In July 2016 we received a $450 refund check from the IRS. The same day that we received it we wrote to the IRS telling them it was a mistake.
Since then the incredibly incompetent IRS has sent us a series of letters (each with a "we need 45 more days to respond" letter in between) saying: (1) that the refund is not a mistake, (2) mark the check void and send it back to the IRS, (3) that we owe $450 plus interest more on our 2015 federal income tax, and (4) that the IRS has confiscated our 2016 income tax refund and applied it to the tax plus interest that the IRS erroneously claims that we owe for 2015.
The IRS has ignored our letters to them in which we repeatedly have told the IRS that: (1) our 2015 tax return, filed in April 2016, is correct, (2) the IRS made a mistake sending us the refund and (3) that we don't owe additional taxes for 2015.
Not only is the IRS incredibly incompetent, but also the heavy-handed IRS is the biggest bully on the block.
Here are the details:
1040 QD&CGTW Difference
taxable income $42,425 $39,430 $2,995
tax $5,441 $4,991 $450
QD&CGTW = Qualified Dividends & Capital Gain Tax Worksheet
We always do a pencil draft of our taxes first. When we completed the pencil draft for our 2015 taxes, we realized that there was a very obvious discrepancy/error between the taxable income ($42,425) and tax ($5,441) from the form 1040 and the taxable income ($39,430) and tax ($4,991) from the QD&CGTW.
The IRS instructs taxpayers not to include the QD&CGTW with their tax return.
The IRS instructs taxpayers that they must use the tax tables to get the tax (line 44) for their taxable income (line 43).
Nowhere on lines 1 through 44 of the form 1040 are there places to record the reduction in taxable income ($2,995) and the reduction in tax ($450) from the QD&CGTW.
Using the tax tables for the taxable income ($42,425) on line 43 calculated from lines 1 through 42 on the form 1040 and the tax ($4,991) on line 44 from the lower taxable income ($39,430) from the QD&CGTW results in a very obvious discrepancy/error because the tax ($4,991) on line 44 doesn't agree with taxable income ($42,425) in the tax tables. Using the tax tables and the taxable income ($42,425) calculated from lines 1 through 42 on the 1040 yields a higher tax ($5,441) than using the tax tables and the lower taxable income ($39,430) from the QD&CGTW (tax = $4,991).
To correct this obvious contradiction/error, and so the tax ($4,991) on line 44 of the 1040 would agree with the taxable income ($39,430) on line 43 of the 1040, we entered the reduction in taxable income ($2,995) from the QD&CGTW on line 28, other miscellaneous deductions, of schedule A, itemized deductions, and clearly annotated it on schedule A as from the QD&CGTW.
Our 2015 tax return, filed in April 2016, is correct. Our taxable income and tax for 2015 are $39,430 and $4,991. We paid $4,991 in taxes. We aren't due a refund nor do we owe additional tax for 2015.
1040 QD&CGTW Difference
taxable income $42,425 $39,430 $2,995
tax $5,441 $4,991 $450
QD&CGTW = Qualified Dividends & Capital Gain Tax Worksheet
We always do a pencil draft of our taxes first. When we completed the pencil draft for our 2015 taxes, we realized that there was a very obvious discrepancy/error between the taxable income ($42,425) and tax ($5,441) from the form 1040 and the taxable income ($39,430) and tax ($4,991) from the QD&CGTW.
The IRS instructs taxpayers not to include the QD&CGTW with their tax return.
The IRS instructs taxpayers that they must use the tax tables to get the tax (line 44) for their taxable income (line 43).
Nowhere on lines 1 through 44 of the form 1040 are there places to record the reduction in taxable income ($2,995) and the reduction in tax ($450) from the QD&CGTW.
Using the tax tables for the taxable income ($42,425) on line 43 calculated from lines 1 through 42 on the form 1040 and the tax ($4,991) on line 44 from the lower taxable income ($39,430) from the QD&CGTW results in a very obvious discrepancy/error because the tax ($4,991) on line 44 doesn't agree with taxable income ($42,425) in the tax tables. Using the tax tables and the taxable income ($42,425) calculated from lines 1 through 42 on the 1040 yields a higher tax ($5,441) than using the tax tables and the lower taxable income ($39,430) from the QD&CGTW (tax = $4,991).
