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Here Are Some of Your IRS Horror Stories

"That $600 bill literally halved my ‘disposable' income for the year."

On Sunday, the New York Times reported that President Donald Trump claimed enormous losses on his various businesses in order to avoid paying taxes for 11 years, has written off the most absurd (albeit normalized and permissible) charges during his presidency, and only paid $1,500 in taxes in his first two years as president.

Somehow this revelation isn’t the most upsetting news about the president this week. But it was enraging nonetheless. It pissed those of us at Discourse Blog off so much that two of us shared stories about our own fucked-up encounters with the IRS. And we knew we weren’t alone. So two days ago, I asked you for your own IRS horror stories.

Here are just some of the responses we received. I appreciate and thank everyone who wrote in for their openness and honesty. We’ve removed everyone’s names, and these stories have been very lightly edited for clarity.

“The IRS took her passport away and claimed she owed them a crazy sum of money.”

Wanted to share about my mom! She was a real estate agent and mortgage broker for a company that helped her file taxes but after the crash in 2008 she lost her job and had to freelance many jobs including cake decorating and cooking. She doesn’t speak English and struggled a lot filling out the forms- my brothers and I tried to help but we are also like 10-14 at the time and with no internet at home (pre-smart phone accessibility) so she turned in her taxes and a few weeks later the IRS took her passport away and claimed she owed them a crazy sum of money. This whole ordeal took like 6 months to fix (we had to look EVERYWHERE for proof of our finances including store receipts and bank statements). She got her passport back in the end but the process was super stressful and we all had to go through it for like 6 months. So yeah… super fucked up how the IRS is a bitch to working class families but lets these rich assholes get away with not paying shit!! So annoying.

“…15 years later, they still owe nearly $30k because of interest.”

I have a true horror story. When I was in 5th [grade in] (2004), my parents came into a bunch of money when my dad sold his part of a business in which he was a co-owner. My parents used that money for the downpayment on their house and to pay off other debts they had accrued throughout my life. In 2005, they filed their taxes by themselves as they always did and made some mistakes in claiming extra income. The IRS audited them. They couldn’t afford a lawyer (my dad was already [working] two jobs to keep the lights on). They got fined $30,000. They’ve been making payments ever since and 15 years later, they still owe nearly $30k because of interest. My parents were 33 yo and 35 yo when they were audited and they will likely be paying this down until they retire.

“…They will accept my reasoning for now, but I could still be audited in the future…”

I had a weird experience with the IRS. I got a letter in the mail saying I had wrongfully claimed a tuition tax credit and that I owed the IRS $1800. I was at the end of my first year teaching in NYC, having just quit a PhD program elsewhere, so I had both paid tuition and had another kind of tuition taken out of my paycheck as a part of an alternative certification program. I didn’t have $1800, and neither did I have the money for an accountant, whatever that might have been. So I drafted a letter explaining myself and attached a massive amount of documents: pay stubs, a 1098-T, and various communications from the program proving my enrollment and structure of the payment plan. I sent this packet via certified mail to the IRS, and got a letter back a few months later saying basically that they will accept my reasoning for now, but I could still be audited in the future and have to pay up if I wasn’t right. Hopefully that never happens!

“That $600 bill literally halved my ‘disposable’ income for the year.”

I moved to the SF Bay Area post college as part of the Jesuit Volunteer Corps, an AmeriCorps-esque volunteer program. I was ‘making’ a food stipend of $90 per month (to be shared with the community in which I was living) and a personal stipend of $100 per month. (Housing and utilities was taken care of as part of the deal). As part of the program, I was eligible for an AmeriCorps educational award to help pay off student loans. Because I suck at paperwork, I filed late and was only able to get their half time award, to the tune of roughly $3k. Because again, I suck at paperwork (and I was 21 filing taxes for the first time in my life), I forgot to claim the ed award to the IRS when I filed my taxes. AmeriCorps did not forget to file. Within the year, I got a $600 bill from the IRS for my transgressions. That $600 bill literally halved my ‘disposable’ income for the year.

“Oh. Fuck. Fuck fuck fuck. Fuck me.”

I don’t have an anecdotal IRS horror story that takes place in the past, but I have a magical crystal ball that allows me to see very clearly one coming up in my future. I have been accruing a titanic amount of interest in my student loans. My principal is close to $200,000 now, and my income will never be able to pay down the interest. I have an income-contingent repayment plan that at least spares me from completely unsustainable monthly payments. Yay, I don’t have to starve! According to the feds, after 25 years of payments on this plan my outstanding balance will be forgiven. Yay, the loans will be no more!

The IRS will count this as taxable income when the time comes for me in about 20 years. Oh. Fuck. Fuck fuck fuck. Fuck me.

“I spent the better part of my 30s paying off the IRS.”

Way back in the dot-com crash, circa 2002-2006, I, like many others, was laid off and unable to find reliable full-time work in my field. I was able to stitch together an income from short term/temp contracting, also known as 1099 work. Anyone that’s done 1099 work for any amount of time can probably guess that I massively underestimated my taxes, and ended up owing tens of thousands of dollars to the IRS, who proceeded to threaten liens, paycheck garnishment, etc. For normal people, there is no recourse to owing back taxes, the only way to get them discharged is a byzantine process that doesn’t apply unless you are essentially homeless and destitute. I spent the better part of my 30s paying off the IRS at 500/mo under a payment plan. The IRS was very efficient in letting me know my tax obligations.

Fast forward to now. I’ve been fortunate in my employment, and financially last year was a pretty good one. I made a mistake when initially filing my tax returns, and mistakenly paid nearly 15k more in tax than I needed to. The IRS *immediately* took the payment from my bank when I e-filed the return….it will probably be 6-12 months before I get that money back.

