Amidst all the other craptacular things that happened in our household last year, we got a letter from the IRS saying we owed additional taxes from 2011.  We were stunned to get the letter, because we use an accountant to get our taxes done, and pay our taxes in full every year at the time they are due (unless we get a refund, which I think has happened exactly twice since we’ve been married).  We weren’t being audited, but the letter said that the amount of income we claimed that year didn’t match paperwork they had received, and due to the difference we owed $800.

I would never be happy to find out I had to come up with $800 out of the blue.  But in a year where we were struggling to pay down a ton of debt and had nothing to spare?  It was really upsetting.  Not to mention, once we looked into the matter, we realized what the discrepancy was about, and that it wasn’t actually income, or even our fault.

Back in 2011, Ron had rolled over a 401(k) account, but in the process, the bank lost the money.  Just completely lost it, and because it was Bank of America and they SUCK at customer service, they were like, “Oopsie!  Total bummer.  Not sure what we can do!”  Ron had to go around and around with them, and ultimately they did find the money, BUT, instead of classifying it as tax exempt 401(k) income, they mis-classified it as taxable income – therefore the reason the IRS was citing the exact amount of the rollover as “unclaimed income”.  We had discussed the situation with our accountant when we filed our 2011 taxes, and she said there wasn’t a lot we could do, and  it was possible it could come back to haunt us.

And come back to haunt us it did – to the tune of $800 smackers.  We again asked our accountant if there was anything we could do to fight it, and she said the only option would be to send in every old paystub from a job Ron had held ten years ago, to prove the money was from the 401(k) account connected to that job.  While we may have more junk in the house than we wish we did, we are not hoarders to that level, so we had to tell her we didn’t have the paystubs as documentation, at which point she said, “Oh, well then you’re screwed.  You’ll have to pay it.”

We were upset, both about the money and about the fact that it felt really unfair.  The bank messed up and would take no responsibility for it.  And now we were paying the price – literally.  And even our accountant was telling us to just shut up and take it.  But we couldn’t.

Ron started an inquiry with the IRS by sending in an explanation letter about what had happened, and all the documentation he had available to back up our claim.  We also sent a good faith payment of $200 to show we would pay it if we had to, but we would really appreciate them looking into our story before we gave them the whole thing.  They responded with a form letter with random boxes checked that had NOTHING to do with what we had sent in, and they also returned the non-negotiable check we had sent as proof of the rollover, saying they couldn’t cash it because it wasn’t made out to them.  (It’s so great when people actually READ what you are sending them, isn’t it?  Gah.)  We contacted them again explaining that the check was proof of the ROLLOVER, and not meant to be cashed by them.  We then waited for a couple months, getting at least one more form letter indicating no one was looking at the materials we were sending in, and having to contact them again and encourage them to actually read the letters that would explain what had happened.  In the meantime, we were worrying about how we were going to pay our monthly bills, our upcoming taxes in April, our credit card debt, AND this new screwed up back tax situation.  We also got a reminder notice that the amount they claimed we owed hadn’t been  paid in full and was accruing interest, so if we didn’t want to end up paying even more money, we should send in a payment.  It has hung over our bank account for months like a foreboding little black cloud.

About a week ago though, we got a letter saying they were looking into our situation, and to not take any action at this time.  After a good full year of really unfortunate financial blows, we were wary of getting too hopeful, but we still crossed our fingers that they would at least reduce the amount, even if they didn’t eliminate it completely.

And then, a couple days ago, we got a letter from the IRS that said this:


We were positively GIDDY at the news.  To not have to come up with $800 for a mistake that was not our fault felt so vindicating.  They are even going to reimburse the $200 we had sent in with our initial inquiry.  It made us both feel that maybe 2014 is going to be a kinder year for us.

It also made me think about how we might have handled this same situation ten years ago.  I know we still would have been upset by the injustice of it, but because we had the money, I wonder if we just would have paid it instead of going through the hassle and frustration of trying to fight it.  Technically, it would have been easier and less stressful.  But because we don’t have the same resources anymore, it has become worth it to us to be inconvenienced in order to protect what we have.  We now look at things more closely and question things that don’t seem right, such as medical bills that don’t seem properly covered by insurance, coupons that the computer or store employee won’t accept that are not past the due date, or the product or service that isn’t living up to it’s promise and should be refunded.  Discrepancies come up often enough that I’m guessing a lot of people are simply counting on you to not pay attention, and just blindly pay whatever is put in front of you.  Questioning things takes a lot of time and energy, and there’s always the chance that you could be wrong and the outcome will be exactly the same.  That thought alone can be very discouraging.  But while I’m not convinced that the world is out to get me, I have come to recognize that it’s in my best interest to look out for myself, because it’s no one else job to do it, and no one will ever care about my well being – or bank account – as much as I do.

I wish I could say when we get our $200 back we’ll do something fun with it, but we will simply be using it to chip away at our credit card debt, as usual.  And you better believe we will double check our statement to make sure the payment goes through correctly, because…you just never know. ; )