IRS Has a Strange Way of Doing Its Accounting

complaining about my past-due amount and threatening to issue a levy, I noticed that their accounting seemed a little off.

They’d divided up what they thought I owed them into three categories: “Assessed Balance,” “Accrued Interest,” and “Late Payment Penalty.” But the “Assessed Balance” seemed to me to be higher than it should have been.

As it turned out, the “Assessed Balance” figures in this most recent letter included the interest and penalties the IRS had added in the first letter they sent me.

So I sent them a note about this . This was the first time I’d responded to any of their nagging. My note read:

To whom it may concern:

I recently received the enclosed “Letter 1058” (“Final Notice of Intent to Levy”). I am writing to dispute the amounts involved.

According to the table on the back of this letter, the “Assessed Balance”s for tax years were $784.21 and $4,170.35 respectively. According to my records, these should be $770 and $4094.

I believe you have erred by incorrectly including some of the early penalty and interest amounts in the “Assessed Balance” total, rather than correctly adding those to the totals in the “Accrued Interest” and “Late Payment Penalty” columns. For example, the first “Request for Payment” letter I received from you regarding my unpaid balance correctly showed $769.99 as my assessed balance for that year, and added $7.70 in penalty and $6.52 in interest, for a total of $784.21. This matches the current figure you are reporting as my “Assessed Balance” for that year. I suspect this is not coincidental, and that this is probably the source of the error for the balance as well.

I have not attempted to double-check the interest and penalties figures that you listed in the recent “Letter 1058” and so I reserve judgment as to their accuracy. But given the discrepancy in the baseline figure, I would not be surprised to find that these are inaccurate as well.

It occurs to me that “Assessed Balance” may be a term with a special meaning within the IRS and that I may be wrong in presuming to apply a common-sense definition to it. If so, please let me know what the correct use of this term is.

Otherwise, please correct your figures and send me an accurate accounting of my current balance.

David Gross

On , I got the IRS’s reply:

Dear Taxpayer [sic]:

Thank you for your correspondence received .

We have not resolved this matter because we haven’t completed all the processing necessary for a complete response. However, we will contact you again within 45 days with our reply. You don’t need to do anything further now on this matter.

If you have a current installment agreement with us, please continue to make scheduled payments while waiting for our response. Even if you do not have a formal installment agreement, you may make payments to reduce the balance owed and minimize interest and penalty charges. To help us apply payments properly, make checks or money orders payable to the United States Treasury, and clearly print your name, the tax year on which you owe, and your Social Security or Employer Identification number on the check.

Following this was some how-to-contact-us boilerplate, then “We apologize for any inconvenience we may have caused you, and thank you for your cooperation.” The letter was signed by the department manager for Automated Collection System (ACS) Support, Collection Operations.

They also, in their optimism, sent me a payment voucher, noting (in all-caps, which I’ll spare you), that I should “cut out and return the voucher at the bottom of this page if you are making a payment, even if you also have an inquiry.”

I believe, in IRS lingo, this is known as an “interim response” — specifically a letter 2645C. My best guess is that a low-level IRS employee scanned my letter in, dated it, gave it a rough categorization, and entered it into their “Correspondence Imaging System” database, but no qualified employee has had a chance to look at it yet, so their computer system automatically generated a “your call is very important to us, please stay on the line” message for me.

Sorry if this is dull, but I hope to keep posting a full account of my interactions with the IRS here so that people know what they can expect. Thusfar, these encounters have hardly been of the edge-of-your-seat variety.

For previous installments in the nasty-letters-from-the-IRS series, see: