The IRS noticed that I didn’t include a check with my tax return again this year.
They responded by sending one of their “Amount Due” CP14 letters. It contained a surprise:
|Tax you owed||$5,548.00|
|Payments and credits||−12.00|
|Amount due by||$5,606.40|
What’s that −$12.00 “Payments and credits” bit?
That is the same amount that I paid for my health insurance this year. I have one of the Obamacare exchange’s heavily-subsidized plans. Indeed, according to the rules, I’m supposed to get this plan for free, but for some reason the insurance company insists on charging me a token $1 per month for it. I’m able to take this $12 as a credit on my tax return (line #69: “Net premium tax credit”).
But the $5,548.00 shown above is exactly $12 more than the $5,536.00 that I calculated on my 1040, so apparently they added this back in on my tax return and then subtracted it as a “payments and credits” amount.
I’m not quite sure what to think of this shell game. Did the IRS trick me into paying $12 in taxes last year by disguising it as health insurance premium payments? Or, because I’m getting free health insurance on Washington’s dime, do I have nothing to complain about?
Included with the letter was an explanation of the penalties (0.5% of what I owe per month, until the amount hits 25% at which point the penalties stop), and interest (currently 3% per year, but subject to change).
Also included was a copy of their new single-sheet Publication 1: “Your Rights as a Taxpayer: The Taxpayer Bill of Rights.” This is a document the agency released with much fanfare a while back. Though called a “Bill of Rights” in mimicry of the set of Constitutional amendments, this bill of rights is thoroughly unenforceable and creates no new obligations for the IRS. It’s more of a “rights we’d like you to think you enjoy until such time as we decide to violate them” list. A cynical “customer relations” sort of ploy.
For example, #2: “The Right to Quality Service” (“Taxpayers have the right to receive prompt, courteous, and professional assistance in their dealings with the IRS…”) was notoriously violated this year: the agency shut down its in-house tax preparation clinics, kept callers on hold for an average of a half-an-hour or so (and even so more than half of those who called in never reached anyone — the agency flat-out hung up on eight million calls without answering them), and refused to answer any but the most basic tax questions. The agency, of course, claimed that Congressional budget cuts were to blame — but they were caught diverting some of their discretionary funds from customer service.