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Ever tried to get customer service from the I.R.S.? I hope you got a little better response from them than I just did! They actually seemed to refuse to answer what I thought was a clearly-written, objective question which asked for clarification of the tax law. See if this jives with anyone else's experience in dealing with the I.R.S.:
As you know, tax issues can get complicated, especially when a one-time type of tax event takes place. I can see by this board that people have many questions with things like capital gains, allowable deductions and tax-shelter plans. The latter is what I had a question with - I knew I was going to take early retirement from a school system and so had them take as much from my pay checks in 2006 as I could possibly afford. Knowing there would be no more checks from here on in, I padded my 403(b) account almost to the maximum allowable limit for '06.
All well and good, the big final day of work arrived. Now it is 2007 but there is one more check to be received: As a public employee, there is a perk in which a payment (in the form of a payroll check) of several thousand dollars is doled out for unused sick pay. If I could, I would like to put most of this into the same tax shelter. The thing is, being almost maxed out for 2006, I would need to have the tax-shelter contribution from this check count in the year 2007 to avoid going over the allowable limit for 2006. But technically I am now retired, we are in a new tax year, and I am several months removed from being an employee. My question, then, was pretty straightforward: Can I do this in 2007?
The person in the payroll department at work said that she didn't see why I couldn't but that before she began to process the check I should first check with the I.R.S. to make sure I wasn't doing something that would get me into trouble down the line.
So, I wrote to the IRS and waited a few weeks for their reply, which arrived this week. Here, summed up, is what they told me:
"Go read the publication."
I DID read the publication, and it didn't exactly answer my question. Why do they think I wrote the damn letter?
I also asked around, I read the laws, I searched the web and read everything that came up on this issue. I found only that, yes, it does SEEM to be something I can do. It seems to fit all the definitions for 403(b) contributions: It is "includible compensation", the payment is given out in the form of a payroll check with deductions, the 403(b) contribution would be made in exactly the same way as other contributions have, etc., etc. Its eligiblity as a 2007 contribution was the only thing in question.
I tried to carefully phrase the question so that it was an objective, 'yes or no' type of thing. I figured that they will not give out tax advice, but I was asking only for clarification of the tax laws. In the time it took to write back to me, to type out the letter and stuff the envelope, he could have easily just answered my question. Why do you think he didn't? Was it so obviously a dumb question? Are they under legal advice to not put anything in writing? I know this isn't J.C.Penny's or Macy's customer service department. But it's the I.R.S. for Mary and Joseph's sake! Where else am I supposed to go to get the tax laws clarified if not to them? He invited me call back if I still had any questions after I read the publication.
I thought I'd rant a little bit here first, to see what any other Fool might have to chime in on the issue. I will then call them back. I promise I'll be polite.
Cheers!
Sunny Jim

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I'd call back everyday until somebody gives you an answer to your simple question, then call back everyday until some one agrees to send you a letter with the same answer for your records.

The fact that their answer was to read the publication implies that it's the taxpayers interpretation of the tax laws that determines what the tax laws are. If that was the case, I'd be paying a lot less in taxes.
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If the school system is going to issue a W-2 for 2007 showing the payment as wages, which it sounds like they will have to do, then you have earned income and the contribution would be okay, I think. I'm sure the school system has an accountant. Why don't you ask his opinion?
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The person in the payroll department at work said that she didn't see why I couldn't but that before she began to process the check I should first check with the I.R.S. to make sure I wasn't doing something that would get me into trouble down the line.

And here's where you went wrong. You listened to someone who didn't fully understand the law. Unfortunately, you also got someone at IRS who didn't, assuming your question was worded at least as clearly as it was here.

The law doesn't prohibit the contribution you want to make, nor does it require that the plan allow it. The answer to your question lies with the plan, not with the IRS. Since the payroll person wasn't sure, your next call should be to her, asking her to find out for sure. The "trouble down the road" potential is the plan's, not yours.

As for IRS customer service, their performance is anywhere along a scale running from fantastic to gawdawful in any one case. Much the same as most large organizations, except banks. Banks invented bureaucratic ineptitude and buck passing.

Phil
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As for IRS customer service, their performance is anywhere along a scale running from fantastic to gawdawful in any one case. Much the same as most large organizations, except banks. Banks invented bureaucratic ineptitude and buck passing.
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And at this time of year, your scale runs toward the low end, when IRS hires temps for customer service. The original letter probably ought to have been handled better. But a phone call? You'll probably get someone who doesn't know what a 403(b) plan is. Even if the Federal Savings Incentive Plan IS one. (IF that's the right name.)

