Santa Clara attorney Todd Rothbard received a sober letter from the IRS a few weeks ago. Sorry, you miscalculated your taxes. We owe you $ 284,603.
Rothbard shook his head and laughed. “No, no, no,” he thought. He called his accountant briefly and they agreed he didn’t owe a penny. For days he tried to contact the IRS.
This Week, A second envelope arrived with a check for just over $ 285,000 – presumably with interest on the money it didn’t make.
“I’m pretty scrupulous,” said Rothbard, who runs a busy property law firm with about two dozen employees. “There was no way I would miss $ 285,000.”
The IRS processes between 17 and 18 million individual tax returns in California each year. It sends millions of letters to citizens. Sometimes, they admit, they screw it up.
“Such a thing happens,” said IRS spokesman Raphael Tulino as he refused to comment on the details of Rothbard’s case. “No question about it, the IRS – and taxpayers – make mistakes.”
Rothbard agreed: “You are insane.”
Rothbard’s annual income puts him in the highest state and federal tax brackets and hasn’t changed dramatically in recent years, he said. He makes estimated quarterly tax payments and typically owes a small amount at the end of the year.
71-year-old Rothbard is a sometimes moody but thoughtful conservative who favors free markets and limited government. “I was wondering how many other people they did this to,” said Rothbard. “There goes the treasury.”
But in this case the government levers appeared to be working in his favor.
The IRS letter posted on Jan. 4 states that the agency reviewed his tax return and found that he miscalculated and overestimated his alternative minimum tax, qualified business income allowance, and total rate. The IRS changed three tax calculations for its 2019 tax returns.
The agency adjusted its reimbursement accordingly and asked Rothbard to expect a check within 4 to 6 weeks.
But Rothbard says the only mistake was the IRS. He doesn’t want to cash the check just for the auditors to spot a mistake.
Rob Seltzer, a Los Angeles CPA, did not verify the return but said miscalculations by professional accountants are extremely rare. The calculations are carried out with sophisticated control software that leaves little room for human error. And Rothbard would have noticed if he overpaid or accidentally made an extra payment.
“It’s bizarre,” said Seltzer, who specializes in business services for affluent entertainment customers. “It just doesn’t happen.”
A more common, but still uncommon, IRS mistake is failing to credit a taxpayer, he said.
The January letter was just the beginning of Rothbard’s frustrations. He called an 800 number on the letter several times to try to resolve the problem. He just received an automated message that the IRS Complaints Office was not accepting any complaints at this point.
After receiving the check, he drove from his home in South Bay to the IRS office in downtown San Jose. Two guards met him at the door. Sorry they told him you need to make an appointment. They gave him a different number and website address and turned him away.
Tulino suggested making an appointment to acknowledge the large volume of correspondence. “You have the right to appeal anything the IRS has judged,” he said.
Rothbard runs a successful law firm serving landlords and property managers, typically handling hundreds of tenant disputes and landlord evictions each month. He’s running out of patience.
This week he finally reached out to an IRS agent. In a brief interview, the agent informed him that they would investigate the case and get in touch with him within 30 days.
“Giving money back,” said Rothbard, “is not easy.”