My heart skipped a beat.
The letter from the Internal Revenue Service was sitting next to the microwave in my kitchen, nearly buried under a stack of junk mail. When I pulled it from the pile, I noticed it was a little thick, and that’s never a good sign. I was already worried, and I hadn’t even opened the envelope. Why was the IRS sending my husband and me correspondence? We hadn’t filed our 2014 returns yet.
I opened the envelope and immediately focused on a line that said “the income and payment information we have on file from sources such as employers or financial institutions doesn’t match the information you reported on your tax return.”
I could feel my heart rate go up with each paragraph.
The agency said, “If our information is correct, you will owe $12,255 (including interest and penalty), which you need to pay by April 15.” The letter was dated March 16.
The IRS compares what it receives on documents such as W-2s or 1099s with what people report on their income tax returns. My letter was generated as part of the agency’s “automated underreporter” program, which sends out notices if it appears that you haven’t reported income or that you miscalculated your tax payments, credits or deductions. When a discrepancy is found, the IRS sends you a proposal to adjust your return. It could result in additional tax owed or a refund.
My notice said the IRS had received a 1099 from 2013 showing $25,000 in income its system thought I hadn’t reported. The problem was, I didn’t make any extra $25,000 in 2013. Or if I did, somebody owed me that money. Either way, I was in cardiac arrest territory. I immediately called my husband.
“Honey, it’s a mistake. Don’t worry,” he said, calm as usual.
“But it’s the IRS,” I said, breathing hard. “They don’t play.”
I read through the rest of the notice carefully and saw that a media company I had done some television and radio work for several years ago had sent the IRS the 1099. But I hadn’t worked for them in 2013, and they had never paid me $25,000.
The notice from the IRS gave me two basic options:
●Agree with the changes and pay the amount in full. If I didn’t have the money, I could pay what I could and then make payment arrangements. If I wanted to apply for a monthly installment plan, I would have to respond to the notice and complete IRS Form 9465. I could download the form at irs.gov or call 800-829-3676 to request a copy. I could also apply online. (For more information about how an installment agreement works, go to the IRS Web site and search for “tax payment options.”)
●If I didn’t agree with the proposed changes, I had to send in my response along with any documentation. The IRS notice said that if I didn’t respond by April 15, I would get a “Statutory Notice of Deficiency” (that’s a very scary term) followed by a final bill for the proposed amount due. By the way — during this time, interest would increase.
I, of course, disagreed. But I had to first figure out what happened. So I placed a call to the media company. An internal accounting glitch had erroneously attached the payment to my name and Social Security number. Turns out a famous singer had earned the $25,000. Had I received the incorrect 1099 back in 2013, I could have straightened out the problem then. But the company mailed it to the wrong address.
The company promised to provide me with whatever documentation I needed to submit to the IRS. They are also sending the IRS a corrected 1099. (I hope that the singer reported the $25,000 even without having received the 1099, because you still have to accurately report your income.)
My next call was to the IRS. I needed to talk to a real person. It took 35 minutes on hold before I reached a representative. She told me a letter from the company would suffice. So with letter in hand — I got it the same day (I don’t play) — I’m responding to my notice.
All’s well that ends well.
But here’s my advice if you ever get a similar letter from the IRS.
Even if you’re alarmed, as I was, attend to the issue immediately. The worst thing you can do is to do nothing.
Readers may write to Michelle Singletary at The Washington Post, 1150 15th St. NW, Washington, D.C. 20071 or firstname.lastname@example.org. To read previous Color of Money columns, go to http://wapo.st/michelle-singletary.