Tax collectors can be so painful. You do your best to get your taxes done right, yet the IRS cleverly robs you of your money because you are never quite sure exactly how much to pay!
Only years later, does the IRS send you a deficiency letter stating you actually owed X more ad now have a fine. We've got a maddening tax system where the tax code is over 70,000 pages long.
Battling The Tax Collectors
Every IRS person I've spoken to has curiously been kind. Yet, despite their kindness, I still feel my heart drop every time I get a letter from them.
I'm not sure whether it's because the movies always portrays the IRS agent as a bad man in a rain jacket, looking to shake down individuals for all they are worth. Or, perhaps it's the fact it's little ‘ol you vs. the omnipotent government that presents a no way out scenario.
Whatever the case may be, dealing with the IRS sucks.
Those who work at the IRS or State Tax Collectors agencies are actually on your side. Sure, some have mandates from higher ups to milk you dry. However, most are willing to help you resolve your issues because they know how complicated taxes are in America. Perhaps this is one of the reasons why so many citizens have decided to just call it quits and not work!
One acquaintance I know worked for the IRS so of course I peppered him with questions to extract all the juicy details. I am against anybody paying more taxes than they need to. It's just not right for the government to tax more than a typical person saves a year. If the government could show they can efficiently spend our money, then fine. But, they can't even come up with a darn budget so forget it!
For all you conspiracy theorists out there, I think you'll really enjoy this post.
An Insider's View Of The IRS
Here is some straight up feedback from an acquaintance I met who spent years at the Ogden, Utah IRS center.
* “They are always watching me. My phone is always being recorded.”
* “I feel so sorry for everybody who calls in. They have no clue what they are doing on their tax forms, and frankly, I have trouble helping them too because it's so damn complicated!”
* “The government is very smart for adding an extra 70,000 pages to the IRS Tax Code since its founding in 1913. How else can the government payback all the accounting and financial planning lobbyists who took them out for steak dinners all these years? Tax help is BIG business!”
* “We really are on the people's side. Nobody is going to jail for screwing up on their taxes because we understand. 99% of the cases end in simple fines. Only the most outrageous tax evaders get locked up, so don't worry!”
* “Shit, they don't pay me enough to do this!”
Pretty interesting what's going on behind the scenes right?
How Tax Collectors Make More Money Off You Than They Should
Now that you've got some background on how one IRS agent feels, let me share with you a short story of my recent dealings with the New York state tax authorities.
Earlier this year, I got a letter in the mail from the New York State Department of Taxation and Finance. I was perplexed since I live in San Francisco, so I decided to give them a call just to make sure it wasn't some scam. Money scams are everywhere, so one can never be too careful.
I dialed 518-485-9094 and got through to a friendly gentleman on the first try. It felt like I won the lottery because if you call up any government agency in California, you'll be lucky to get through after the 10th try! Anyway, I asked him to explain the letter saying I earned taxable income in New York State in 2007 and that I owe state taxes. That's right, they are asking me for money from five years ago!
He basically said my company withheld NY State income in 2007, which gave notification to NY State that I therefore must have earned income in New York. This is obviously not the case because I spent a total of four days in New York State that year, only three of which was spent in the office. I don't know what the exact rule is, but I definitely know that if you work less than 10 days in New York, you don't have to pay New York State taxes.
I called up my company to get clarification for my 2007 W2 and they sent back a 2007W2C (Correction). From there, I sent my documentation and reasoning as to why I don't owe NY State taxes as a California resident. I called up the NY State Dept of Taxation again to ask when I should be expecting a REFUND! That's right. If I erroneously paid NY State income taxes, I should therefore get my money back right? Right?! Wrong!
IRS Statute Of Limitations, Suckers!
The friendly NY State Dept of Taxation employee mentioned that one must file an amended return or appeal within three years in order to get any money back from the State or Federal government! I thought this was absolute horse crap since they sent me a letter FIVE YEARS later asking for an explanation on my taxes! How am I supposed to file an appeal within three years if I don't know I am being robbed until five years later?
Incredulous, I looked up the IRS statue of limitations on how far back they can go to audit your tax returns and it does say three years. See below.
Generally, the IRS can include returns filed within the last three years in an audit. Additional years can be added if a substantial error is identified. Generally, if a substantial error is identified, the IRS will not go back more than the last six years.
The IRS tries to audit tax returns as soon as possible after they are filed. Accordingly most audits will be of returns filed within the last two years.
If an audit is for an older year, you may be requested to extend the statute of limitations for assessment of your tax return. The statute of limitations limits the time allowed to assess additional tax. The statute of limitations is generally three years after a return is due or was filed, whichever is later. There is also a statute of limitations for making refunds.
If the audit is not resolved and the statute of limitations date is nearing, you may be asked to extend the statute of limitations date. This will allow you additional time to provide further documentation to support your position, request an appeal if you do not agree with the audit results, or to claim a tax refund or credit. It also allows the IRS time to complete the audit and provides time to process the audit results.
You do not have to agree to extend the statute of limitations date. However, if you do not agree, the examiner will be forced to make a determination based upon the information they currently have. Therefore, the examiner may not be able to consider additional adjustments, such as expenses, that could lower the amount of tax due.
They say three years as a statute of limitation, but then they put in all this vague language to allow them to send audit notices way later! I could tell the NY State Tax employee was on my side, and I almost got him to admit to the hypocrisy of the rule, but he caught his tongue when he remembered that his line was being recorded by Big Brother!
Heads The IRS Wins, Tails You Lose
I'm sure the NY State Tax Department was hoping to extract more money from me once they sent the notice. Instead, their plan backfired because given I am a California resident. I am owed thousands of dollars back from New York as my company erroneously witheld some money for NY. But, will the tax department pay me? Nope, because it's past the three year statue of limitations to file an amendment. My company's hands are tied as well.
