Hawaii Has The USA's Highest Overall Tax Burden - WalletHub

[HiloJulie]

...treated me like a child.
She made light of it,
...wasted my time, and treated like an idiot to boot.

I don't think that behavior is limited solely to the State of Hawaii Tax office.

[HereOnThePrimalEdge]

I don't think that behavior is limited solely to the State of Hawaii Tax office.

That’s true.
It’s bad enough when it happens anywhere.
But I had to pay them for the abuse.
In most other instances there’s no charge.

[HiloJulie]

While we can debate the burdens of Hawaii taxes, audits, and staff competency, I'm more upset that a portion of those high and burdensome taxes have to pay for this sheer lunacy.

[terracore]

Political based rants, tall tales and wild claims aside, the primary reason any taxpayer fails any type of tax based audit is failing to be able to produce the documentation used to substantiate the claimed income, expense or deduction.

Many years ago my then-wife got a notice from the IRS that she owed a fortune in unpaid taxes, interest, and penalties.  I don't remember the amount but we were struggling financially so any amount would have been a hardship, but this was a FORTUNE. 

Long story short, an employer she had years prior accidentally filed a duplicate W-2 on her earnings.  Basically reported that she made exactly twice the amount she did. The only remedy the IRS offered was to have the employer file an amended W-2.  Problem is, they had gone out of business and we couldn't even find a remnant of it to try and track somebody down who could do this.  There was nobody who could correct the issue.  We went round and round with the IRS and their letters just got more threatening and the amount we "owed" kept increasing due to interest and penalties.  Trying to call them went nowhere.  All they would say is that we had to pay and we were looking at wage garnishment. At my wits end, I consulted a tax attorney.

His advice:  Pay them.  He said if we went to court we would more than likely win the case, but in tax court the IRS doesn't have to pay attorney's fees when they lose.  I don't remember what his hourly rate was but he said we would pay him more than we owed the IRS, so just pay them off and "get the money back in the future through creative filing" (basically to cheat on taxes because in the legal world two wrongs make a right).

Sometimes "produce the documentation" isn't an option.  We did absolutely nothing wrong and had to pay for it anyway. 

To add insult to injury, one time when I called them I was on hold for HOURS.  Then the hold music ended and a recorded voice came on and said that I had exceed the maximum hold time and to leave a voice mail.  Then a second recorded voice came on and said "Voice mail box full.  Goodbye." CLICK.

Another time (years later) I started getting threatening letters from the IRS but I could even understand what they were alleging.  So I called them and actually got connected to a human being within a reasonable amount of time.  They were unable to tell me what the problem was and suggested I wait and see if it sorted itself out.  After I got another letter I called them again.  I got a different person who also couldn't tell me what the problem was.  Since I had PTSD from the previous time they ripped me off I asked, what do I have to do to make this go away?  They said they didn't know.  So I asked, how much do I owe?  And the person said as far as they could tell, I didn't owe anything, and they couldn't rule out that its possible they owed ME money.  But they still didn't know why I was getting letters with gibberish on them.  Again, they told me to just wait it out and see if the problem went away on its own.  It did.

So yeah.  I have no trust in the system, and its not true that saving all your documents is going to save you from anything.  They can manufacture or "find" documents that don't exist or shouldn't exist, and make you pay one way or another.

[HiloJulie]

So yeah.  I have no trust in the system, and its not true that saving all your documents is going to save you from anything.  They can manufacture or "find" documents that don't exist or shouldn't exist, and make you pay one way or another.

In as much as I can say that I too have no trust in the system, and I have no reason to doubt your stories, but in my humble opinion, I believe you have been truly misinformed.

First, with respect to your wife's duplicate W-2's being filed by a now nonexistent employer, yes, it happens, A lot more than one would think. However, the IRS does have steps in place to, in most cases, detect a duplicate filing. Primarily, the IRS and the SSA communicate and verify reported earnings and remittances. If an employer does remit a duplicate W-2 your SSA contributions for that year would have been doubled what there actually were. 