“…I paid more than our current president, despite making less than $10k…”

When I was fresh out of high school, I got a gig through my drum instructor teaching a high school band’s percussion section during marching season. At 18, getting a “job” teaching music to kids just a couple years younger than me was a dream come true. It wasn’t great pay ($1,500 for the season), but it was a lot of fun and I was learning about the field I was interested in, music education. Fast forward two years and I get a letter from the IRS saying that because I never claimed or paid taxes on that $1,500, I now owe almost 900 dollars to them with late fees and interest. 1,500 dollars had been a large sum of money for me at the time and not much had changed. The solution offered, and what I accepted, was a forfeiture of my tax refund for the next 3 years as interest continued to accumulate. So I guess, at least for that year, I paid more than our current president, despite making less than $10k while attending a public college and teaching public high school kids how to play the drums.

“…My bill was $35k. Even as well as we’ve done, a bill of that amount would have effectively wiped out our ready cash.”

I never thought this would happen to me, but in 2018, I got a $35,000 bill from the IRS. (Full disclosure: we’re very lucky to be on the winning end of late capitalism. Everything is fine.)

I got laid off in 2018, found a new job pretty quickly, and had to roll over my retirement accounts. I’m not sure what happened, but there was some sort of crossed wire with the IRS and they thought I’d taken a full dispersal of my retirement savings at 33. As such, I (supposedly) owed taxes on tax-deferred income going back 11 years – my bill was $35k. Even as well as we’ve done, a bill of that amount would have effectively wiped out our ready cash. Also, the money the IRS thought we had on hand was in an appropriate tax-deferred account and thus inaccessible. I wound up having to pay our accountant around $500 to straighten it out.

This is obviously a story from a person of privilege, but I pass it along to make the point that even at a position far from the margins of the economy, an IRS mistake could machete-whack away stability with a single form letter, and it takes a substantial amount of cash to limit that machete-whack to a papercut.

“I was so angry in fact that I simply refused to pay them.”

I had dropped out of grad school, moved back home to live with my parents, was desperately looking for a job that would help pay down my student loans, and to make at least some money, settled for a job delivering pizza. When I started at the pizza shop I insisted on getting put on payroll and having taxes come out, unlike other employees who would take cash payments under the table. Well the ownership of the pizza shop changed about a year after I started there, and I stayed on for another 6 months with the new owners before taking another, different, low paying job. Tax season comes, send everything off, I don’t remember the exact number but I was making less than 19K annually at the time. Skip to a few months later and I get a notice that I am being audited for my work under the new owners, who had, by that point, already run the business into the ground. I was furious. How was I, someone making less than 20K, selected for an audit? I was so angry in fact that I simply refused to pay them. And so I would throw away any IRS letters for a full year. The following tax season arrives, and the IRS simply withheld the money that was supposed to be paid back to me from my latest filing, still sub 20K in earnings, and seemingly called us all square.

Based on some of the stories I’ve seen coming out today I guess I could be considered lucky that the matter seemingly resolved itself? I sure didn’t feel lucky at the time.

“The agent basically told me I’m shit out of luck?”

I’m eligible for the stimulus check and still haven’t received it. I doubt I ever will!

I spent a few months checking the status of the stimulus check on their shitty website tool, unable to get anything other than “Sorry! You’re not in the system.” Seemed weird, since I knew I was eligible and had already received my federal tax refund through direct deposit. I kept trying, to no avail, to understand my status. Eventually, maybe two months ago, I was able to get an IRS agent on the phone on a new call line they set up. I was told that, despite submitting my 2019 tax return that confirms I’m eligible sometime in March, they went ahead and processed me in the stimulus check system off my 2018 tax return.

I made a mistake on my 2018 tax return rushing to complete it last minute and checked “Someone can claim you as a dependent,” which is true. My parents can claim me as a dependent, but they haven’t for several years. I read it too literally – apparently, to the IRS, someone can claim you is the same as someone did claim you! Who knew.

Dependents are not eligible for the stimulus check. So, that means their stimulus check system doesn’t actually check if I’m claimed as a dependent (because I wasn’t). It also means that the system won’t work for anyone that had their dependency status changed between 2018 & 2019 (because even if I was claimed as a dependent in 2018, I should be able to get a stimulus check when I’m not a dependent in the year of the pandemic!). The agent basically told me I’m shit out of luck? And that maybe sometime next year? I can get it fixed and processed when they’re all back in the office? Because they can’t do that working from home?
Maybe I’m an idiot for making that mistake on my 2018 returns. Whatever! Still seems like a shitty system! I’m fortunate enough to not need the $1200 to survive, but it was a nightmare trying to figure out why they thought I wasn’t eligible for it.

“I think the stress of opening that letter literally as I got home from saying goodbye to my grandmother on her deathbed almost broke me.”

My friend and I started an online lit mag to have somewhere to publish our writing. About ten months into it, we wanted to launch a physical edition to sell at cost, and let anyone order it online. So we decided we should find a way to accept credit cards, which turned into us needing a tax ID, which turned into us needing to fill out several very confusing forms for the IRS. The big fuck-up on my part was accidentally putting the date we launched our magazine on a form instead of the date we were going to start selling things. Because of that, they thought that we’d been operating without filling out an initial return for close to a year, and [we] were fined $3,500, more than we had in our savings accounts combined. I cannot stress enough that we were making no money off of this project. Thankfully we were able to get a first-time abatement and pay nothing, but I think the stress of opening that letter literally as I got home from saying goodbye to my grandmother on her deathbed almost broke me.

Photo of Donald Trump via gageskidmore/Flickr.