We received a notice over the weekend from the IRS about our 2018 return.

"We reviewed your account and found that we misapplied payment(s) totaling $10. We have adjusted your account to correct this error, and as a result, you have a balance due of $825.71.

Misapplied payment: 10
Failure-to-pay penalty: 321.93
Interest charges: 493.78
Amount due by September 26, 2002: $825.71"

Suggestions? Call them this week and see if a real human can help me understand this and what my options are?Mail them a dispute letter asap?

Stupid.

Brian Earl Spilner said:

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Wait, they are charging you for their screw up? There's no way that's right.

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It sure sounds like it. Stupid.

It's likely not a scam. I've had this happen to several friends. Often the IRS will waive the "penalty" due to it being their error but you still have to pay the interest even though it's their fault. Supposedly they claim their are prohibited by law from waiving the interest.

I'm sure they'll be able to find more of these egregious instances of rich people dodging paying their fair share with the additional manpower they've been provided with.

LostInLA07 said:

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Those new agents already getting to work!

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The next few years are going to be wild. We are going to have 87,000 new friends. All thanks and glory to our benevolent leaders and their "Inflation Reduction Act"!

As general advice, this is a real good reason to use a CPA. The first time I got a letter from the IRS saying I owed them $30,000 I FREAKED OUT. Blew up my CPA's phone. She pretty much said, "Calm down, you don't owe this, I'll handle it." And she did. Problem went away and I never had an interaction with the IRS on it. I get these kinds of letters from time to time and it is always from incompetent IRS calculations or procedures or whatever. I did just pay the last letter I got that was for like $87 because I wasn't going to even waste my CPA's time with it, and I think the IRS knew that.

Are they charging interest on both the penalty and the $10? That's the only way I can even fathom it being nearly $500 in interest. If they waive the penalty, it should also knock out almost all the interest, too.

Still doesn't make it right…

Also, they're still charging the $10 that you already paid them?!

BenTheGoodAg said:

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Are they charging interest on both the penalty and the $10? That's the only way I can even fathom it being nearly $500 in interest. If they waive the penalty, it should also knock out almost all the internet, too.

Still doesn't make it right…

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They're charging interest on the 10 and on the failure to pay penalty. Even if the 10 is because of something that "we misapplied"

I'll call this week and see if I can some answers. Maybe I can pay just the interest on the 10.

I missed that the first time. It was simply "misapplied?" You weren't even short $10, it was just messed up on their ends?

As someone else mentioned, this is a legal scam. Our fore fathers are rolling in their graves at this one.

aginlakeway said:

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We received a notice over the weekend from the IRS about our 2018 return.

"We reviewed your account and found that we misapplied payment(s) totaling $10. We have adjusted your account to correct this error, and as a result, you have a balance due of $825.71.

Misapplied payment: 10
Failure-to-pay penalty: 321.93
Interest charges: 493.78
Amount due by September 26, 2002: $825.71"

Suggestions? Call them this week and see if a real human can help me understand this and what my options are?Mail them a dispute letter asap?

Stupid.

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Are you sure this is legitimate? Did it come certified mail, because the IRS would send something like this certified.

Also the numbers don't look right. I am not aware of a Failure to pay penalty, only interest.

Fightin_Aggie said:

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aginlakeway said:

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We received a notice over the weekend from the IRS about our 2018 return.

"We reviewed your account and found that we misapplied payment(s) totaling $10. We have adjusted your account to correct this error, and as a result, you have a balance due of $825.71.

Misapplied payment: 10
Failure-to-pay penalty: 321.93
Interest charges: 493.78
Amount due by September 26, 2002: $825.71"

Suggestions? Call them this week and see if a real human can help me understand this and what my options are?Mail them a dispute letter asap?

Stupid.

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Are you sure this is legitimate? Did it come certified mail, because the IRS would send something like this certified.

Also the numbers don't look right. I am not aware of a Failure to pay penalty, only interest.

