The Internal Revenue Service erroneously sent dunning notices to an unknown number of Washington state residents who accepted its offer of a later tax-return deadline as a result of the Feb. 28 Nisqually earthquake.

Yesterday, IRS spokeswoman Shawn George in Seattle said as many as 200,000 state taxpayers may have taken advantage of the two-week reprieve. The only condition was that they write, in big red letters, "Washington State Earthquake" on the top of the return and mail it by April 30.

But due to a foul-up the IRS can't explain, its Ogden, Utah, office generated notices demanding payment for interest and/or penalties for the "late" filings.

"These notices did go out in error," George said. "I can't explain what happened. We're trying to find out what went wrong."

Not only did the agency mess up by sending out the "request for payment" notices, it compounded the error, George acknowledged, by defending the notices when some taxpayers called to complain.

The interest or penalty payments appear to be relatively modest. But taxpayers are peeved.

George said the agency was exploring how to correct the error, perhaps by conducting a computer search to identify all affected taxpayers, apologizing in writing and rescinding the payment demands.

For now, George said affected taxpayers should fax or mail copies of the notices to the IRS in Seattle.

Among those receiving the incorrect notices was Sharon Lumsden of Kirkland. "We did everything that we were told to do," she said.

Along with her husband, Lumsden works at Edward Jones Investments, a Kirkland brokerage. "We wrote `Washington State Earthquake' in capital letters with a big red felt pen."

Nevertheless, on Monday the Lumsdens received a "late payment interest" notice from the IRS in Ogden. Lumsden said she dialed a toll-free number included with the notice.

She said she spent 45 minutes on hold until a representative answered, then 45 minutes more waiting to speak with a "specialist," who insisted she owed money because her return was filed late.

Gene Morel of Issaquah said he, too, received a notice Monday, saying he owed just under $20. He called the toll-free number and was told that the interest covered the period from the April 16 regular filing deadline until the IRS received his check May 3.

The representative "agreed that I did every thing right," Morel said, but told him, "You still owe interest."

Another taxpayer, Barry Tolnas of Olympia, said that when he called to complain about the $7.11 interest payment the IRS said he owed, the customer-service representative insisted that he had misunderstood the earthquake-delay offer.

She said there "was a difference between the filing deadline and when you had to pay," Tolnas recounted.

"We certainly apologize," George of the IRS said yesterday. "We are trying to find out how many people were affected and maybe come up with some easy solution for taxpayers. ... They do not have to pay."

In addition to "late payment interest" notices, some taxpayers received notices saying they owed "tax penalties in addition to interest," George said. "And of course those (notices also) were in error," she added.

She said the IRS was trying to get updated information into the hands of its customer-service representatives to avoid the kind of frustrations experienced by Morel, Tolnas and Lumsden.

"It may take a day or so to do that," she said.

Washington state has about 2.8 million taxpayers, and residents of the 22 counties within the earthquake-disaster area were eligible to file late.

Based on the number of returns filed before April 15, the IRS estimates that roughly 200,000 taxpayers took the extension, George said.

Eugene Brezany, a spokesman for the Federal Emergency Management Agency, the lead federal agency dealing with the earthquake's aftermath, said the decision to offer tax filers a two-week extension was not his agency's.

"This was totally a decision by the IRS," he said.

Seattle Times

-- Anonymous, June 07, 2001

Answers

IRS recount shows error affected 2,000

The latest aftershock from the Nisqually Earthquake affected only about 2,000 Washington state taxpayers, says the Internal Revenue Service.

That's the agency's most recent count for the number of state residents who earlier this month were erroneously notified they owed interest and/or penalties for filing their tax returns after April 16.

In fact, the wrongly accused taxpayers merely responded to the IRS' offer to wait until April 30 to pay and file without penalty - on condition they lived in counties affected by the Feb. 28 earthquake and marked their returns accordingly.

"Certainly a lot more (erroneous) notices would have gone out if it (the mistake) had not been caught," Seattle IRS spokeswoman Judy Monahan said yesterday. "It was stopped as soon as it was realized this was a programming error."

Monahan said about 500,000 taxpayers took advantage of the two-week reprieve, but not all of them owed the government money. And therefore, not all of them were potential recipients of the mistaken notice.

Many taxpayers who received the notices were assessed only "two days' interest," Monahan said, meaning small amounts were involved. The IRS plans to reimburse taxpayers who may have paid whatever amounts they should not have been billed, she added.

The glitch resulted from "a combination of human and systems error," Monahan said. Washington was not the only state whose taxpayers were hurt by IRS mistakes regarding the agency's disaster-relief programs. A number of New Mexico residents who were entitled to extensions to pay and file taxes - because they were affected by last year's huge wildfire in the Los Alamos area - also erroneously received notices that they owed interest and/or penalties, IRS officials said yesterday.

Meantime, Washington taxpayers who received the mistaken notices can fax a copy of the notice to the Seattle IRS office at 206-220-5550, marking them as "Washington State Earthquake" victims.

-- Anonymous, June 15, 2001