Beware of the Decimal Point
Beware of the decimal point. A slight movement of the decimal point, one or two places, could cause receipt of an I.R.S. notice similar to the one I got this week.
The notice claimed that I failed to report $3,000,000 in income on my 2003 income tax return. The notice gave me three weeks to contest, or else pay the I.R.S. tax on this additional income, plus interest and penalties dating back to 2003.
I don’t even know how to calculate the income tax, with interest and penalties, on $3,000,000. And I certainly don’t have the money to pay it, even if I knew how to make the calculation.
More importantly, I don’t remember receiving an extra $3,000,000 in 2003, or any other year for that matter. Is there any conceivable way I could have received $3,000,000 and forgotten about it?
I suppose it is possible. I might have received the money and put it in my pocket. If I had a hole in the pocket, I might have lost it in a parking lot and then forgot all about it.
Or maybe the $3,000,000 was sent to my bank by direct deposit. Later, I lost my ATM card, and someone found it (and guessed my PIN), and took all of the money from my account. It could have happened this way. Couldn’t it?
I am fairly certain that if I had received $3,000,000, I would have remembered it. It’s not the kind of thing I ordinarily forget.
I have forgotten my mother’s birthday. I have forgotten to pick up my laundry. I even forgot to vote yesterday in the school mileage election. But I don’t think I ever forgot receiving $3,000,000.
So why is it that the I.R.S. thinks I received an “extra” $3,000,000 in 2003 which I neglected to report on my income tax return?
I did some investigation and I think I found the answer.
Someone else who resides at the Café, and who files a joint income tax return with me, earns commission income. Commission income is not reported on a W-2 like ordinary wages. Rather, it is reported on an I.R.S. Form 1099. The 1099s are sent to the taxpayer for use in preparation of the income tax return, and to the I.R.S. so it can verify the taxpayer’s income.
This Café resident earned a little under $15,000 from one source in 2003. For some reason, known only to the 1099 preparer, two different 1099s were prepared – one showing commission income of $14,867.20 and the other showing commission income of $30.00. These numbers were shown on the 2003 income tax return as taxable income, in full compliance with the Internal Revenue Code.
For some reason, also known only to the 1099 preparer, two different 1099s were sent to the I.R.S. Both of these 1099s used the ”1486720” figure (I don’t know what happened to the $30.00). But the 1099s omitted the decimal point. The $14,867.20 became $1,486,720.00. And since the I.R.S. was sent two 1099s, the total income shown was $2,973,440. I swear fiction could never be stranger than fact.
Frankly, I don’t know what was worse – sending a 1099 without a decimal point or sending two 1099s and thereby doubling the problem.
As an aside, I looked up “decimal point” on Math World and discovered that the decimal point is used in the United States, but Europeans use a comma. Maybe the data processor who did the 1099 was European. Wikipedia lists most countries of the world, separating them as “point countries” and “common countries”. The most confused nation in the world must be Canada. The English-speaking Canadians are point people and the French-Canadians are comma people.
If the 1099s at issue were prepared by an American (or English-speaking Canadian), then perhaps a tutorial on decimal points would be in order. There is an elementary one at this community college. I thought I understood decimals until I read this definition at Wikipedia: ”The decimal separator is a symbol used to mark the boundary between the integer and the fractional parts of a decimal numeral.” Got it?
If you ever want to mess someone up, all you need to do is send a bogus 1099 to the I.R.S. It is not difficult to do. You can download blank 1099s from the I.R.S. webpage. They can even be completed online, or mailed to the feds. Don’t use your return address because this might not be legal.
But the I.R.S. would not come after you for reporting, erroneously, that you paid someone else a lot of money. Rather, the I.R.S. will go after the other person for not paying taxes on all of the money! Revenge can be sweet.
Well, I advised the I.R.S. today that this was all in error. It wasn’t that I forgot to report the $3,000,000. It was that the 1099s were wrong.
Anyway, that’s my story and I’m sticking to it.
June 16, 2005 Update
I received yet another form letter from the I.R.S. this week. It thanked me for my response and promised a reply within 60 days. The letter stated that I didn’t have to do anything until I received further notice from the I.R.S.
But the letter also stated:”If you owe any additional tax, you should consider paying it now, because we will charge interest on any unpaid amount.” The I.R.S. even provided a payment coupon, in case I wanted to make a remittance.
I’m really not sure what to make of the letter. I’m told that I don’t have to do anything yet, but I’m also warned that I’m better off if I confess and pay the additional taxes.
I would if I should, but I don’t, so I won’t.
At least not until I get the next notice from the I.R.S.