Correction to This Article
The article about a software glitch involving the D.C. Office of Tax and Revenue used incorrect math to describe the error. Some taxpayers were credited for only 1 percent, not 10 percent, of the income tax withheld from their paychecks.

Software glitch causes huge errors in tax bills for some D.C. residents

Don McCrabb has received a huge property tax bill from the District in error and, like many residents, he's trying to resolve the problem.
Don McCrabb has received a huge property tax bill from the District in error and, like many residents, he's trying to resolve the problem. (Jahi Chikwendiu/the Washington Post)
Buy Photo
By Derek Kravitz
Washington Post Staff Writer
Saturday, June 12, 2010

When Donald McCrabb opened a letter Thursday afternoon from the District's Office of Tax and Revenue, he thought he'd received a rebate -- something in the $1,400 range -- after he and his wife had paid more than $8,350 in income taxes in mid-February.

But the letter didn't come with a check. Instead, it came with a bill charging the couple an additional $7,263.46, including $651.95 in penalties and interest.

"I do everything I can to play by the rules," said McCrabb, 55, who works for a nonprofit that teaches leadership to Roman Catholic priests. "When it comes to this city agency, the rules don't seem to apply to them."

McCrabb's notice was an error caused by a software glitch with a third-party program used by both tax collectors and taxpayers online, city officials said Friday. Natalie Wilson, a spokeswoman for the tax office, said officials were working to identify who was affected by the error, which resulted in residents not being properly credited for their personal income tax withholdings for 2009. D.C. officials said it was still unclear Friday how many people had been improperly billed, but taxpayers who received a bill in error can call the office's Customer Service Center at 202-727-4TAX (4829).

Washington attorney David F. Power, who also received a tax bill, said Friday that a city employee told him that roughly 3,000 residents had been impacted. "It credited only one-tenth of the taxes withheld for D.C. income taxes," Power said. "Instead of giving refunds owed, it is unlawfully demanding penalties and interest for its own mistakes."

Adding insult to injury, tax collectors at the call center said late Friday that their computers had been down for much of the day. "We're praying it'll be back up by Monday," one city employee told The Washington Post. Wilson did not respond to further questions about the reported computer outages or long wait times for many customers.

The glitch comes at a time of increased scrutiny for the District's tax office.

In a case that began in November 2008, 11 people were charged in connection with a $48 million theft of taxpayer money by issuing bogus refund checks over nearly two decades, the biggest embezzlement in city history. Since then, hiccups have been discovered in the city's accounting and recording of taxes paid and refunds owed. A similar case was reported last July when a processing error led to a number of income tax refunds being mistakenly sent out, including a check for $2,886, the exact amount the taxpayer owed. The city said the faulty refunds were isolated incidents.

Residents who received the bills this week, many of which asked for payment by June 20, were not sympathetic. A 3,400-member e-mail group for residents in Washington's Chevy Chase neighborhood was aflutter Friday, demanding answers from D.C. Council member Muriel Bowser (D-Ward 4), who promised she would check on the problem.

"This is totally crazy. Everyone seems to recognize that this seems to be a system-wide problem," said Spencer W. Clark, 27, who works for the federal government.

David Affeldt, a tax preparer and lawyer living in Potomac, said he received calls from clients Thursday and Friday complaining about the billings, and he noticed a pattern.

Many of the tax problems he heard about involved a simple mathematical error. Taxpayers found that they were only being credited for 10 percent of what was withheld from their paychecks and reported on their W-2 forms. For example, one client said he had roughly $10,744 in income withheld last year for D.C. income taxes. But he was only credited for $107.44, leaving the remainder past due.

"D.C. must be getting a ton of calls with this," Affeldt said. "This is not an easy thing to fix."

D.C. Council member Jack Evans (D-Ward 2), chairman of the Committee on Finance and Revenue, said Friday his office had received several calls about the tax errors and would be working to get the accounting in order. "I think the tax office is being overwhelmed with calls," he said.

But McCrabb said he had little faith the city could fix the tax mess. "When I get my refund check, we'll see."

© 2010 The Washington Post Company