Even though NY State is violating their own guidelines by sending an inquiry five years later for more money, I can't get any money in return. Let's say I actually did owe money, then of course I must pay back taxes even though it's beyond three years! The traffic flows one way.
You're Not Paying Enough Taxes If You Want Bigger Government
My case clearly demonstrates the government's menacing authority over its citizens. Tax collectors are ruthless! The playing field is NOT the same. It's like going into the arena to fight Megatron. You will die if you don't kneel down and obey!
The government and the people who rule the government need you to fall in line. They use tax policy to control people's behavior. The only way out is to stop making money so you can stop paying taxes. For the love of strawberry cupcakes, please stop supporting big government. The government is brilliant for creating a 70,000 page tax code bill so mistakes are made.
Once you make a mistake, they wait for YEARS to send you a notice telling you why you made a mistake. Along the way, they charge an interest penalty 50X+ higher than what you would get in a savings account. If you don't pay, you will be fined further until they eventually throw you in jail for not complying.
Open your eyes people. The Borg will crush all of you if you are not willing to fight for your financial rights! Even the people working for the Borg are afraid! So what does that say about the whole system? Tax collectors are dream crushers, especially during hard times when people need help the most.
How To Pay Little To No Taxes For The Rest Of Your Life
Tax Rules When Deducting An SUV Or Truck As A Business Expense
Tax Savings Recommendation
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84 thoughts on “How Tax Collectors Like The IRS Cleverly Rob You Of Your Money”
Kill the globalist cabal. End the tyranny.
As soon as i saw this statement (Tax Collectors agencies are actually on your side. ) I stopped reading because i new you are another typical brain washed american tool that has been conditioned to think this theft called income tax is your civic duty.
This lie fed to each of the mindless dumbed down proletarians to warp their perceptions of reality into accepting this massive fraud con artist game perpetrated by bankers and government shills and sycophantic politicians to milk the public for all its worth.
Tax the goods but NOT the people or you are a DOU!CHE!BAG!.
This is right where government crossed the line right into fascistic tyranny and its been hell ever sins. And I can feel the cognitive dissonance welling up in your brain stem from the mere mention of this challenge to long held core ignorant mind control belife systems from all the high fructose koolaid you people have been sucking up sins you fell out of the birth canal.
but i suspect as is typical this is another cleverly disguised method of reinforcing the same con game psychology onto the unsuspecting peasants that might be actually getting fed the fack up with it all.
So to clarify, you don’t believe like the title of the post says that the IRS has clever ways of robbing the public through taxation? Or are you reading this post wrong?
I’m reading your comment and I don’t understand what you are saying. Is this satire? Are you trying to criticize financial samurai? Sorry for bad English.
“This is right where government crossed the line right into fascistic tyranny and its been hell ever sins. And I can feel the cognitive dissonance welling up in your brain stem from the mere mention of this challenge to long held core ignorant mind control belife systems from all the high fructose koolaid you people have been sucking up sins you fell out of the birth canal.
but i suspect as is typical this is another cleverly disguised method of reinforcing the same con game psychology onto the unsuspecting peasants that might be actually getting fed the fack up with it all.”
Not happy with the new tax code. After all these years, I owe taxes because I took some money out of my 401K to buy a house. Even having a loss on my business doesn’t help anymore. To top it off, the IRS sticks you with all kinds of penalties and don’t list them out on your account in their website. I had to wait 30 minutes to talk to someone to find out when they would take out my installment payment. Why can’t that information be in my account online?
Can’t get ahead or save for retirement anymore!
Mail them a check though, and they will have it cashed before the ink is even dry.
I divorced, got two rentals out of it, sold them to purchase a home and told my broker and lender I wanted to do an exchange (1033?). They didn’t file it for me and didn’t tell me they didn’t do it. I got slammed for nearly $100000. Which I can never pay back as long as I live. I no longer have any deductions, if I work overtime, get a second job, rent out my home, I’ll be bumped into the next tax bracket and pay more taxes in following years. They are levying, my home threatening my small savings, my car, my paycheck. If I retire I will lose my home because I won’t be able to afford to pay them back on social security. I hired a tax remediation company they asked for $6000. I feel I’m a slave to the IRS and will be living in poverty for the rest of my life, penniless, with each following tax year adding to my debt. Truly, there’s only one desperate way out from what I’ve deduced, no one is helping me. Not even the consumer protection agency reruns my calls
Jaysus! I only came here because I am searching for ways to get someone from the IRS on the phone. I need to prove who I am to them through the ridiculous amount of verification they are asking for. I put in said info they say no match. I call them no answer. I have always lived paycheck to paycheck. I havent made the best life decisions and I am 40 with no 401k no property nothing. I am actually looking for work as the country shut down for covid. All that said reading your comment makes me even more furious at how the tax system is. Stick with it and dont do anything drastic. I know things dont always seem like they are great and I hope you have some kind of support system with family or friends. I can say money isnt everything cuz I have never had any and I have lived nearly half or more of my life. Keep ur chin up.
Every law abiding average (read not super wealthy) should stop paying taxes because we are not represented any more. We make a pittance as wages yet the charger maximum andbit given to the wealthy so some CEO can buy himself a boat every year when regular American can’t even afford a basic house. NO TAXATION WITHOUT RERESENTATION I SAYS!!!! The greedy have corrupted the entire American system. They have sold out regular americans. Capitalism without proper oversight is just plain GREED.
