IRS horror story - happened to me just now

I maintain 2 accounts at TDAmeritrade - I switched from Merril Lynch after the crash as they had me buying every dip on the way down.

I had received a crazy enormous bill from the IRS, due to their figuring of a cost basis of zero for every stock I ever sold, and I'm an active trader - I might "churn" 10x or more of my account value in a year, so I got this million dollar plus bill for losing ~~400k in the crash.

My accountant then filed (a costly undertaking when your trades are 64 sheets of single spaced printing on both sides of the paper), and told me not to pay, that they would send me a bill with the appropriate penalties, which we couldn't know till then. Her number for what I owed them was on the rough order of 8k + any penalties.

About a week ago, I received an IRS letter that said "we've got your filing and will get back to you in January" but nothing else.

This morning, 1460.62 was simply taken from my cash (not my IRA) account, and the account locked down so I can't get any money myself, as verified by a phone call to TD. There is no way on this planet I owe them that. They gave me no warning, and I missed a voice mail from TD last week about it, which they say said - the IRS needs info from you by today. Note, they didn't contact ME. They didn't contact my bank (which has more than that amount in it). They simply just stole $1460 plus the remaining value of my account, in effect, as I can't disburse any of what's left (about $40k in that one) to myself - so it might have just as well gone poof as well. Over an 8k tax bill they said to wait on paying till they'd figured the penalties/interest on it.

It begins. Glad for the stack of course, but...hope there are no emergencies I need a big chunk of cash for, since the only other cash I have in large chunk is in the IRA, which gets taxed if I take any out, of course.

This is 100% true and verifiable - I can make the statements etc public, there's no secrets involved. Spread the word!

This is NOT some vague rumor by a tinfoil hat wearing economist. This is a statement of actual fact by someone you know, and I can back up every word of it.

The whole "guilty until proven innocenty thing is beginning to really piss me off. Cops are doing the same thing these days using the forfeiture laws to steal money from people. In Tennesee, the cops will sieze large sums of cash and force you to prove you are the rightful owner, sometimes taking years fo court battles to get it back. It has become a lawless empire, where banksters can steal billions, cops can steal millions and the IRS can take all of your money and they can do it with apparent impunity irrespective of the rule of law.

I feel for you brother DC, we have been in similar battles over large sums of money as well. When you get complacent, thinking you are protected and stop staying on top of shit constantly, things can go awry in a hurry.

I'm sorry for the hassles these cock knocking bastards are putting you through man, I hope it comes to a quick and positive resolution.

There has to be a law on the books that requires prior notice to the account holder before the IRS taps into it. I'd get a good tax attorney and fight it. Otherwise they might just continue raiding your accounts, next time in larger quantities.

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Anyway, as a foreigner I was always puzzled that the IRS has the right to tap into bank accounts. Even if they used a proper procedure, e.g. going to court and demanding a judicial authorization.
Here in Switzerland, the Swiss IRS doesn't even have the right to look into my accounts. They'd have to proove that I am a criminal first. If I owe them money, they have to sue me just like any other creditor. There is no special priviledge for them to tap into my accounts. This old concept of "banking secrecy" exists for Swiss citizens and residents only, however.

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One last idea: Is it possible to circumvene raids of accounts by the IRS by setting them up outside the US? I'm not talking about dodging taxes with black accounts in a tax haven... Just relocating the account to a third country and still declaring taxes. The IRS shouldn't be able to tap into accounts in other countries?

SA, I would bet that all personal brokerage accounts are tied directly to your SSN or TIN, which is with you until you die. These fuckers are relentless and will dog you all the way to the fucking grave. They will say you dodged taxes, take whatever the hell they want and leave you with the burden of proving they are wrong. Guilty until proven innocent. The court system is exactly the same.

swissaustrian said:

...
One last idea: Is it possible to circumvene raids of accounts by the IRS by setting them up outside the US? I'm not talking about dodging taxes with black accounts in a tax haven... Just relocating the account to a third country and still declaring taxes. The IRS shouldn't be able to tap into accounts in other countries?

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Not really. Any banks clearing funds in dollars are under the thumb of the US system/authorities. "Know your banker" laws and such are being forced abroad under penalty of losing their ability to handle dollar transactions. They might have to jump through a couple of extra hoops, but I believe that the end result is the same. Lots of US expats living abroad are renouncing their US citizenship lately to avoid this problem which is creeping onto "their expat shores".

ancona said:

I'm sorry for the hassles these cock knocking bastards are putting you through man, I hope it comes to a quick and positive resolution.

