Hey, @blocktrades.
Worst tax story happened roughly 13 years ago, so I might be a little hazy on the details. Here goes:
In February, 2005, we moved into a new home. Our taxes for 2004 were filed sometime after that, with our new address. In September of 2005, we ended up with a notice from the IRS that we owed back taxes on another year (1999, 2000—something like that). They'd conducted an audit of this previous year and decided they wanted to see proof of our donations, since the amount exceeded what they figured was normal.
The notice we actually received was like the third or fourth notice, since the previous ones had been sent to our old P O Box, but apparently not forwarded onto us. They were sent there despite the fact our new address was already in the system as early as mid-March. Apparently the change finally took place because this latest notice came to our new address.
Most of what we had claimed as donations went to the church we belong to in form of tithes and fast offerings. We couldn't just give them receipts or a print out—we had to do that, plus get the leader of the local church to sign an affidavit that we had actually made those donations.
Fortunately, the church keeps very good records, and so the bishop was able to sign the letter with absolute guarantee that we had paid that much to the church.
Not allowing the deduction caused us to owe a few thousand dollars in taxes, and since we had not replied the previous times they'd sent the notices, we also owed penalties and late fees. I think the total came in above $5,000.
Fortunately, a couple of months into this, I was able to get a hold of a local IRS agent and set up an appointment to see them. They were in a nondescript building (no signage whatsoever) with the drabbest decor I've ever seen (outside of an ICE office). He went over the proof and within a few minutes determined that we were good. All of the taxes, along with the penalties and fees they said we owed were rescinded. I think this was early 2006 when it was finally resolved.
All because the agent conducting the audit decided it wasn't possible for us to pay so much in donations based on my earnings. :)
That is both scary and sad. All that wasted effort and the tax agent responsible probably didn't miss a minute of sleep for all the trouble he caused you. It's lucky your church was so responsible in their record keeping!
I agree. It was very fortunate. Seems like the audit department was in Cleveland or some place like that, and they were only accessible by mail. So insulated they weren't going to even talk to me on the phone. As you said, probably never missed a wink, and probably never knew of the reversal, either.
That was an extremely generous upvote. Thank you for the chance to share the story. :)