The IRS is full of “POOP!” I had a representative tell me I wasn’t listening to what she was telling me. So I listened and tried to inform her that wasn’t the case and she just kept telling me I wasn’t listening to her. HOW IS THIS OKAY? WHEN I CAN’T EVEN TELL THE IRS THAT WE HAVE CONFORMED TO THEIR LETTER REQUEST AND THE REP JUST KEEPS TELLING ME I AM NOT LISTENING TO WHAT SHE IS TELLING ME. WHAT A DAMN GIMMIC!!!!!!!
I’m one of those “a” holes who “doesn’t pay my fair share”. Income Removal Service thinks I owe at LEAST a kidney. What gets me is so many people get horribly angry at people like me because they say “If I have to pay, so should YOU!” They don’t understand that just because they don’t have the balls to ignore Megatron; that doesn’t give them the right to get angry with me! Just because they DON’T KNOW THE LAW I should pay what they are getting fleeced for. 90% unless something has changed with the latest edition do not fall into a category wherein their income CAN BE TAXED! So they are doing it voluntarily based on threat from COLOR OF LAW. They are IGNORANT OF THE LAW and get pissed when YOU AREN’T. They should be pissed at the Income Removal Service for jacking them ALL THESE YEARS instead of me for not playing the game.
How do you get away with paying no taxes?
I disagree with the general characterization of NY State IRS employees as “kind” people. The one time I had to contact them via telephone to address an error I had made which resulted in non-filing, the guy I spoke to on the phone–“Ed”–was the rudest, most condescending asshole I have ever encountered ina professional capacity. If he was a customer service representative at ANY OTHER COMPANY I would have asked to speak to his supervisor and demanded he be fired. To this day I am astounded that “Ed” thought it was okay to say the things he said, using words like “retard” to characterize my clerical error on my income tax form. To be honest, if he had adopted that attitude towards me in a public venue, where he was within my physical reach, I would have smacked the shit out of him.
https://www.thenation.com/article/town-turned-poverty-prison-sentence/ mines yes and I’m being punished even worse so I wonder what I should do…? all im getting is hung up phones and close doors and my life is falling apart
Just a small victory but one I’m sure has been past around maybe even used in training.for the IRS. When I was young and feared nothing I missed a few years of taxes. I started to think hey I’m not a teenager maybe I should act like it.
So not really knowing the last year I filed I called the IRS and tried to ask. I was left feeling dumber than I was, by an agent who somehow didn’t understand forgetting. Even an address to a P.O.Box I sent the last return from. (I didn’t bother to say I’d been 21) Much of that year was foggy.
After hanging up the phone and searching for clues to the old address I had a flash of brilliance. I redialed them and this time I asked to speak with someone in their auditing department.
It was their turn to sound dumb when I was asked why…..And maybe one of the few times they were flat speachless when I said ” because I want to be audited”. In fact I thought I’d been hung up on, but I’d only been transfered. The next agent answered and I repeated without an explanation ,”yes sir, I’m still on the line and still want audited”
A smile was on my face as I thought of agents gathered round a speaker phone while an agent proceeded to say ” no mam you really don’t” and I firmly stated I really did! We continued back and forth a few times. I finally lost a bit of my temper and said “are you refusing to audit me?” With a sigh that sounded sorry for me , I was transferred once more.
This time to someone in the department I had asked for , where I once again said the same thing. This time I was told people do not usually call and ask for an audit so he’d love to know my reason.
I explained, I was lucky I lived past the parties of my 21st year, and remembered my name. There was no way I’d remember an address. I could swear I heard laughter in his voice but he said, “you won’t need an audit.” He wanted to transfer me but I asked if he could please help me because he hadn’t made me feel stupid.
Of course the name, current address ,S.S.number , and birthday was asked ( it hadn’t been by any other agent on that call) He went over my record and then he chuckled and said , “well miss, it looks like you maybe have money coming to you so I’d suggest filling”. He even made sure all the information they had for me ,was sent to me. He said that was to ensure I didn’t feel the need for an audit again. Lol!
My husband came home that night and wanted to kill me then move. He couldn’t believe I’d said that to the IRS. When my information came in a big envelope from them…. in record time, he almost passed out. I think he searched the sky for black hellicoptors for a week.
Anyway hope that gave you all a laugh. I’m in my mid 40s now but everytime I do my return I still giggle . I think maybe someone will see my name and say, ” don’t worry its fine, really that nut case will want the audit!”
Taxes, for any nation, are actually quite simple to understand. Pay them, or they will come after you, and eventually use force to place you in jail or harm you. Taxes are tyranny. There is no gray area on the matter. You are part of the problem if you willingly declare income and pay taxes. Collectivist models of dominance survive on the dimes of others. Stop paying into these corrupt systems. Stop believing the lie that delegation of security makes for a better society. Yes, I am advising others to stop paying taxes to their fraudulent false government occupations.
How do you get away with not declaring income?
Are there any special circumstances, like becoming disabled , that can allow you to pay less than the amount State of NY assess ?
I became disabled in 2005 but the State kept adding interest and penalties so a $6000 payments ballooned to $17000! Meanwhile , I had no income . Can one work out with State of NY to release them from interest and penalties and just pay the principal?
Can you please answer the above question? The State had suspended my DL and now I can’t go see my Drs and get therapy .
I want to pay my share of the bill but the interests and penalties are outrageous !
Robby is the keyword. These people are always looking for more ways to get our money. WE go to work, and have to pay a full 30% of our income, and for those of us who don’t make enough to make it from one paycheck to the next, that is a lot of money coming out of pocket. Now, they are taking people’s winnings at the casinos, and people who buy homes never own their homes, because if the government don’t get their money, you soon learn who owns your house. then there is city taxes, taxes on groceries now, taxes for this, taxes for that. I would like one question answered: When will slavery be abandoned in America!
