Monday after getting back from Convergence, I had a little letter from the IRS in the mailbox.
Flashback: it is 2000, and I am dealing with the IRS trying to buy down back taxes through a process called Offer In Compromise (OIC). It's a long involved process-- I was in negotiations for a year and a half-- where you essentially get to say "look, I can't pay the amount you are asking, but I can pay this much".
And then they crawl up your ass with flashlights and determine what they think you can pay.
Say you owe $10,000 in back taxes. Add in the interest and penalties, and after a couple of years, it's up to $25,000 (no, not an exaggeration-- the penalties are stiff). You can't pay $25,000, and you make an offer of $12,500. They come back and say you can afford $17,500. You counteroffer with $15,000, they counter with $17,500, and so on.
Eventually you agree on the $17,500. You can't pay all at once, so they urge you to sell your house or they will sell it for you, etc. etc. and eventually you work out a payment plan.
Then you do your taxes, and you get a refund-- say $5000. Lucky you, they keep your refund and they apply it to your offer. Right?
Oops, no, they apply it to the initial $25000, so now you only owe $20,000.
Confused? So was I. To the tune of over $9000. And I went over the IRS tax laws with a fine tooth comb. They are confusing and ambiguous at best.
Well, due to a very timely refinance, I finally got the entire amount paid off last fall, to great relief.
Until the letter.
Apparently, the computers had dug up back taxes from 1999, about $2300 worth, and I had 30 days to pay up, or the OIC would be rescinded, and interest and penalties would be appended to the entire amount retroacively as if the offer had never been in force. That's about another $10k.
Except that the back taxes from '99 were supposed to be included in the offer. Which was paid for.
Finally got a hold of the IRS rep today. A real live person. And within 30 seconds of talking to him, he said "whoops".
They had screwed up.
The IRS screwed up.
And admitted it.
Apparently whoever had keyed it into the computer had inadvertently left of the '99 in one field.
I am free and clear. Ignore the letter. A second letter to that effect is on its way as of tomorrow.
I feel like drinking heavily. And laughing hysterically.