Banks? I would have said telecoms.

Bill
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Banks? I would have said telecoms.

You could be right. I may have been overcompensating while trying not to focus on my recent Verizon horror story.

Phil
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So calling the I.R.S. IS like calling JC Penny? Yikes!

I echo the sentiments of Hutch: Why shouldn't you be a little demanding when it comes to getting them to clarify the tax law? Just think of the swiftness and efficiency they will employ when issuing you a Notice of Underpayment, Penalties and Interest. I think that writing them back instead of calling might be better, though.

The guy from I.R.S. who told me to go check the proper publication signed his name and also his title: Employee Plan Specialist. I will write him again and use quotes from the publication.

I also went back and checked the I.R.S. rules which refer to what Phil was talking about. Yes, it does state that it is incumbent upon the district's plan administrator to know what is allowable as an employee deduction and contribution to a tax shelter.

It would also seem that the company accepting the tax shelter money should also know the law. I will check with them for precedents - I am sure that there have been others in the same boat who have come before.

Ultimately though, wouldn't it be the employee who would get popped with the penalties if the I.R.S. discovered an error? As the old song goes, It's No One Else But You they have in mind when they warn: "Excess contributions can result in income tax, additional taxes and penalties".

Cheers.
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I may have been overcompensating while trying not to focus on my recent Verizon horror story.

Oh pray tell. I've had about 3 months of horror with them on several fronts, and have been absolutely astounded at their ability to filibuster. This must be one of their primary competitive advantages.

A recent classic was while I was researching the phone tax refund issue that I mentioned a few days ago. I could not find the line item on the ~100 page bill that showed the tax. I called customer service and asked which one it was. I talked to 6 people (through multiple calls and being transferred around) and everyone professed complete ignorance of the issue. Surely, I am not the only one calling them about this, since nearly every individual and business in the country with phone service is eligible for a refund.

I finally talked to a supervisor and she suggested that I call the IRS. She said that Verizon was just reporting whatever information gave them, and that the IRS would be able to tell me what I was looking for. Normally I would argue, but I was so speechless, I just hung up.

T
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While on the topic of Verizon (sorry for the tangent), this is somewhat amusing:

http://verizonmath.blogspot.com/2006/12/verizon-doesnt-know-dollars-from-cents.html

T
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The guy from I.R.S. who told me to go check the proper publication signed his name and also his title: Employee Plan Specialist. I will write him again and use quotes from the publication.

If it makes you feel better write your heart out. Just make sure that you don't get carried away and say anything that could be vaguely interpreted as a threat.

IMO a more effective letter would be to the Commisioner of Internal Revenue, Washington, DC 20224. It's not only water that flows downhill.

I also went back and checked the I.R.S. rules which refer to what Phil was talking about. Yes, it does state that it is incumbent upon the district's plan administrator to know what is allowable as an employee deduction and contribution to a tax shelter.

Your zeal to be mad at the IRS seems to be blocking the realization that it's more than just knowing, it's deciding. The law allows plans a lot of leeway.

It would also seem that the company accepting the tax shelter money should also know the law. I will check with them for precedents - I am sure that there have been others in the same boat who have come before.

Ultimately though, wouldn't it be the employee who would get popped with the penalties if the I.R.S. discovered an error? As the old song goes, It's No One Else But You they have in mind when they warn: "Excess contributions can result in income tax, additional taxes and penalties".


I'd be interested in a cite for that quote if it's not the ubiquitous "they" that often turn up in discussions of tax law. The worst that can happen to the employee is that he pays the tax he should have paid in the first place plus, in some cases, interest. There are no penalties.

The entire plan can be disqualified if they mess up.

Phil
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I may have been overcompensating while trying not to focus on my recent Verizon horror story.

I finally talked to a supervisor ...


A real live English speaking one? What's your secret?

Phil
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Thanks for the advice, and all of it will be very well taken. And no, making threats to the I.R.S. is for people who drive the freeways 20 miles over the speed limit in the far left lane. Not me.

Sidebar grousings are amusing, too, and are what make these instructive Motley Fool boards such great fun.

Cheers.
Sunny Jim
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