Are you crazy? The people that work at the IRS are NOT your friends! I have had nothing but rude and inefficient IRS employees everytime I call them or send mail to them. The biggest problem that I see is that the left hand does not know what the right hand is doing. By that I mean there are so many different offices of the IRS that collect tax information and if you do not work with the exact same person at the exact same branch, you will get screwed! I have had nothing but problems with them people for 5 tax years where they said that they have not received our tax 1040’s. I use to use Turbo Tax but no more, it got to the point where I had to hire a tax attorney to communicate to them because if you try to handle it yourself, you’re in for a big headache. I even mailed and faxed them Turbo Tax receipts where all of my 1040’s were filed to them electronically (their preferred method). It got to the point where we had to hire a tax attorney because of their inefficiency. When it is time for them to collect they sure want their money pronto, but it they owe you money, they can take their sweet A_ _ time about it. Now you tell me, how is that fair? Anyways, it got to the point where we are now looking at moving somewhere where they can’t touch us for not even a penny!! The IRS can pound sand as far as I’m concerned.
What was the IRS asking you for? What was the error and how was it resolved?
I think it’s strange how sometimes it’s more income in the long run to make less income and lower your tax bill, depending on the government’s chart calculations and tax brackets. Now I think I know why the poor stay poor and the rick stay rich, sometimes by choice. Then again it would depend if the democrats are in office or the republicans.
Make more by making less? Marie I’m sorry whichever schools you went to did teach you about marginal tax rates.
The IRS never even sent me a letter.NY said I owed $9,000 from 2002 !Its 2015 wtf! A lawyer cut me check from a lawsuit. They are claiming I received $22,000.I Gave my bank statements from 14 years ago! I told them lock me up ! I am tired of 14 years later you come to me.Bullshit go get bigger money ! Assholes….
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HOW CAN I VOLUNTARILY TURN MYSELF IN AND GO TO PRISON FOR NOT BEING ABLE TO PAY BACK TAXES? I OWE ABOUT 16.000 DOLLARS AND I PAY 1,000 A MONTH RELIGIOUSLY, THE AMOUNT NEVER CHANGES BECAUSE OF PENALTIES AND INTEREST. I AM LIVING WITH CANCER AND AM UNABLE TO WORK IN A “REAL JOB” SO I WORK AT HOME…I GET UP IN THE MORNING SICK AT HEART KNOWING I AM GOING TO DIE STILL OWING THIS MONEY AND MAYBE MORE. I FEEL MY ONLY HOPE IS PRISON.
Just stop paying!
I got a letter from the Ohio taxation department in 2013 stating that I didn’t file my 2012 return. I file my return through turbo tax and submitted my returns the same as I had years before. So I was shocked to find out the return didn’t go through. I contacted the Ohio taxation department who advised me I could sign and file for free on there website. After I filed they said I was due a refund of almost $300. I might be wrong but it is my understanding if I am due a refund I paid too much tax money to Ohio. Well now its 2014 I file my federal return and get notice that almost $300 was deducted from my federal return because I owe Ohio taxes. A week after I get my federal return I file my state and I am due refund. I get another letter saying Ohio is taking that as well. How is this possible? How does it make any sense that I paid too much into taxes and still owe Ohio money? I have searches the web for an advice or a way to file a compliant. Any information would help. Thank you.
I have been separated for 2 & 1/2 years. During the time my estranged husband and I were together, I caved in to his stupid, ” I’m the man of the house…I will take care of finances…”, mumbo jumbo. I let things be, now I recently had to make a payment arrangement with the IRS and just had a levy placed on my financials from the state of California. I have been in Texas for the past 2 & 1/2 years and he has been bouncing from New York and California, making him a former US Marine “untrackable”. WTF???!!! No!!! The fu@$!#/ IRS and California Tax Board are not doing their due diligence to get him to pay as well. I am having to foot the entire bills. He is happy go lucky not a care in the world all while my life is flipped upside down. Peeved as f@$! !!!
Right now this moment the IRS owes me 3 years of income tax returns which brings my total to 19,775.00. The IRS has tied my money up fradulatly giving it to this place , putting down false places that never existed saying I worked under the table when it’s all lies. They even pulled the card and said I owed taxes . This is complete bull shit. I’ve never owed taxes because I know how to do them and I have proof of years of tax papers, and this is pure dam robbery. How can you take a total of 19,775.00 and say this is what your refund is now 4,000.00 and something . This pissed me off and I’m not letting into this so I told the IRS I’m hiring a attorney and we will see how much of my income taxes for 3 years I get back and you will pay my court cost. Always trying to steal so I’d be watching carefully and paying attention to your taxes and refunds and so on and so on . I’m livid that’s my hard earn money not theirs to do what ever they fucking want
hey owe you? Time to get going and claim that money back!
In year 2012 from Jan 10 to Dec 31 worked and stayed in PA State, before that from Jan 1st to Jan 9th worked in NY state at same employer but my employer had reported total federal wages showed in NY state wage and tax withholding reported very small amount which i paid at pay check, in addition to reported PA state wages and withholding as per my working days.
how to compute NY state tax return?
Taxation is theft. Tax attorneys should be focused on helping clients pay as little as possible through ANY means. Offshore leasing agreements. Shell corporations. “Deductions”. As little as possible. Zero is optimal. Ultimately the client assumes all risks. Yet instead, all todays tax attorneys focus on is compliance and veiled intimidation. Show me one tax attorney thats on my side. It’s almost like they work for the IRS and not the client. Attorney client privilege. Ever hear of it? Stop encouraging compliance and focus on your clients. GE made billions and did not pay any taxes. I doubt the GE lawyers spent their billing hours scaring GE into quivering compliance with the IRS maze of laws. Stop consulting me on consequences. Someone get me a tax attorney offshore I can have a REAL consultation with under attorney client privilege without the fear of being reported under the new Obama laws.
