STACEY AND THE IRS

Buenos Dias! I'm back from my long needed vacation from the Internet!

This past weekend, I was able to get a lot of family time in and took the opportunity to explore the wilder side of me this past Friday (partaay!).

I'm still enjoying Pilla's book, The IRS: Problem Solver, and I encourage my peers to partake in the reading experience...our turn to face the IRS is but a step away from tomorrow...

The book, however, is not as good as my last reading, H&R Block's Personal Finance Advisor (C. 2003). My issue is the verbose language--it's clear that the book was not intended for people my age, but for people that have had more experience with the IRS and Filing taxes. Overall, it's extremely helpful and offers a lot of templates and advice on how to "step-up" to the IRS, not necessarily evade or deceive them.

While reading, I came across a very interesting scenario that I want to share:

I'll re-name her Stacey.

Stacey lives paycheck to paycheck. Stacey received a deficiency notice from the IRS, claiming that she failed to file her tax return for that year.

She did quite alright, and she kept every evidence to prove that she did. Using certified postal mail, she mailed her affidavit and supporting documents to the IRS ...BUT...the documents were lost or misplaced somewhere in space.

Penalties and Charges soon began to kick in. The IRS levied Stacey's IRA (retirement account), yanking a grand total of $20,000. The reviving breath of this story is that Stacey kept spare copies of all documents and she was able to resend them to the IRS, prompting them to withdraw the penalties/charges.

The bad news is that the $20,000 was returned to HER, and not her IRA. As a result, the $20,000 was treated as a taxable distribution since she did not meet age requirements.

The winner in this case: THE IRS.

A scenario like this was eye-opening for me. Stacey's story was based on a true person's account...so...IT HAPPENS TO REAL PEOPLE! It also keeps me wondering whether the IRS does these types of things on purpose...because... in the end, they still get fed, they still win!

In any event, I'm glad to know that such a situation exists. The best advice that I can pull from this scenario is to always use certified mail, keep copies of all documents, and be timely when communicating with the IRS.

As always people, be on your guard!