An Unpleasant Experience with IRS
An advisor had a client who had missed part of her required minimum distribution (RMD). No big deal. This happens – frequently. To fix it, you take the RMD that was missed and you file IRS Form 5329 with the tax return. Form 5329 has you calculate the penalty – 50% of what was not taken. However, IRS can waive this penalty for good cause. The instructions for the form tell you how to do this, although they are a bit confusing. Then you attach a letter explaining what happened and requesting the waiver of the penalty.
Apparently the tax preparer did not read the instructions and the penalty was included in the tax due on the client’s return. She did not pay the penalty portion of the tax due because she requested a waiver of the penalty. Now comes the fun part.
The client gets a computer generated letter from IRS telling her she underpaid her taxes, plus interest, plus penalties. She responds, again telling IRS she is requesting a waiver of the penalty. She gets a computer generated notice of levy. So we call IRS.
The advisor and the client were on hold for one hour before a human took their call. At that point I am put in on the call. I explained the situation to the IRS employee. He checks the computer and tells us that the case has been assigned to a unit, but not to an individual yet. In other words, the computer just keeps spitting out notices and no human has yet to look at any of the associated paperwork.
After further conversation, he put us on hold, then came back and said an amended return needed to be filed to fix the mistake and reduce the tax to the correct amount. We are told to just mail it in. It with go with all the other returns and amended returns submitted by the general public. There is no special address, no specific individual, and it would take about eight weeks for the amended return to be processed. We asked “What happens to the levy in the meantime?” Well, that can be put on hold. And he transferred us.
Now we start all over again with the explanation. We are told by this IRS employee that he can do a hold on the levy. It will be good for 30 days. But, we say, it will take eight weeks for the amended return to be processed. We are told to just call us back here in the levy department in 29 days. Don’t worry. All will be fine. Once a person is assigned to the case, then at some point all the paperwork will come together and everything will work out. End of conversation.
Now, I have to say the individuals we spoke with were professional, patient, polite, even cheerful. What is mind boggling to me is that we have an automated collection system that just runs on its own with no input, guidance, or oversight by a human. IRS is apparently so short staffed that there is no one to read the letters sent in response to the automated notices or the notes a taxpayer is told to include on a tax return in the first place.
And what does Congress do about this situation? They are again proposing to cut the funding for IRS. My poor mind is boggled again. This is the department in the government that collects all the money to pay all the bills and to pay the salaries of our Congressmen and their staffs. The ones who suffer the most are the individuals who made an honest mistake on their return and cannot find someone to help them straighten it out; all the while being threatened with the possibility of their bank accounts being levied.
– By Beverly DeVeny and Jared Trexler