Here is the thing. Tax codes whether they be federal or state are built for compliance. When taxpayers fail to pay timely interest and penalties run. And the rates are higher than anyone can get at a bank or a financial institution. Normally, the statute is 3 years but in certain cases it can be 6 years (substantial understatement, 25%) or indefinitely if for fraud. These rules have been on the books for years.
Each year stands on its own under tax codes. If one fails to seek a refund on a timely basis it is gone. I cannot tell you how many new clients I have had who never bothered to file returns with nothing more than paycheck income who have lost refunds merely by failing to file such returns ( and to offset tax due years by the closed refund years).
The rules you mention just scratch the surface of some of the draconian penalties the IRS and state taxing authorities can assert. For example, the failure to file, not the failure to pay mind you, can result is a 25% penalty. Now, all the taxpayer has to do is file the return without paying 1 cent to avoid this penalty. Rule #1 in the tax world is to always, always file your return by the due date or extended due date even if you cannot pay a thing.
My point to all this is that you are right in many of your comments but there are just so many simple things that can be done to avoid many of these problems. Sadly our financial and tax world is complicated and to avoid these problems it helps to know the rules of tax engagement and to have a good accountant, CPA or tax attorney to keep you compliant.
I know this stinks but with the interest and penalties at issue, it may be well worth it to have assistance. Just one dumb tax attorney’s opinion.
Thanks for stopping by Steven. I will absolutely ask for help if I reach an impasse with future taxation issues. I don’t expect any difficulties given I’m on my taxes like a hawk every single year. I’ll stay vigilant!
Why did you not notice NYS tax being withheld on your 2007 W2? Wouldn’t it have been in a separate box?
I noticed it, but NYS tax is always withheld and then refunded. This time, NYS decided to send me a letter asking me to pay MORE NY taxes. They never did this before. It’s also not a coincidence that 2007 was a big income year. They are being greedy.
I work in the tax industry and I’m not worried about my job going away because of a simpler tax system. The biggest reason the US will never have a simple tax system is because the government uses it to encourage certain things – tax credits for education and first-time homebuyers are a few examples. And don’t forget the making work pay credit ($400 for single, $800 for married) that we were supposed to spend to improve the economy. Coming up, they are using income tax forms for payment of penalties for people without health insurance under the new healthcare reform. And on and on it goes. . .
My stomach drops anytime I get a notice from NY State or the IRS. I have had a few penalties but I never even look into it I just pay since the amounts were small…leads me to the question how many other people just pay it also?
Oh, taxes. I haven’t received any notices, but when I had my business, I was always scared of making a mistake because I received “revenue” from all states and had to pay sales tax in multiple states. It was a nightmare to deal with the taxes. I am sure I will get something one day.
The term frustration doesn’t even begin to describe such an experience. About as exasperating as hearting a campaigning politician bloviate about tax “reform”, as if such a fantasy could ever come to pass.
Our taxes are fairly straightforward, but I have a couple of friends who have been through audits. One keeps meticulous records, and got through relatively OK except for the time wasted. The other wasn’t so fortunate. It took him the better part of a year to get everything sorted out. Stealing money at gunpoint is hard work.
That is a pretty frustrating irony. I look at a rule like that as nothing more than typical government money-grab bureucracy. I love all the little death by a thousand cuts taxes. A little new 1% local tax here, a little new Obama tax there; it never ends. Once the government gets their claws in something, you never get it back.
Maybe they wait a few years to ensure that the penalties and interest fees will add up… those tricky devils.
Since I’ve been working overseas in a country that has higher taxes than the US Federal taxes, I suspect I’m safe. Can’t squeeze blood from a stone. The rates here have not been indexed for inflation in the 7 years I’ve been here…WTF! Anything above $3.5K is taxed at 10%, then above $16.5K 20%, above $33K is 30% and above $133K is 37%. The tax form is one page, with a small standard deduction and some other deductions (donations up to 10% of income, some retirement funds, life insurance and a few others)- effective tax rate always ends up being around 30% or so…
Boy, taxes can sure get you fired up!
That’s exactly what they due, to charge penalties and charge interest rates 50X higher than the national average.
I always become a little less agitated when I hear 37% tax rates for incomes over $100,000 and in your case, $133,000 in Thailand. At least you don’t have 8-10% state tax!
Yes, no state tax. Nor medicare nor Social Security… The 30% rate above $33K is pretty freaking steep, look up what the equivalent is in the USA- much, much higher.
And you get NOTHING back for that high tax rate… Singapore & HK are the better places to make money but the cost of living is higher and then you will have to pay US taxes since the tax rates are so low.
It is hard to find the best of all worlds situation, that’s for sure.
To pay a TOTAL effective tax rate of around 30% living in California, you’re making roughly $400,000-$500,000 a year.
At least Thailand has cheap food!
I’ve heard that because the IRS is not a government agency (it is a private company), and because it was initially formed illegally (required a higher percentage of states to ratify it than they actually got), they actually have no legal grounds to take money from any individual. I don’t know if this is true, or what legal hoops you’d have to go through if you refused to file and/or pay. But I find it interesting how much power they hold over us and our sense of well being.
This is completely not true, the IRS is part of the Department of Treasury and under direct supervision of the Secretary of the Treasury. Ask anyone who is an employee of the IRS there paycheck is signed by Timothy Geithner the current Seceretary.
There have been many lawsuits trying to claim the IRS is not a goverment agency and they have all been rejected overruled or simply denied.
Read this it list various court rullings that have shown the IRS is valid and has the rights to perform its duties.