As for one of the best documents to always keep is your paycheck stubs. Especially the last one of each year as it should match your W-2.

Since the employer is no longer in existence to verify an accidental duplicate filing, all one would need to do is file IRS Form 4852 which allows for you to substantiate true earnings, provide supporting documentation and explain in detail the issue.

Further, any tax attorney who tells you to just pay the IRS what they say you owe instead of fighting it (assuming you are correct) is not a real tax attorney and should be disbarred.

Lastly, the IRS does not produce nonexistent documents. While it's true that if you claim something and are subsequently audited and can't back it up with reasonable documentation, well your hung with the taxes owed, plus everything else they can throw at you. But when faced with the IRS claiming you made twice as much money as you reported due to an employer issuing duplicate a W-2, the first question to ask is why would any employer issue 2 identical W-2's? And where is the SSA remittance on the other half of the supposed reported income? Also, since an employer sends the IRS and the subsequent state filings under separate cover or separately electronically, your state tax return is also evidence as to your true income.

My husband and I had a long, drawn-out audit issue with the State of California that dragged on over 5 years and dealt with several years of taxes on income earned and taxed in California versus Hawaii. While representing ourselves not as attorneys but just as taxpayers, we finally won our case. The State of California thus owed us several years of modest refunds plus interest. At that time California was under a severe financial crisis. Our refunds finally came in what looked just like a check but was actually 180 day "IOU!" 

   

[leilanidude]

Further, any tax attorney who tells you to just pay the IRS what they say you owe instead of fighting it (assuming you are correct) is not a real tax attorney and should be disbarred.
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There is no guarantee that one will win. If the risk/reward does not add up, that would be perfectly acceptable advice and left up to the client to decide which way to go has less pain for them. This is no different than offering a plea bargain even though you are certain your client is innocent but the evidence could sway a judge or jury either direction.

p.s. - @ *

[terracore]

Yeah... I've never second-guessed myself for listening to what an actual tax attorney told me. He was more than willing to take my case and simply explained that I was in a lose/lose situation. How much did I want to lose? Was it worth bragging rights if I won my case but it cost me more money in the end? Would I lose sleep over it? How much time do I have to piss away? Pretty simple questions really.

This reminds me of a commencement speech by Michael Burry where he explained how the government made up a case against him and it cost him over a million dollars and thousands of hours of time... even though he "won". https://www.youtube.com/watch?v=1CLhqjOzoyE

[Rob Tucker]

I've heard it stated this way: How much justice can you afford?

[HiloJulie]

How much justice can you afford?

Well, that can depend on several factors, however, when a taxpayer who tosses 20 bucks into the collection plate while at Mass on Christmas and Easter and at tax time turns that donation into giving the church 2,000 bucks to juice a little more write offs on his 1040 and later is called in for an audit, unless you can find a dirty priest to say you did donate 2 grand, you're probably better off just paying what the IRS says you owe.

On the other hand, if there is a clear error that has been made by the taxing authority and they claim you owe a substantial (as determined by your own finances) amount due to that error and you have your ducks in a row, I'd say it might be worth it to fight it. And even more especially if you're dumb enough to believe a taxing authority sent you a delinquency claim meant for someone else and even dumber enough to believe they don't send out a corrected notice if they ever did.

At any event if you are going to have a tax attorney/preparer/guy/gal, make sure they have professional liability insurance as if the tax guy makes an error that now causes you to pay additional taxes along with penalties and interest, while you are still responsible for the additional taxes owed, the penalties and interest would be a valid claim against the professional liability insurance of the tax guy.

[TomK]

How much justice can you afford?

Well, that can depend on several factors, however, when a taxpayer who tosses 20 bucks into the collection plate while at Mass on Christmas [...]

Then they're probably very gullible. If god is omnipotent, he or she can make his or her own money without begging, and if the preacher has a problem with that, why not ask god for the money?