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  • Everybody loves to hate the US Internal Revenue Service, right?

    Wrong. Not me. Make that N-1.

    Stories about how the IRS has hassled conservative "public welfare organizations" that applied for tax-exempt status have been plastered all across the news media and the blogosphere for a week. It must be true, because even our dear leader calls it an unacceptable breach of trust.

    Whatever. I don't have an accountant and I'm not clever enough to finagle tax-exempt status. So, every year I sit down with a spreadsheet and figure out what federal and state taxes I owe and send in the paperwork, and in some years a check along with it. I'm old-fashioned, so I don't file online. I'm stingy too, so I don't pay a tax preparer.

    As a result, I'm never sure if I've paid too much or too little in taxes, but I kiss it off. I did my best. Let them come after me if it's such a big deal.

    Last year was tough. I only had earned income for about a month and spent the rest of the year looking for work. While I was looking, every dollar of income I received came from the state or federal government in one form or another. Because I withheld income taxes from all those payments, by the end of 2012 I figured I didn't owe any taxes.

    I was correct, but less correct than I thought. It seems I made a mistake in figuring out my taxable income, which raised it above the amount that would make me eligible for the Earned Income Tax Credit. For those of you who don't know, this is money the US government pays people as a negative tax when the amount they make in wages falls below a certain level, adjusted for family size and other factors. It's complicated to figure out if you qualify, but I did the numbers several times and decided I didn't.

    Still, my taxes were pretty low – about $800. That was considerably less than what the government had withheld, so I ended up getting a refund. That made me happy.

    I filed my taxes in mid-March. About six weeks later, I started wondering where my refund was. Just then, I received a letter from the IRS, which I opened with trepidation. It said that they had determined that I had overstated my adjusted gross income, and as a result, I was eligible to receive an Earned Income Tax Credit, which they had calculated for me. The letter went on to say that if I felt their determination was in error, I could call them to protest. Readily convinced I had made an error, I decided against doing that.

    The very next day I received a tax refund check from the US Treasury for about $1000 more than I had expected to get. I immediately deposited it, genuflecting all the way to the bank.

    I'm back on a payroll now, so I don't expect this will happen to me again soon. But I will not forget the incident, especially when I encounter people yelling about tax tyranny.

    Which brings me to observe: As a result of the recent flap about how the IRS abused its powers, Congress will probably do something to punish it, like garnishing its wages. Such cuts will be on top of the $1 billion budget shrinkage the IRS has recently suffered, mostly thanks to anti-tax politicians. With fewer resources, the agency will be less able to help people like me – who lack resources to hire tax advisers and accountants – to get the tax advantages that the Internal Revenue Code bestows on them.

    Even though tax rates have crept downwards for almost everyone, we certainly could use a hefty does of tax reform. It would take 7500 pages to print out the entire contents of Title 26 of the U.S. Code (26 USC). That's ridiculous. Government policies and operations should be understandable to reasonably intelligent people without an army of advisers.

    Regardless of any scandals within the IRS, I am grateful for its kind attention to my situation. I just thought you should know, because it could happen to you.
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