I have an employee who didn’t file a tax return for 7 years. At the time she was a sales rep and worked on commission. She knows it was wrong. She was young and stupid. She says the first year was kind of an accident, but then when they didn’t come after her, she thought why bother. At year 7, they came after her with a vengeance, draining her bank accounts and sending threatening notices. When she came to work for me, she was a mess and paranoid. After spending quite a bit of money, she got a CPA to file all seven of the returns plus the current one. They set up payment plan of around $300 a month. I believe she owes around $20K, but most of her monthly payments go toward penalty and interest. After the first year, they automatically raised the payment. I believe they are taking $600 a month now. They automatically debit it from her account. She doesn’t make that much. She works for me in the day and waits tables at night to earn extra money. About 6 months ago, her dad agreed to loan her the money to try and make a settlement. Wow, what a rip. She, with the help of her accountant, proposed to pay $10K as a settlement. She had to send in 20%. After all this time, I get a text from her a couple of weeks ago that they accepted. She was extremely happy. The next day, her accountant got a call from a different person at the IRS saying that the person above the person who approved it was now denying it. She does not get her 20% back and they are going to keep taking payments. She is very distraught. She hides money in her dryer because she’s afraid the IRS will drain her account at any time. She admits to the wrongdoing, but holy crap, she’s going to die still owing the IRS. They are like terrorists. I’d love to help, but I have no idea if there is a way out for her.
Wow….. 7 years of not filing tax returns seems a little excessive, especially since she knew what she was doing was wrong.
It might be actually lucky that all she has to do is pay $20,000 back to the IRS. That’s willful negligence.
It is unfortunate she couldn’t make a deal for half off. Where there is a will, there is a way, and I’m hopefully she will pay everything off well before.
Oh errgghhh … it’s the same in Australia – they go back YEARS. A few months ago I got picked up on a mistake I made 4 years ago. I asked them why did it take 4 years and the woman just said they are allowed to go back that far. Some of them, despite being govt employees, get bonuses based on the extra tax they drag in. Also, they charged me interest for those 4 years! (not fair in my mind) AND the interest rate is 11% – who gets away with that?! – well credit cards I suppose – but they are the Government! Ripped off in my mind but no recourse cause the public servants got this into their tax legislation years ago.
I think tax collectors count on many people to just freak out, roll over, and pay. Costs them nothing to mail out notices. If the owe a refund, we can’t collect either due to statue of limitations.
Got the nice lil IRS invitation to join them in the Federal Building to look over tax returns from three years ago, we had rental property and extra medical bills, i am sure the medical deduction triggered an audit. So be careful with those. I got our money back the next year with extra deductions. Ha take that IRS! Had to pay around 3600.00. My husband still want to remind me of it every April though. I do pay extra for audit defense tax software programs.
but I just went in myself, took the paperwork. Oh, another thing i got dinged for was not declaring a stock I sold on sharebuilder. I think I made $50.00 on the sale. I think the guy had the decency to look embarrased for that one. I had to pay $10.00 to park, still makes me mad!
Glad u got some money back! Ridiculous on the $50 sale they were nitpicking!
A part of me wants to sit down with an auditor so they can review and do all my taxes for me and get me more refunds! On second thought, what a PITA
Ah… the end of year and the thoughts of taxes. Interesting enough my VITA (Volunteer Income Tax Assistance) training books arrived yesterday. Yes I volunteer thru AARP to prepare taxes for anyone who is willing to stop by with all of their paperwork at one of the sites.
I haven’t had any run ins with the IRS… yet… odds are, there might be a day. But I think I am prepared should it happen. I have assisted family and friends who have gotten the ‘letter’ and have been successful in satisfying the gov’t without penalties. I feel for all those folks who have gotten stuck in that arena.
As usual Sam, interesting article. I enjoy reading them.
Catie, great job assisting others! What’s your day job?
Perhaps you can volunteer to help me out one day :) although, as I do my best to go Galt, I hope I disappear from the grid!
Day job is within the IT field at a major bank. As for helping you one day… well this clientele doesn’t have your knowledge of finance. It is my hope that with this knowledge I will also be able to one day disappear from the grid.
My pulse races everytime I see an IRS envelope in my mailbox. Fortunately I was able to sort everything out fairly quickly. I’ve had to send in forms and such and have called their customer service a few times. I was also suprised how nice everyone was and super helpful. I never would have guessed that either given people assume the IRS is evil because they are always taking our money.
So far, no scary IRS stories. In the 80s, I received a standard office audit request. My neighbor at the time was a former IRS prosecutor in the White Plains, NY court. I asked him what to watch out for etc. He said unless two IRS officers come to my office, don’t worry about it. He used to prosecute modern day “Al Capone” people. They were big time criminals and the only way to get them was through tax court similar to AL Capone.
In a former life, I was a successful tax preparer in the state of California. There are so many laws and loopholes! I can only compare it to a complex game for those who have good memories, like ace spellers and those who can memorize insanely trivial details. Long story short, I had no fear of the IRS (just a healthy respect for the “bachelors”, lol) but all that has changed. Living as an expat entrepreneur, my personal sentiment is to keep in the game (get US income with tax returns each year) but stay as far away from the fire as possible. Thanks for your meaningful post, definitely struck a chord.
I’m, u might have it real good. Even if you get an erroneous Multi million dollar refund, you won’t get punished because you are out of the country!
I wonder if a lot of people do this. Big loophole?
Hahaha, yes, accountant doesn’t = tax accountant. You need an E.A (such as myself) or C.P.A. who specializes in tax, not just a generic accountant.
Jacob, is it fair to say the tax accountants of the world do NOT want tax simplification?
