Jun 16, 2006

An Internal Revenue Service Nightmare

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(Toledo, OH) My wife and I are in the process of refinancing our mortgage, and part of the reason we wanted to refinance is to clear up an old debt we have with the Internal Revenue Service.

Years ago I owned some restaurants, and there were some unpaid taxes owed to the IRS for which I became personally responsible as an officer of the corporation. Although my wife was not an officer, she acted in a financial capacity for the company, and an IRS revenue officer later added her to the list of people held personally responsible.

Fair enough, I suppose, as this would also prevent me from shifting all my assets to my wife's name and playing an Enron-esque shell game. Besides, I do feel a moral obligation to pay my debts, and a marriage is "for better or worse."

We have now entered a strange Catch-22 with the IRS due to the fact that, in running credit reports, it appears to the mortgage company that my wife and I have separate debts, and not a joint debt. The IRS has duly been keeping track of my balance as payments are made, but reports my wife's debt at the original amount (about $24,000 including interest and penalties).

Thus, the mortgage company is balking, thinking that there is an extra lien for $24,000. This makes our overall debt look that much higher.

However, I cannot get a cooperative IRS employee to write a simple letter that says my wife's lien will go away the minute my debt is paid (currently a little over $7,000). I spent most of an entire day being trasferred, put on hold, and (at one point) hung up on.

I said to one administrator: "Look - I am just ITCHING to give you this $7,000, and all you have to do is write a quick letter explaining the situation and fax it to my mortgage broker."

The best that this person was willing to do is to put in a request to update my wife's lien, so the amount is identical to the lien in my name.

Oh - best part - "that will take 30-45 days."

At this point I got pretty indignant. I did not cuss, threaten, or act inappropriately toward this person - who gave me an ID number in lieu of an actual name - but I implored her to act like a human being instead of an automaton.

"Look, 75018 [number changed to protect identity] - I know that there are procedures to follow," I said. "Surely there is someone who is authorized to handle such a request."

"No sir," she said. "You will have to wait like everyone else." CLICK.

At this point, representatives of the mortgage broker are huddling, trying to decide how to proceed. They want to refinace us (all the numbers are good), they want to pay my $7,000 debt to the IRS, but they have to abide by their own internal criteria.

This situation is enough to make the most ardent leftist become a gun-toting, government-hating, libertarian revolutionary.

13 comments:

Anonymous said...

Shitty deal, Mike. Piece of advice - don't waste your time with the national IRS ombudsman's office. They are completely useless.

If it gets any worse, hire a tax attorney. They know how to work through the IRS maze better than you.

historymike said...

Thanks, anonymous. I may at some point retain an attorney, but for the amount of money involved I did not want to shell out $500-$1000.

This seemed to be a simple refinance, as I have little consumer debt beyond my existing mortgage, and we were not looking to pay off any creditors beyond the IRS.

I wanted to switch from an ARM to a fixed-rate mortgage and lock in a lower rate while I can still get between 6% and 7%.

Kate said...

Wow. Tread oh so carefully. My Mom is a CPA and if you like I'll send you her email address. She's helped with strategy in the past. She may have an idea.

You can, I have a long, long saga with VZ Wireless - challenge those entries with the credit reporting agency's who have them.

They have (?)something like 15 days to verify the validity with the IRS who should, obviously, not confirm the entry to your wife's record.

That may be a quicker/cheaper route to go. It's under the THE FAIR DEBT COLLECTION PRACTICES ACT...

http://www.ftc.gov/os/statutes/fdcpa/fdcpact.htm

Berserker said...

Mike.

I used the Tax Payer Advocate office in Cleveland.

While they are IRS employees, they will joust with the rest of the organization on your behalf.

They will help you.

They are at the Fed Building in Cleveland.

Google them. Talk to them. Drive out and meet them.

Brian said...

Call Marcy Kaptur's office.

Call Senator DeWine's office.

Call George Voinovich's office. Somebody will help you.

I'd recommend DeWine since he's running for re-election and his staff is probably eager to please.

Anonymous said...

Will the DeWine's staff help me unclog my toilet for my vote???

Lisa Renee said...

I second Berserker's advice. My mom had major problems with the IRS and they helped her solve them and even helped negotiate most of the penalty she was being charged. I did some research and found out about them for her.

:-)

historymike said...

Thanks for the excellent suggestions, all. I never cease to be amazed at how much information can be brought to any particular discussion by people stopping by this site.

Brian said...

Anonymous,

Perhaps DeWine keeps a plumber on staff -- especially if they serve bran muffins at staff meetings. I don't know. But you would have to reveal your name and address.

Anonymous said...

Mike,

I second the suggestion that you call Marcy Kaptur's office. My sister and brother-in-law got a letter from the IRS saying that she had not filed a return for 2003 when she had, in fact, had a refund issued to her.

The IRS contended that she owed over $20,000 with interest and penalties.

She tried to deal with their omsbudman and 3 times (yes, 3 times) over-night mailed them copies of her return. But the omsbudman never received them.

She called Marcy Kaptur's office and it one of her aides was all over it. The matter was resolved successfully ... end of story.

Dariush said...

"This situation is enough to make the most ardent leftist become a gun-toting, government-hating, libertarian revolutionary."

Welcome aboard, Mike. :)

And don't worry, there's no inherent contradiction between being a leftist and being a gubmint-hatin' libertarian.

Hooda Thunkit said...

Good luck Mike!

It's tough to have a battle of wits with a cadre of unarmed opponents...

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