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Me too

ancona said:

The whole "guilty until proven innocenty thing is beginning to really piss me off. Cops are doing the same thing these days using the forfeiture laws to steal money from people. In Tennesee, the cops will sieze large sums of cash and force you to prove you are the rightful owner, sometimes taking years fo court battles to get it back. It has become a lawless empire, where banksters can steal billions, cops can steal millions and the IRS can take all of your money and they can do it with apparent impunity irrespective of the rule of law.

I feel for you brother DC, we have been in similar battles over large sums of money as well. When you get complacent, thinking you are protected and stop staying on top of shit constantly, things can go awry in a hurry.

I'm sorry for the hassles these cock knocking bastards are putting you through man, I hope it comes to a quick and positive resolution.

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A., I used this same argument in a roundabout way, as the local gestapo is seizing your home and bank account if they bust your kid with drugs (it's up to you to fight it out in court). So when my kid was hanging with some other kid that smokes dope I QUICKLY pointed out to him I wasn't interested in losing my house cause of his poor choices (I'm not against marijuana per see).

@ DCFusor

That is VERY BAD. Yes, it looks things have begun, how appropriate during the Holidays...

Please do let us know how this turns out. If you are unable (or only at high expense w/ lawyers, etc.) to get your money back, then that will tell us all one very important thing:

Get out now! $500 (more) coming out of the ATM when I drive home...

DoChenRollingBearing said:

@ DCFusor

That is VERY BAD. Yes, it looks things have begun, how appropriate during the Holidays...

Please do let us know how this turns out. If you are unable (or only at high expense w/ lawyers, etc.) to get your money back, then that will tell us all one very important thing:

Get out now! $500 (more) coming out of the ATM when I drive home...

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do people think that those 17,000 IRS auditors Obama hired were for show?

snip:
Salary

According to the U.S. Bureau of Labor and Statistics, in 2009 the starting median salary for an IRS auditor was $42,035

Other Benefits

IRS auditors receive other benefits as compensation besides a base salary. These benefits include family leave, vacation pay and sick leave. In addition, IRS auditors receive health and life insurance. IRS auditors also have the ability to participate in tax-deferred retirement savings and investment plans with employer matching contributions. As a government employee, IRS auditors receive all federal holidays as paid days off.


Read more: What Salary Does an IRS Auditor Make? | eHow.com http://www.ehow.com/info_8794134_salary-irs-auditor-make.html#ixzz2GgPBtXQ8

I had the same thing happen- but not the taking of funds.

The IRS was so sure I made a profit for 2 years-- I never bothered to file- as I am on SSDI- and that amount- not required to file.

So I got a you must file letter- I replied- I dont have to. They came back at me saying I earned over 40k on stocks. But this was the same 3k churned many times.

I had to hire a tax preparer- she went thru things- I gathered all the records which were from 3 diff places.

It cost me $80 for the prep.

My income for both years came to -$2000. So no tax. They did not charge a penality.

Not only is the stock game rigged they get you on the IRS too.

This is why physical silver is best.

Man that sucks, DC, good luck, you're probably going to need. it.:doodoo:

Bank accounts? What's that? Do people still use such financial traps any more? (Insert smilie for a mattress here)

Keep just enough cash in accounts (preferably Credit Unions) to see you through expenses for awhile and the rest goes in the canoe with your PM's.

Hey, you might as well be the one to lose it as have it taken from you!

DC --- I'm sorry to hear you are locked up in such a mess.

I had a similar thing happen to me with 401k money and the IRS.

Short story: Employer takes money from check, never deposited it in 401k account, found out, chased with attorney, after two years I received payout from employer, paid 1/3 to my attorney... THEN the IRS shoots me a letter that I owe them tax as though this money was taken as a distribution from a 401k. Money never went to a 401k, but since it was taken as a payroll deduction earmarked for a 401k they were considering it as a distribution.

Now, I DID pay income tax as though this was simple income when I received it... IRS wanted more.

I would have lost more money fighting the IRS, so I paid their tax - which was a good chunk of change - and went back to what my grandfather taught me: PMs. Eff them.

Good luck with your situation... I'm sorry to hear about it, man.

ADK

-- there is a car dealership in chicago- that- 'accidently" added 10k to everyone w2.

that was not fun for many.

DCFusor - my comment above was in no way to minimize the seriousness of your personal situation. It is terrible, and I really feel for you.

I have had more than my fair share of run-ins with the Canadian Tax Dept (RevCan), and having gone through it a couple of times, can assure anyone that has not, it is one of the more stressful and obnoxious experiences imaginable.

