I love the IRS

I like the IRS. I’ve never really minded paying taxes, and though I have some complaints with the complexity of our tax code, I know that’s not the IRS’s fault. They do the best they can with the mess given to them each year by congress. I think the way the IRS does e-filing is stupid, but I suspect it’s one of those things that simply can’t be any better than it is, for a bunch of reasons out of control of the reasonable people at the IRS. (There are unreasonable people everywhere, even at the IRS.)

I don’t mind paying taxes, and in fact I’d be happy to pay more. I believe we are undertaxed, and though I can’t remember where I saw it, I have seen apolitical analyses by neutral economists that show that Americans are undertaxed, when you compare our expectations of government to the objective cost of delivering that government.

Due to some unnecessary complexity the Congress added to the tax code, I had a problem with my IRA contributions in 2002. I filed for an extension, and promptly forgot about it. Quite a while later, I got a reminder from the IRS that I hadn’t filed my taxes, and then I got things fixed up, almost. It appears I either didn’t send in the fixed tax return for some reason, or I did send it in but it got lost. I was a bit distracted, as it was between trips this year (I think between London and Guatemala, but I don’t really remember). Also, I was irritated that the tax preparer I had used (this being the first year I owned a house) had definitely not made things easier for me. Never going to use a tax preparer again, ever. Karl was right: human interaction is bad; e-file via TurboTax is the only way to go.

So, when I got home I had a tax bill for $37,000 from the IRS. I didn’t really panic too much because I know my rights, and I knew beyond a shadow of a doubt that they owed me, if anything. And though I was aware I had pushed things into the penalty zone, I figured the penalty would likely be less than what they owed me. I finally sat down and figured out where their number came from today by comparing their return to the one the incompetent tax preparer from hell begrudglingly gave me once I threatened to sue her. The problem was that the IRS was missing the basis price on a stock sale I made to help buy the house. Instead of showing my profit as $2000, they were showing it as $70000. Right, like I went out and picked the stock shares off the money tree in my front yard.

I called the IRS to clarify how to get this fixed, and to make sure I understood the state of all my other returns. The lady who picked up the phone there was really nice, and explained things very well. She did a really good job of telling me what deadlines were coming up, and what to expect to happen. And she agreed with me that though I have really screwed this up so far, I can still get our of trouble by just doing the paperwork right. Which I did today, sending it with certified mail and return receipt, just to be sure.

The mail from the IRS was politely worded. It was evidentally written my humans, not lawyers or compters. It was easy to understand what they were threatening to do, and how to make it stop. They also included several useful pamphlets I could have read, and an 800 number to call an agent and talk one on one. I was on hold for less than 5 minutes, and the lady was courteous. The hold music sucked, but you can’t really have everything, right?

I just wanted to post this so that if I ever get audited (or if this self-imposed fiasco triggers an audit) I’ll remember how nice the collections/late filing part of the IRS is. Hopefully the audit people will be as nice. (My grandfather was audited one time, and the auditor found some tax savings for him. She wanted to re-file to get him his rebate, but he said, no, let’s just get this over with, keep the extra money. Smart man.)

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