I owe taxes

May 30, 2008 10:28 AM

(TaxErrorFilter) I just received a letter in the mail stating my 2006 tax return is flawed and now I owe about $3600 to the government. Is there any way to fight this?

The letter states what I claimed on my return as taxes withheld by my employer is double than what they claimed they withheld. I checked my old W-2 and this is in fact true. I called the IRS agent and she said the tax software I used (free1040EZ.com) must have doubled what I put in. If the government knew that the numbers were different, why did they proceed anyway? Is their any way to dispute or at least reduce what I owe?

posted by Brandon1600 to Law & Government (11 answers total)

Best answer: Not a tax lawyer, but generally you can't fight something on the basis that it was in error that you didn't notice. Nor is it a defense that the government didn't check your return for over a year; they've got up to three years (I believe, may be five) to do that.

You can see if filing your taxes with this correct information but in a different way (claiming deductions, filing as head of household, that sort of thing) would reduce the amount you owe. If so, you can file an amended return. Just inform the IRS that you'll be doing this, in response to having this big tax bill.

You can also see if you have a warranty claim against the software maker.
posted by Capri at 10:56 AM on May 30, 2008

If the government knew that the numbers were different, why did they proceed anyway?

They didn't know they were different... until now. The IRS accepts filings under the assumption that they're correct because realistically it's impossible with current technology to cross reference and check all the returns as they come in. But they do go back and check, which is why there's a window (be it 3, 5, or 7 years... I don't remember).
posted by sbutler at 11:04 AM on May 30, 2008

This won't help you now, but in the future you might want to use one of the more commercial products (TurboTax, etc.). Most of them will cover any fees/interested caused by a calculation error on their end.
posted by sideshow at 11:51 AM on May 30, 2008

Most tax software guarantees to cover your loss if a calculation error by their software costs you money, at least software you pay for does. However, proving that is going to be difficult. Let's face it, the most likely scenario is that you put in the wrong number and didn't notice.

If you can't rejigger your filing to save money you should be able to work out a payment plan with the IRS if coming up with that kind of cash is a problem.
posted by COD at 11:55 AM on May 30, 2008

Is the money that you owe (the $3600) what you would have owed, or is it that amount plus interest and penalties? If the latter, you could probably fight to have some of that amount reduced.
posted by salvia at 11:55 AM on May 30, 2008

Best answer: Yeah my immediate question was going to be what Salvia asked -- is that $3600 in penalties, or just back taxes? Maybe (and I mean maybe) you can work with them to get the penalties reduced or eliminated, if it really was filed in good faith ... but you're probably never going to get them to just write off the taxes you didn't pay.

Maybe a free consult with a tax lawyer is in order? I see people around my area who advertise consults after you've gotten an IRS letter; at least that might be a way to get some better answers to your questions from someone with experience.
posted by Kadin2048 at 1:47 PM on May 30, 2008

Response by poster: The $3600 includes interest on what I already owe. I am going to call tomorrow to see if I can amend or somehow reduce what I owe and I might call around for a free consult as well. I suspect I will end up paying all this though. I cannot find words to express my aggravation at all this but thanks for the input.
posted by Brandon1600 at 3:39 PM on May 30, 2008

You could certainly fight penalties were any assessed (as opposed to interest) and you could also ask for a payment plan if it would be hardship to pay the full amount now, but the deferred amounts would bear interest.
posted by MattD at 5:07 PM on May 30, 2008

Seriously, call them ASAP. They'll let you set up a payment plan, and they're insanely easy to work with. The people there are oddly helpful and laid back. They have an attitude that goes something like "We're the IRS. We're going to get our money one way or another, so we'll work with you until you stop working with us, then we take your stuff."

Regarding the payment plan, they pretty much ask you how much you want to pay a month.
posted by onedarkride at 4:53 AM on May 31, 2008

Don't just pay the penalties - the IRS will usually waive them if you ask, especially if you're prepared to immediately pay the taxes you owe. Seriously, there's no harm in asking.
posted by robinpME at 6:34 PM on May 31, 2008

The IRS will usually abate penalties (if any) upon request. Usually this means writing a letter and explaining your "reasonable cause". Interest is is charged on taxes due. If you owe tax, and it is paid late, you owe interest. It is unusual to see this reduced or abated. Taxes owed must be paid and are not reduced except in some bankruptcy, insolvency or similar circumstances. If you have the capacity to pay, the tax will need to be paid.

You may want to check your old pay stubs to convince yourself that the withholding shown on the Form W-2 is right.

If you made an error on the withholding amount, you may have made other errors that were in the IRS's favor. If you can find other errors that should be changed, you might consider filing an amended return to get a refund. If your tax went down on an amendment, the IRS would pay you interest.

You might want to work with a professional in the future. The software today is very powerful. But it is like a handgun, you can shoot dinner if you're good or you can shoot yourself in the foot if you don't know how to handle it.

Good Luck.
posted by Wagging Dog at 11:55 AM on June 2, 2008