How Tax Collectors Like The IRS Cleverly Rob You Of Your Money

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Every IRS person I’ve spoken to has curiously been kind. Yet, despite their kindness, I still feel my heart drop every time I get a letter from them. I’m not sure whether it’s because the movies always portrays the IRS agent as a bad man in a rain jacket, looking to shake down individuals for all they are worth. Or, perhaps it’s the fact it’s little ‘ol you vs. the omnipotent government that presents a no way out scenario. Whatever the case may be, dealing with the IRS sucks.

Those who work at the IRS or State Tax Collectors agencies are actually on your side. Sure, some have mandates from higher ups to milk you dry. However, most are willing to help you resolve your issues because they know how complicated taxes are in America. Perhaps this is one of the reasons why so many citizens have decided to just call it quits and not work!

One acquaintance I know worked for the IRS so of course I peppered him with questions to extract all the juicy details. I am against anybody paying more taxes than they need to. It’s just not right for the government to tax more than a typical person saves a year. If the government could show they can efficiently spend our money, then fine. But, they can’t even come up with a darn budget so forget it!

For all you conspiracy theorists out there, I think you’ll really enjoy this post.


Here is some straight up feedback from an acquaintance I met who spent years at the Ogden, Utah IRS center.

* “They are always watching me. My phone is always being recorded.”

* “I feel so sorry for everybody who calls in. They have no clue what they are doing on their tax forms, and frankly, I have trouble helping them too because it’s so damn complicated!”

* “The government is very smart for adding an extra 70,000 pages to the IRS Tax Code since its founding in 1913. How else can the government payback all the accounting and financial planning lobbyists who took them out for steak dinners all these years? Tax help is BIG business!”

* “We really are on the people’s side. Nobody is going to jail for screwing up on their taxes because we understand. 99% of the cases end in simple fines. Only the most outrageous tax evaders get locked up, so don’t worry!”

* “Shit, they don’t pay me enough to do this!”


Now that you’ve got some background on how one IRS agent feels, let me share with you a short story of my recent dealings with the New York state tax authorities.

Earlier this year, I got a letter in the mail from the New York State Department of Taxation and Finance. I was perplexed since I live in San Francisco, so I decided to give them a call just to make sure it wasn’t some scam. Money scams are everywhere, so one can never be too careful.

I dialed 518-485-9094 and got through to a friendly gentleman on the first try. It felt like I won the lottery because if you call up any government agency in California, you’ll be lucky to get through after the 10th try! Anyway, I asked him to explain the letter saying I earned taxable income in New York State in 2007 and that I owe state taxes. That’s right, they are asking me for money from five years ago!

He basically said my company withheld NY State income in 2007, which gave notification to NY State that I therefore must have earned income in New York. This is obviously not the case because I spent a total of four days in New York State that year, only three of which was spent in the office. I don’t know what the exact rule is, but I definitely know that if you work less than 10 days in New York, you don’t have to pay New York State taxes.

I called up my company to get clarification for my 2007 W2 and they sent back a 2007W2C (Correction). From there, I sent my documentation and reasoning as to why I don’t owe NY State taxes as a California resident. I called up the NY State Dept of Taxation again to ask when I should be expecting a REFUND! That’s right. If I erroneously paid NY State income taxes, I should therefore get my money back right? Right?! Wrong!


The friendly NY State Dept of Taxation employee mentioned that one must file an amended return or appeal within three years in order to get any money back from the State or Federal government! I thought this was absolute horse crap since they sent me a letter FIVE YEARS later asking for an explanation on my taxes! How am I supposed to file an appeal within three years if I don’t know I am being robbed until five years later?

Incredulous, I looked up the IRS statue of limitations on how far back they can go to audit your tax returns and it does say three years. See below.

Generally, the IRS can include returns filed within the last three years in an audit.  Additional years can be added if a substantial error is identified.  Generally, if a substantial error is identified, the IRS will not go back more than the last six years.