Any idea how much money is spent lobbying the government to make the tax code as complicated as possible?
Enrolled agents are ponds for the IRS a go between. Enrolled agents don’t have a clue what the law is they will lie and take your money for phony advice.
I sent my NYS tax return in back in 2005 and I owed like $400, I included the check with the return paper clipped not stapled as they requested. Several months later I got a letter indicating I owed them like $1,000 in taxes, penalties and late fees. The got my return, but no check, they never thought they lost it had to be my fault for not sending one, for this they decided to charge me an arm and leg in fees and interest.
My accountant wrote them a very nice letter for the low cost of $50 and NYS decided to let it go this time, however if in the next 2 years I had any errors or late payments the fines would be reinstated and additional interest would be charged.
Here is another useful piece of information, if you get a letter from the IRS it is just a random audit and dumb luck, if a single IRS agent ever shows up at your door they are auditing you for something they suspect and can likely recover funds from, if 2 agents show up it is the criminal division and you are going to be arrested…. Don’t ask how I know this, but consider yourself warned… For the record I have never had an IRS agent show up at my door on official business.
Hmmm, interesting! Just like the movies!
One way ticket to Mexico!
Great post, Sam. This really connected with me, and leads me to two comments:
First, I also had to play the “avoid New York” game, and was always careful to keep my days there less than 10, even though my company has 2 facilities there. I’m sure it’s to catch the stockbrokers and whatnot, but what a pain!
I also wanted to point out a subtlety in your IRS quote of the statute of limitations:
“The statute of limitations is generally three years after a return is due or was filed, whichever is later.”
I would emphasize the last phrase, “…whichever is later.” I had a co-worker in Indiana who ended up in a real mess, because the Indiana Department of Revenue cashed his check, but never filed his taxes. Several years later, they came back for him after a routine license transaction with the state. Even though he had done everything right, and they acknowledged a problem with their employees’ behavior at the time, the burden was on him to reproduce all of the documents and to re-file his taxes. Guilty until proven innocent! This was after 6 years, but because the taxes were never filed, they claimed the statute hadn’t even started yet. Maybe you could take another crack at New York with the same logic, and file a $0 tax return looking for a refund.
“Guilty until proven innocent” is EXACTLY the default position the tax collectors have on all citizens. They know they can bully people around b/c they are the law. It’s a sham.
I haven’t been screwed by the IRS thus far (knock on wood), but have been frustrated with them many times. There were 3 years in a row that they made the same mistake on my parents’ Federal tax returns because my father was serving as a missionary overseas, and they didn’t properly account for that. So, I had to make the exact same phone call 3 years in a row when they claimed I completed the tax return incorrectly, but in fact they made the mistake.
Other than the insanely long wait times to actually talk to someone, it drove me a bit nuts that THEY had to pay interest on the refund they owed; wish they could just get their processes in order and use that tax money for something useful.
That’s interesting and I can see where it’d be frustrating since the rules are different for them but it doesn’t surprise me. I’ve luckily never been audited or contacted (knock on wood) about any tax returns I’ve filed.
I do laugh because at one point I worked in the city of Detroit, and they way it works there is if you live there, you pay 0.75% city tax and if you work there, you pay 0.75% resident tax, but for any employer that does withholding, they have to take out the full 1.5%. If you’re a non-resident that means you get back half of what they took out. But, good luck getting that in any sort of reasonable fashion. I think I waited 10 months one year to get it, and that was in 2006, when the city was actually in better shape than it is today. Yet, if you filed even a day late, I’m sure they’d be all over you to collect any fines and such.
Smart of government to tax everything up front. If they didn’t, people wouldn’t pay!
This is why we need something like the Zero Plan. It takes out ALL personal tax credits and deductions. No more getting to use our tax code for social manipulation. Since there are no more deductions, the plan calls for three income tax brackets: 8%, 14%, and 23%.
A married person with two kids that makes $200,000 a year while paying on a $400,000 mortgage will pay the same exact amount in federal income taxes as a single person with no kids that makes $200,000 a year while renting an apartment. Two people make the same amount of money, they should pay the same exact income taxes. Marital status, number of kids, charitable contributions, mortgage interest…none of that should matter.
Also, by cutting out the credits and deductions, tax returns become incredibly easy. Everyone from the $12,000/year burger flipper to the $12,000,000/year hedge fund manager will be able to fill out a one-page tax return. I know tax lawyers and accountants won’t like this, but I’m sure not too many people will shed a tear over a tax lawyer losing his job.
One change I would make is to add a 0% bracket. As much as I want everyone to pay in at least 8% to the federal tax system, I know some people simply cannot afford to do so. If we had a 0% tax bracket up to the poverty line, then increase the three tax brackets by 1-2 percentage points, that might be structured a little better for low-income earners. Of course this means they don’t get their EITC or child tax credits any longer, so NOBODY gets a tax refund that is higher than the amount they paid during the year.
Because this is wholly logical and makes a lot of sense, it will probably never happen. Sadly.
Travis, sorry to say…8, 14 and 23 are still not equal(I like 0% though:), which takes more from some and less from others…still not fair and it breeds division.
The income tax was not designed to tax the citizenry that had just created a new country over taxes and religious freedom. It was designed to prevent foreign financial influence. It was created primarily and almost exclusively for 4 Entities:
1. American companies doing business outside America getting foreign money…You owe uncle Sam.
2. American citizens doing business outside America getting foreign money…You owe uncle Sam.
3. Foreign companies doing business inside America getting American money…You owe uncle Sam.
4. Foreign people doing business inside America getting American money…You owe uncle Sam.
5….It was NOT designed for American citizens doing business inside of America getting American money from American companies…You DO NOT owe anybody a dime. They made their money from import and export tariffs. Soak that in…and read(if you can find it) Income Tax : Shattering the Myths, Authored by Dave Champion and published by Dave Champion(I wonder why…).
