time to do taxes, I hadn't gotten anything from the bank other than a letter declaring that the debts were no longer owed. There was no IRS form to be seen, so we happily did our taxes without counting the "forgiveness" amount as income. We got back a pretty healthy refund that year, too.

When we got the letter from the IRS earlier this year, enclosed were copies of the IRS form the bank sent to the IRS along with a copy of the recalculated return for that year. Ta-daa, we owe them money. I was a little miffed about the whole thing because I felt the bank did me a disservice. But, the bottom line was that we owed the money based on the recalculated amount.

My wife and I described this situation with an accountant about this whole event, thinking it rather humorous. She offered to recalculate our taxes for that year and see if we could knock the amount we owed down a little; at least enough to get it where we just had to pay the "rebate" amount. She was successful, so we sent in an amended tax return along with a check for the amount we felt we owed.

A few weeks later, we received a letter from the IRS letting us know they were going over our paperwork again and that they would contact us again if need be. I figured the matter was pretty much settled and consoled myself with the though that the amount extra we sent in would pay for body armor for a soldier in Iraq - a worthwhile expense.

But, this wasn't the end of the matter. 4 months later we received another letter from the IRS. They accepted our amended tax return, but we owed some more money based on the interest accrued from the time we sent in our amended tax return until they accepted it. The total we still owed was $2.00. Now, I thought, we're getting into the absurd.

Thinking it over, I figured based on a person's salary to go over the paperwork, computer cycles, printing and postage, that letter cost far more than $2.00 to send. What a waste! I was pretty ticked off about it - not so much that the IRS wanted more money but that the bureaucracy was now wasting my money sending out a request for 2 bucks.

In the end, I sent a check for $2.00 to the IRS. Rather than quibble over 2 bucks and sending this transaction further into losing territory I thought it best just to give them what they wanted and get it over with. Ah, but that wasn't to be.

The day after I dutifully sent in my $2.00, we got not one, not two, but three envelopes from the IRS. The first envelope contained a check for $5.72. The other two envelopes, one addressed to me and the other to my wife, contained identical copies of documents which showed how the IRS actually owed us money, rather than we owing them $2.00. By this time the whole affair is so absurd I can't stand it. Not only did they lose money sending the bill for $2.00, now they've compounded the loss by $5.72 and however much it cost to process that check - and the waste of sending two identical letters to us.

As I described this series of events to the accountant who figured our amended return for us, she cautioned us to make sure if there is any interest which was paid to us that we make sure to count it as income next year or we'll be sure to be audited again. We better check those letters carefully. Though I'm not concerned about an audit, I certainly don't want to cause the national debt to increase because I forgot to claim a few cents as interest income.

Tax Rebate Humbug

If the federal government can afford to give me a tax rebate, then it can afford not to take so much of my money in the first place.

Tax Dodgers in the Great White North

Canadians Discarding Old Clothes in Mall Parking Lots on U.S. Shopping Trips

This is nothing new; it's been going on for years.

My mom worked at the catalog desk for a department store in suburban Detroit before her retirement a few years ago. She often said it was pretty routine for Canadian customers to order from the catalog (over the phone in those days) and have their purchases delivered to stores on the US side of the border.

They would drive across the border, out of their way, to come in to the store, pick and up their stuff. She said there were countless times she saw people put on the new clothes over their old or pack the new clothes into suitcases for the trip back across the border. This was, no doubt, an effort to avoid paying the 15% or so sales and value-added taxes they would have had to pay if they made their purchases at home in Ontario.

For a time, it wasn't unusual to see more Ontario plates than Michigan plates on cars in the parking lot.

It's a sad tale for those folks in Ontario who are forced to pay such high taxes that they must resort to going way out of their way to buy things without going broke doing it. For those in the US who want government-run health care, who want the "nanny state," take heed. That type of socialism comes at a high cost - not only out of our freedom but also out of our wallets.