The IRS has never been known for its reasonable, sensible approach to taxpayer mistakes. If you have ever faced an IRS dispute, you know that the agency will seize on the smallest mistake and assess huge penalties and interest. That’s part of the reason an IRS dispute is so stressful for taxpayers – because rather than helping taxpayers correct their mistakes and pay reasonable penalties, the IRS uses their power like a sledgehammer and assesses penalties so severe that many taxpayers simply can’t pay them.
A recent example of over the top IRS behavior caught our attention. It took place in the city of Virginia Beach, and it’s an excellent example of the aggressive, punitive nature of IRS collection agents. As a recent Virginian-Pilot article reported:
The Pilot’s John Holland reported this week the IRS picked a totally ridiculous fight with the city of Virginia Beach. The tax agency said the city had miscalculated – by one day – the eight-year maturity date of a $20 million water and sewer bond from 2010.
Thus, the city would get the princely sum of $33.59 more than it should have over those eight years. (Try spending that little on a dinner for two at an Oceanfront restaurant.)
The penalty for such an error? A cool $5,000.
City officials were stunned. Granting a mulligan would’ve been saner.
In a letter to the IRS that Patricia Phillips, director of finance, wrote Oct. 10, she urged the cost be lowered to $1,000: “While this amount is still punitive, it is much more reasonable in comparison to the trivial mispricing caused by an innocent and inadvertent mathematical error.”
Eventually, the city wrote a check for the full amount. But Beach officials still felt the edict was rotten, and they continued to fight.
A new IRS agent and common sense helped overturn the original ruling. The city got a full $5,000 refund in March.
“An IRS reversal is highly unusual,” City Manager Jim Spore wrote to council members March 28. “In fact, our bond counsel commented that this is ‘unheard of.’ “
Phillips has said the dispute cost the city thousands of dollars in attorney’s fees and staff hours. But the Beach also taught the feds a lesson.
Yes, you read that right. An error of less than $35 led to a five THOUSAND dollar penalty from the IRS. In what world is that reasonable or fair? Unfortunately, this type of IRS aggression is very common, as anyone who has faced an IRS controversy can attest. In this case, though the penalty was eventually refunded, the matter was extremely costly and time consuming for all involved.
If you’re facing an IRS dispute, it’s important to have an experienced tax attorney on your team. IRS collection efforts are aggressive and their tactics are designed to intimidate taxpayers. If you would like to learn more, or if you need assistance resolving your IRS controversy, we want to help. Please call 844-841-9857 to learn more!
Additional Readings
Getting a notice that you’re facing an IRS audit can be unnerving, to say the least. Last year, 3.8 of every thousand tax returns were audited. An IRS audit is something no one wants to face, but it’s always a possibility. Even if you’ve followed every rule for filing your taxes and think you have accurate returns,...
We have compiled this comprehensive guide to help businesses understand their obligations related to sales tax in the state of Kansas. The guide covers various topics, including what items are subject to sales tax, how to register and file sales tax, and how to collect and remit sales tax. In addition to providing information on...
We’re in an era in which more small businesses are launching like wildfire. Recent studies showed that 17 million new small businesses were expected to launch in a single year. Small businesses are the backbone of the economy. But they’re often more tumultuous, have fewer resources, and are run by less experienced professionals. If you...
April 18 is fast approaching. That’s the official deadline for filing your 2022 federal tax return. As you gather your documents and assemble your information, it’s important to know about recent changes that have occurred. This year, the Internal Revenue Service (IRS) adjusted many of its 2023 tax rules. While you’ll still follow 2022 rules to...
Sales tax is paid to a local or state governing body for the sale of certain services and goods. In Oklahoma, the state sales tax is 4.5%, which is charged on sales of certain services and tangible personal property. Along with the state sales tax, local sales taxes and special district taxes may apply. Business owners...
If you have been struggling to pay the bills or your taxes, you may receive a notice that a garnishment or levy has been placed on your wages or bank account. Even if you make every effort to pay your back taxes, your circumstances may make paying your taxes difficult, such as a job loss...