To correct this obvious contradiction/error, and so the tax ($4,991) on line 44 of the 1040 would agree with the taxable income ($39,430) on line 43 of the 1040, we entered the reduction in taxable income ($2,995) from the QD&CGTW on line 28, other miscellaneous deductions, of schedule A, itemized deductions, and clearly annotated it on schedule A as from the QD&CGTW.
Our 2015 tax return, filed in April 2016, is correct. Our taxable income and tax for 2015 are $39,430 and $4,991. We paid $4,991 in taxes. We aren't due a refund nor do we owe additional tax for 2015.
The IRS made a mistake--they sent us a refund check that we weren't due. When we informed the IRS of their mistake, the heavy-handed IRS ignored our letters, lied to us, threatened us, and stole from us. Under the same circumstances the mafia wouldn't have treated us as badly as the IRS has.
Only the IRS (Idiotic Revenue Service) would have two methods for calculating taxable income (form 1040 and the Qualified Dividends and Capital Gain Tax worksheet) that give different results; and instruct the taxpayer not to include the QD&CGT worksheet with their tax return.
Only the Idiotic Revenue Service would have form 1040 that omits the reduction in taxable income from the QD&CGT worksheet.
Only the Idiotic Revenue Service would leave the taxpayer with reporting a higher taxable income (line 43 on form 1040) that doesn't agree with the lower taxable income from QD&CGT worksheet. Obviously, using the higher taxable income yields a higher tax from the tax tables which obviously doesn't agree with the lower taxable income and lower tax from the QD&CGT worksheet--a built-in contradiction/error.
DUH!!!
Only the Idiotic Revenue Service could come up with forms and instructions that contradict, and not even know it.
STUUUUU-PID!!!
Only the Idiotic Revenue Service would: (1) mail a $450 refund to taxpayers whose tax return shows aren't due a refund, (2) reject the taxpayers' letters that say that the refund is a mistake, (3) send the taxpayers a letter that says that the refund is not a mistake, (4) send the taxpayers another letter instructing the taxpayers to mark the refund check void and return it, (5) tell the taxpayers erroneously that they owe the IRS $450 plus interest instead*, and (6) while the matter is under review, and without informing the taxpayers first, confiscate the taxpayers' 2016 refund and apply it to the $450 plus interest that the Idiotic Revenue Service erroneously says that the taxpayers owe.
* what a bunch of morons! the Idiotic Revenue Service went from one extreme (the IRS owes us $450) to the other extreme (we owe the IRS $450 plus interest)--and it only took them more than six months to come up with that brilliant conclusion. unbelievable!
The mafia treats its customers better than the Idiotic Revenue Service.
the godfather
Finally, why are we so confident that our 2015 tax return, filed in April 2016, is correct and that the IRS forms and instructions are incorrect? Because we checked our 2015 taxes with turbotax. Turbotax verifies that line 43 of form 1040, taxable income, is $42,425 and line 44, tax, is $4,991 even though the tax tables show that for a taxable income of $42,425 the tax is $5,441. THIS IS THE SAME DISCREPANCY/ERROR WITH THE IRS FORMS AND INSTRUCTIONS THAT WE IDENTIFIED WITH OUR PENCIL DRAFT OF OUR 2015 TAX RETURN.
Our 2015 tax return, filed in April 2016, is correct. Our taxable income for 2015 is $39,430, our tax is $4,991 and we paid $4,991 in taxes in 2015, just as our 2015 tax return shows. We are not due a refund nor do we owe additional tax for 2015.
The Idiotic Revenue Service owes us an apology for: (1) failing to realize that our 2015 tax return, filed in April 2016, is correct, (2) ignoring our numerous letters informing the IRS of their error in sending us the refund, (3) lying to us ("the IRS will correct the error" and we "can speak with an agent"), (4) going from one extreme (the IRS owes us $450), (5) to the other--the IRS's most audacious error--saying that we owe the IRS $450 plus interest more for 2015, (6) stealing our 2016 tax refund and applying it to the IRS's error that we owe more tax for 2015, (7) stealing our 2016 refund while we were still contesting the IRS's errors and (8) our time, expense, frustration and anxiety over more than six months that the heavy-handed IRS has caused us by their failure to see that they're wrong and that we're right from the very beginning.
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