Ask Terry Questions IRS owes us money!

IRS owes us money!

By Terry Savage on June 27, 2020 | Wild Card

I thought I heard you say you have a number to IRS people that answer. But that might have been about an IRS tax attorney. Anyway, I wanted to see if you had any advice. Basically, the IRS made a mistake on my tax return, I didn’t realize it until years later. So we should have had gotten a refund of like 8,000. We over paid SSN withholding that year but about double, because my wife changed jobs and maxed out the withholding at both jobs. The IRS made a mistake and entered the number of 6,000 as prepaying taxes, then saw we didn’t and changed the return.

I did not catch this because we owed the IRS money from previous years so I did not expect a return as it would be used against the balance. But then they said we owed, added to the amount we owed and then gave us late fees and everything else.

About a 2 years ago, in a conversation with an IRS rep, I figured out their mistake. There is a 3 year statue of limitations on their mistakes ( except if you are paying a balance owed). For the last 2 years, I have been dealing with them with appeals and working within their guidelines. Finally I was told I would be given a $13,000 refund. Then weeks later, I got another letter saying that was reviewed and I would get $11,000 refund. If I did not dispute it, they would send me the money. It has been about 6 months since I got this letter, and it was supposed to be 90 days to get my refund,.

Do you have a contact number of someone in the IRS? Should I call a tax attorney, would that be worth it? Can the IRS be sued at all for reparations, because I actually did pay more money due to their mistake.


Terry Says

Whew, that is a terrible situation. I don’t have access to the IRS, just my media contact there. BUT HOLD ON TO THAT LETTER SAYING THEY OWE YOU $11,000!
Right now, the IRS is understaffed and overworked. You can’t get through to talk to anybody! They are so busy that they haven’t sent out tax refunds from people who filed early this year. But they are paying interest of 5% on those refunds back to April 15th!

I mention that because you will be entitled to back interest on the money they agreed they owe you — from the date of that acknowledgment. I have absolutely no idea when the IRS will be able to deal with situations like this. It could be months and months. But you are within your rights to demand interest (the rate varies by quarter!).

So don’t give up. But hiring an attorney now won’t get you anywhere.



a personal
finance question