The Tax Man Commeth…

We all know that the tax man is on his way, slowly creeping up on us. In my case, however, he’s not only creeping up on me for 2008 but apparently is coming back from ancient history as well.

I checked my credit report recently from Experian, and I noticed something new and undesirable on my credit report. Apparently a judgment had been filed against me from Albany, NY. Not cool. Hoping it was just a typo or mix up, I requested my credit report from another one of the three bureau to see if it had this judgment as well. It did.

The judgment was filed in august of 2008, and I haven’t even been to NY in over two years. And the last time was for a vacation (honeymoon actually).

After about an hour of phone calls, disconnected 800 numbers, wrong numbers, talking briefly with some guy that only spoke french, and a bit of misinformation I was able to piece the story together. The judgment that was filed against me was for back taxes. From 2001!!! I worked in NY state briefly in 2001, and apparently I didn’t set up any automatic or estimated tax withholdings while I was there. I filed my tax return in that state for the year as I should have, but apparently my tax adviser, who I paid over $1,000 to, missed the fact that a penalty would be charged because I didn’t set in any tax payments throughout the year.

So ultimately I owe $256. I owe it, so I’m (reasonably) happy to pay it. The state of NY had a couple incorrect addresses for me, but they also took their dear ol’ sweet time figuring out that I owed more money. Here’s the time line that was explained to me:

• I filed my taxes for 2001 in 2002 (on time of course).
• the state of NY has 3 years to review and audit my filings. They found the issue in 2004.
• they apparently did nothing for three years, because they couldn’t locate me.
• I went to graduate school and back, moved a couple of times, got married, continued on with life, yatta yatta yatta
• they somehow found my address in Texas by 2007, but I had already moved to a different city in Texas and the mail forwarding long since expired.
• they turned me over to a collection agency and a judgment was filed in august of 2008, a full 6 1/2 years since I filed my taxes.

Here’s the real downside: this judgment is legitimate, so it will stay on my credit report for some extended period of time, like 10 years.

Lesson’s learned:

• know how to do your own taxes. I’ve since learned this lesson the hard way twice, and both times I would have saved myself a TON of money if I had done my own taxes. I recognize that professionals are well worth the money and I have a lot of respect for the tax preparers that I used for ~10 years. Nonetheless I think it’s worth the $60 or so to buy turbo tax or other tax software and spend a couple hours doing your own tax calculations.
• check your credit report(s) regularly. You can do this for free once per year at each of the 3 credit bureau’s. Some people recommend requesting your report from a different bureau once every four months, which is probably a good recommendation.
• this is unrelated to this discussion, but I recommend that you freeze your credit reports. It’s costs a little money (usually $10 per person per credit bureau), but it will help insulate you from having other people take out credit in your name. I’m even going to freeze my kids credit reports when they’re born (I assume this is allowed).

BTW, don’t you just love the image I found for this post? I love how the business name doesn’t even spell alpha correctly (probably because another business already has that name trademarked), and they have a delta and omega symbol instead of the actual alpha Greek character!

Image Credit: rachaelvoorhees

If You Liked This Post Then Please Check These Out...

• The Power of the Written Word
• Kroger Gift Card Problem Resolved
• Three Free Software Programs You Should Use
• Grow Wealthy Through Conservation
• Book Review: You’re Retired, Now What?

If you liked this post please click here to subscribe to the RSS feed!