The IRS tries to audit tax returns as soon as possible after they are filed.  Accordingly most audits will be of returns filed within the last two years.

If an audit is for an older year, you may be requested to extend the statute of limitations for assessment of your tax return.  The statute of limitations limits the time allowed to assess additional tax.  The statute of limitations is generally three years after a return is due or was filed, whichever is later.  There is also a statute of limitations for making refunds.

If the audit is not resolved and the statute of limitations date is nearing, you may be asked to extend the statute of limitations date.  This will allow you additional time to provide further documentation to support your position, request an appeal if you do not agree with the audit results, or to claim a tax refund or credit. It also allows the IRS time to complete the audit and provides time to process the audit results.

You do not have to agree to extend the statute of limitations date.  However, if you do not agree, the examiner will be forced to make a determination based upon the information they currently have.  Therefore, the examiner may not be able to consider additional adjustments, such as expenses, that could lower the amount of tax due.

They say three years as a statute of limitation, but then they put in all this vague language to allow them to send audit notices way later! I could tell the NY State Tax employee was on my side, and I almost got him to admit to the hypocrisy of the rule, but he caught his tongue when he remembered that his line was being recorded by Big Brother!


I’m sure the NY State Tax Department was hoping to extract more money from me once they sent the notice. Instead, their plan backfired because given I am a California resident. I am owed thousands of dollars back from New York as my company erroneously witheld some money for NY. But, will the tax department pay me? Nope, because it’s past the three year statue of limitations to file an amendment. My company’s hands are tied as well.

Even though NY State is violating their own guidelines by sending an inquiry five years later for more money, I can’t get any money in return. Let’s say I actually did owe money, then of course I must pay back taxes even though it’s beyond three years! The traffic flows one way.


My case clearly demonstrates the government’s menacing authority over its citizens. The playing field is NOT the same. It’s like going into the arena to fight Megatron. You will die if you don’t kneel down and obey!

The government and the people who rule the government need you to fall in line. They use tax policy to control people’s behavior. The only way out is to stop making money so you can stop paying taxes. For the love of strawberry cupcakes, please stop supporting big government. The government is brilliant for creating a 70,000 page tax code bill so mistakes are made.

Once you make a mistake, they wait for YEARS to send you a notice telling you why you made a mistake. Along the way, they charge an interest penalty 50X+ higher than what you would get in a savings account. If you don’t pay, you will be fined further until they eventually throw you in jail for not complying.

Open your eyes people. The Borg will crush all of you if you are not willing to fight for your financial rights! Even the people working for the Borg are afraid! So what does that say about the whole system?

Related post:

How To Pay Little To No Taxes For The Rest Of Your Life

Recommendation: I’ve been using H&R Block’s Premium Tax Software to do my own taxes for the past 11 years. It’s inexpensive and very easy to use for novice to advanced tax filers. The software always updates with the latest tax rules so you’re never behind. They also have audit protection service as well.

Tax Savings Recommendation

Start A Business: A business is one of the best ways to shield your income from more taxes. You can either incorporate as an LLC, S-Corp, or simply be a Sole Proprietor (no incorporating necessary, just be a consultant and file a schedule C). Every business person can start a Self-Employed 401k where you can contribute up to $54,000 ($18,000 from you and ~20% of operating profits). All your business-related expenses are tax deductible as well. Simply launch your own website like this one in under 30 minutes to legitimize your business. Here’s my step-by-step guide to starting your own website.

Start a simple business to pay less taxes and contribute more to pre-tax retirement accounts

Start a simple business to pay less taxes and contribute more to pre-tax retirement accounts. Instead of paying taxes on $100,000 in income, you’re only paying taxes on $12,000 for maybe a $2,000 tax bill, or 2% effective tax rate.

Updated for 2021 and beyond. Income taxes went down under President Trump. As a result, those who contributed to their Roth IRA or Roth 401k and planned on retiring in 2021 – 2021 had wrong tax expectations. 

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