They didn't believe we could live on as little as we did until they did what is called a "life-style audit". That was so personally invasive I sought legal counsel and was able to get out of it.

My first notice was a tax bill for over $70,000.00, and ended up being less than $300.00. And how did they arrive at the 70,000 figure (which is way more than I have ever grossed in any given year). They assumed an error in the year they looked at, and then extrapolated it back several years claiming that the same "error" must have been made during those years and they missed it!!

They made a silly claim on one issue that just wasn't worth the fight so we settled on that. I think they figured they need to at least get something for all the hours the tax-man spent on our account.

I learned my lesson then and there. No more RRSP's, no chartered bank accounts, (only use a credit union where they know you personally), and only keep a minimal amount in the account. (My suggestion is 3 months living expenses.)

Other than that, I am my own banker and I run my own retirement fund, and if I do want to invest in anything, I will choose someone I know and invest in something local.

I hope things turn out well for you, but you will need to exercise a lot of grace and patience through the process.

Jetstream said:

They made a silly claim on one issue that just wasn't worth the fight so we settled on that.

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That's what I did in my case... I'm sure they know that the fight is more costly than the tax (or penalty)... and you are likely to just pay the penalty. That's what I did in my case.

Good riddance to them.

ADK

Well, my accountant hasn't shown up for work yet today (if she will - most take some time off around now).

The deal is, we DID get a must-file letter, and DID file. Due to the accnt's work, we wound up oweing them just a little (on the scale of things). No problem there, I'd have paid it as soon as I knew an amount - we couldn't figure out their penalty scheme, so the advice - from the IRS, is let them just send us a bill in Jan sometime.
Fine.

Then what happens is an unannounced taking of some money (less than I think I owe them, but still) - no due process, no subpoena, no notification to me or the accountant, and I have to call TD to even find out what's up.

So, along with the 4th amendment being toast, now the fifth (due process), and common law (theft) all broken by our great, democratic, principled gov, and I'm not only guilty till proven innocent but "in jail" re my trading account - I can't use it, so in effect, they've stolen the entire amount (5x the worst case estimate of what we owe them).

Why is the IRS allowed to make absolutely ridiculous base assumptions and act on them as if they had been handed down by a judge? Anyone here ever hear of stock just falling on you from the sky with zero cost basis, as an everyday thing (rare instances don't justify assuming it's always the case)?

Obviously, I'm going to be scrambling a bit. For one thing I have to write a check, today, for support of my ex, and it's a bit difficult to see how that can happen right now - and if I don't, I add other legal troubles, for which I'm sure the IRS will not consider themselves liable, even though it is their mistake. And, how to pay a lawyer to fight them, which inevitably will take "forever"?

Yeah, I have some well-off friends (all part of the prep) who will step into the gap for me some - and now I have to go off and find them and get that going on. Obviously, they are frightened as well, so probably they'll be pulling cash in small amounts (hopefully under the radar) to lend me. But we're talking a considerable amount here - a really good tax attorney (no other kind is worth spit) isn't cheap and they don't work on contingency. I learned long ago not to bring a fist to a gunfight, I'll need someone expert and with a track record, and those aren't cheap. This is NOT a situation where you call the cheap local semi pro bono legal aide kinda crap.

Wow, I feel sorry for you DC!

I had a very similar issue a few years ago. I sold off a number of stocks to pay for some unexpected expenses. I purposely picked a combination of stocks to be sold off that would net a small loss, so I would not have to deal with paying capital gains taxes. For some bizarre reason the IRS also thought I had purchased these stocks for zero dollars and sent me a massive bill (complete with late fees and fines!). After much effort and headache, I sent them enough documentation to appease them. Luckily, I had already closed out that account; If not, they may have drained it like they did to you!

The big issue is not the $1460 or so they just stole - we think I owe them about 8k now, but it will be less than zero once the huge losses (about half a mil) I took in the crash are averaged in.

Yet they locked down 42k bucks - my self-insurance, and of course, the only ready cash I have to pay a legal firm with. So far, my bank seems ok (small town affair) and at least they'd have called me first, but there's only a tiny amount of money in that bank (would have been enough to pay the 8k, though). They haven't yet (as far as I know) touched my IRA - but the only way to know evidently would be to call TD again and ask, as no message from them (and you bet they have my contact info) came on the other thing - I had to call them to find out - as I noticed that the 1460 was gone on my own (I DO pay attention).

This is infuriating! I feel for you. Suing the government seems futile, but maybe you could sue TD Ameritrade?