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It's real. From IRS via regular mail. I posted screenshots. My wife received the same notice in a separate 1st class envelope. That makes sense because we file jointly.

I'll call this week and see what they say. But it is 100% from them. 100%

What math do you have to do to get $500 in interest on $10 over 4 years? Seems impossible.

Johnny04 said:

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What math do you have to do to get $500 in interest on $10 over 4 years? Seems impossible.

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I 100% agree. Again, I am just posting what I received from the IRS ... asking for suggestions on my next steps.

If it made sense, I would not have posted anything here.

Thanks for posting, frankly it scares the **** out of me. Any small error in tax returns could seemingly turn into owing thousands. Yikes! Keep us posted.

Johnny04 said:

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Thanks for posting, frankly it scares the **** out of me. Any small error in tax returns could seemingly turn into owing thousands. Yikes! Keep us posted.

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In this case, it states that "we misapplied payment(s) totaling $10.00."

So it was their fault.

Ridiculous.

Johnny04 said:

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According to IRS site, the rate they use is fed short term + 3%. So not sure how they could get to $500 from charging interest on $300 for 4 years.

"Generally, interest accrues on any unpaid tax from the due date of the return until the date of payment in full. The interest rate is determined quarterly and is the federal short-term rate plus 3 percent. Interest compounds daily."

https://www.irs.gov/taxtopics/tc653

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I have no idea either. MAYBE I'll get this figured out over the phone this week.

OP, you might have more luck posting this on the Bogleheads message board. Lots of knowledgeable folks on there.

Keep us posted if you are able to solve this with the IRS.

Agree with the sentiment above but wanted to suggest you block out any of the QR / bar codes. Not sure what they encode in those and if it can be read, but I would always assume someone can decode and could contain personal info.

Think if it was a $10,000 mis-applied payment. Would the letter then be for something close to $1MM.

fka ftc said:

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Agree with the sentiment above but wanted to suggest you block out any of the QR / bar codes. Not sure what they encode in those and if it can be read, but I would always assume someone can decode and could contain personal info.

Think if it was a $10,000 mis-applied payment. Would the letter then be for something close to $1MM.

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OK. I'll just delete them.

The penalty and interest would not be directly related to the $10 as they are too high.

Since this notice is coming a long time after a notice would normally be coming for 2018, changing the $10 might have triggered them to recalculate something incorrectly. Possibly marking a different payment as late. It is also possible that they have already fixed the problem but the system triggered the notice before they fixed it.

rgm97 said:

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The penalty and interest would not be directly related to the $10 as they are too high.

Since this notice is coming a long time after a notice would normally be coming for 2018, changing the $10 might have triggered them to recalculate something incorrectly. Possibly marking a different payment as late. It is also possible that they have already fixed the problem but the system triggered the notice before they fixed it.

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That's what a friend told me a few hours ago. Notice was triggered but already fix. We'll see what they say.

I don't think this was a "final" or "intent to levy" type notice so if you cannot get through I would not worry too much about it. Since COVID we have mostly taken a "wait for the 2nd notice" approach to the IRS. That way we are not calling on issues they have already corrected.

rgm97 said:

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I don't think this was a "final" or "intent to levy" type notice so if you cannot get through I would not worry too much about it. Since COVID we have mostly taken a "wait for the 2nd notice" approach to the IRS. That way we are not calling on issues they have already corrected.

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It is absolutely a 1st notice.

Had a similar experience and found writing a certified letter explaining your position is the path of least pain. The IRS agent over the phone told me to "just pay the $100 penalty because it's less than a bottle of nice wine and not worth the hassle to fix it."

Only 10% of calls placed to the IRS are answered and less than half of those 10% receive a constructive response from the agent.

With the certified letter, you can prove an attempt was made from your side to resolve the issue. If you send me a PM with your email address, I can send you a template of the certified letter that I've used in the past for communicating with IRS on inappropriate penalties. I was eventually successful in getting the penalty abated but it took 5 months to receive a response from the IRS.

They sent me your money!