It makes NO SENSE that our founding fathers went running back into the arms of despotism and decided to tax it’s citizenry, yet it makes PERFECT SENSE that in our recent generation 99% of our citizenry’s tax research has been to do what Mom and Dad did and just sign the damned W4.
Well said the IRS code isn’t for the Americans who work in the private sector, it’s for the worker who work for the government, or receive federal payments that the Secretary of Treasury can withhold, read Title 31section 321(d) its a gift, for working and taking the franchise. Gifts don’t have to be given, and do you ask for your gift back, wake up men and women you’ve been taken advantage of.
Joe, FS, All,
It has been nearly 5 years since I’ve posted and have since discovered blissful knowledge 100% constitutional that the income tax is 100% unconstitutional. All glory and thanks to God. Here it is as simple as I can say it. There are 4 parts of the constitution involved. I’ll list them for easy reference then explain.
1. The 16th (income tax) Amendment
2. Article 1, Section 9, Clause 4
3. Article 5
4. The 10th Amendment
The 16th Amendment has nearly the direct opposite verbiage mentioned in Article 1 Section 9, Clause 4.
Clause 4 is an apportionment clause, the 16th is clearly opposite and recognized by an archives site as affecting clause 4 last I checked.
Article 5 is the provisions and rules for amending the constitution that ALL amendments must abide by.
Article 5 states”…provided that no amendment made prior to the year one thousand eight hundred and eight shall in ANY MANNER affect the first and fourth clauses of the ninth section of the first article…”. There are only 12 amendments ratified before 1808 of which the 10th is paramount.
The first four words of the 10th state: “The powers not delegated…”. Stop, before we go on. The powers that ARE delegated are already enumerated and written down in the constitution. This can only mean future powers (amendments) not written down yet, the 11th, 12th, 13th, 14th, 15, AND 16th and so on, being future powers not delegated yet.
The 10th states in full: “The powers not delegated, to the united States by the constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”
The 10th states: “…nor prohibited by it…”. That means whatever they’re already not allowed to do (Clause 4) in the constitution, with the future granted not delegated yet powers, they’re STILL NOT ALLOWED TO DO, WHAT THEY’RE NOT ALLOWED TO DO.
IN CONCLUSION, the 10th is granting future powers and because it was ratified before the 1808 timeframe mentioned in Article 5, it cannot in ANY MANNER affect the 4th clause that the 16th is affecting. The 10th was ratified in 1791, just 2 years after the constitution itself and nearly 20 years from Article 5’s 1808 timeline that they gave themselves to PERMANENTLY “fix” the problem of immoral taxation they had just come from. With every year that passes, the solution to income taxes is further rooted in time. Changing our FORM of government as we did from the Articles of Confederation to Constitution would be a grave danger as well as amending it further, hence the 10th that grants endless tax-neutered power. A federal gasoline tax on 1 gallon of gas is apportioned, constitutional and an equal amount no matter where or who you are. Tax brackets is already unequal as I mentioned 5 years ago.
Thanks for reading, pass or preach the Word.
I have had numerous tax claims from varying states due to assignments all over the country/world. I was lucky to learn that as of 2006 I was not supposed to pay state taxes and got all but 1 year of overpayment back. It took nearly 9 months to receive my checks for the errored returns however. I have found both the tax departments in MI and VA to be extremely helpful and forgiving of the errors they made.
If you want a great story look up some of Rush Limbaughs dealings with the NYS Dept of Taxation. They are some serious vultures. Its an extremely convoluted tax system there as well, much like CA I imagine.
Doesn’t Rush make like $50 million a year or something crazy like that? Biggest bank for your buck going after such huge fish. I wonder if there is a political bias as well. Hmmmm.
The Governor is intentionally holding back tax returns with any error in order to steal the money.
I haven’t ever had any problems with the IRS or state taxes. this year will be getting more interesting as I will have business income for the first time.
I haven’t had any trouble with big bro because I had a boring corporate job for the last 16 years. The tax was pretty simple, but now that I’m self employed, I expect the tax to be much more complicated. The chance of getting a call from the IRS is going to be higher than before. I’ll need to be very careful when I do tax next year. I hate doing tax, it usually takes me 2-4 weeks, but I’ll see how my small business and rentals are really doing. Perhaps it’s time to hire a pro…
As I tried to send already, I need someone to explain to me why IRS goes back to 2001 when I worked 2-3 months for 5000 at most. Claims I owe 12000 plus enough penalty interest for 29000 plus frivolous filing so statute of limitations no good. Yet never told me for 15 years and they are wrong anyway. Even worsr StopIRSDebt I hired before ever getting any notice, just to handle a small sum from 2004-9 has not caught on or even gets back to me!!!
Too bad you don’t have enough education to be able to read the tax code and see for yourself you are paying tax on private income as a federal tax on federal income. If you earn state income then you might owe state income tax. But, if you don’t work for uncle Sam then you have no federal income and you would not owe any federal income tax.
All of the above is hearsay but is based upon 26 U.S.C. Subtitle C Sections 3401, 3402, 3403 and 3404. Get a copy of the Code and become tax free.
Self employed? That means you are outside of government jurisdictional authority. However you have no liability for a tax on your income that is not federal income.
What you need to do is to take up a study of the tax code and the controlling regulations and start enjoying the fruits of your labor. If the federal mafia should come after you, always stay armed two ways. First and foremost own and bear a large weapon and second arm yourself with the law in hand.
I learned of the federal mafia ( I.R.S.) way back in 1998 and I’m a freeman today enjoying income that cannot be taxed.