I'm closing my TD Ameritrade account now.

mike said:

This is infuriating! I feel for you. Suing the government seems futile, but maybe you could sue TD Ameritrade?

I'm closing my TD Ameritrade account now.

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my kid graduated four years ago with two degrees, int. business and int. economics. Went to a job interview with TD Ameritrade (he was really excited, even bought a suit). Very disillusioned when he came how, I said how did that work out? He said they wanted to pay him nothing to make them a whole lot of money...

Yeah, TD doesn't hire the very best customer-facing guys, to be sure, but they're alright, and I can't blame this on them - they have to follow the law.

As it turns out, it wasn't the IRS - it was the state of VA, more when I know more, but I did owe them some money. Once I ragged on TD some more, I found that out (the first guy told me wrong), the state has their pound of flesh, and the lockdown is expired - for now. There's more action to come, though, as this was from some old news tax years, and more are on the burner. Of course, forewarned is forearmed, and they weren't smart enough to even check my local bank. So there might be some dough moved around and into less-liquid forms (you can guess from where I am posting this what those might be).

Like when the DEA hit me - knowing where they did not look, because there were a lot of easier places to look - is valuable knowledge.

Sounds like it's the right time to change some currency...

Glad to hear that things are getting resolved DCF. Cheers.

ADK, that's precisely what I have in mind. Looks like the public trading stake is about to get smaller; I was not needing as much as I had in there - forget margin, I was mostly-cash most of the time anyway. So I'm going to pull a bunch out and hopefully find a safe place to put the resulting PM's. OPSEC says, I can't say where, but I think I have a good idea for that which will elude most searching of my place (Guess that dumb DEA "bust" had a silver lining, since I know how they search now) while remaining available without shovels.

Glad to hear it is not the IRS! Whew!

DCFusor said:

As it turns out, it wasn't the IRS - it was the state of VA

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So the sate can seize your property without a trial?

It's not just the IRS Mike, the cops do it every day. Guilty until proven innocent. They call it asset forfeiture and it happens to inocent people more and more. If your adult child is busted in your house with narcotics, they can and will seize your house, cars, bank accounts, etc.

What ancona says is fact - various agencies are now beyond the control of congress, and are self-funded due to misuse of RICO and other laws. And in the case he's talking about - the parent never got fair value even after it was adjudicated in court that he was fully innocent - he got the "auction price" of his goods minus some fees, or about half.

Evidently, any tax organization can take your money without any due process whatever, at least the way we were taught the meaning of the word in school. All they need to do is fill out some blanks on a form. And of course, long ago they made laws that make it extremely difficult to sue the state, or more importantly, the bureaucrat who made the crap up.

Yeah, I know guys. I was just pointing out that due process is dead.

ancona said:

It's not just the IRS Mike, the cops do it every day. Guilty until proven innocent. They call it asset forfeiture and it happens to inocent people more and more. If your adult child is busted in your house with narcotics, they can and will seize your house, cars, bank accounts, etc.

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I have not specifically researched this but my cop neighbor says they will seize your assets here in the small town I live in if its your kid that gets busted, and marijuana, not narcotics. Again, I haven't researched this but he almost beat the shit outta his kid when he caught him with pot.

I don't have any feeling about pot pro/con but i don't care for our LE very much.

Luckily, many of our local sherriffs and our local townies shoot at my range, and at an old, local cracker range set up on a third generation Cocoa property by the grandfather of a very old and lifetime resident. I was invited to a bar-b-que a few years ago and welcdomed the chance to meet these locally well known people. The old man took a shine to me and when the hurricanes came through I took five of my mexicans over and put tarps on the roof and cleaned up the water inside. We saved a bunch of his pictures by freezing them and sending them off to be vacuum processed to preserve them. This guy is untouchable by local leo since they all shoot at his pile of dirt. Now, there is a quiet respect at both ranges when local leo shows up to shoot. I hav e never used the card and hopefully never will. These guys know me and probably have figured out I have more than a few guns and a box of ammo. I have joined in community apint-b-ques at more than one cop/sherriffs house to try and bolster my standing. Kids at my daughters private school seem to give her a wide berth, with the exception of cops kids, who have been good friends with her and treated her with respect and as an equal. I don't know if this is healthy or not, but if my kid is sleeping over at a sherriffs house, and I'm the dad that picks her up the next day, when I get pulled over for some bullshit or another it may just result in a smile and howdy do Mark? Rather than the two hundred dollar ticket they like to hand out like free concert tickets these days.