Cashing in on state tax breaks; don't overlook ways your state's rules differ from those imposed by the IRS

Kiplinger's Personal Finance Magazine, March, 1998

If your study of state tax forms doesn't produce any winners, you can always hope that your state will follow the lead set by Colorado and Oregon: Taxpayers in those states get a refund whenever the state has a revenue surplus, even if they owe tax on their returns. The Oregon "kicker" refund, which is figured as a percentage of each recipient's tax bill (14% in 1997), averaged $282 last year.

The IRS Says, "Come on Down"

* Bombarded by bad press, the tax agency says it wants to help.

As Ben Franklin put it so eloquently, taxes are one of life's few certainties. What is not so certain is that you and the government will agree on how much you owe -- or that the payment process will go without a hitch.

Granted, relatively few people hear a peep from the IRS after they've sent in their returns. But if you are one of the chosen, and the person assigned to your case can't answer your questions, where should you turn? If you're not ready to hire a professional advocate, the IRS offers you a number of outlets.

COMING SOON TO A DISTRICT NEAR YOU.

The IRS is billing its Problem-Solving Days as opportunities to address and solve individuals' longstanding issues. The first "open house" last November attracted 6,300 people to 33 regional IRS offices, from Atlanta to Seattle. District offices are now promoting similar events on a regular basis, often during weekend or extended evening hours. (To make an appointment at your district office, look up "Internal Revenue Service" in the business white pages, or call 800-829-1040.)

The issues handled at these events range from disputes over bills to questions about proper documentation. Dan Hale drove to Houston, two hours from his home in Bridge City, Tex., to participate in the first Problem-Solving Day because of an unresolved audit letter he had received six months earlier.

Hale believed that the audit was in reference to early IRA withdrawals he had made. But in Houston he discovered that he had received the letter because the IRS had no record of his 1994 tax payment.

"I've got my credit union going back through my records to find the canceled check," says Hale, a mechanical specialist at Du Pont. "I've got to make a copy to prove that I paid."

Adding to Hale's frustration, the audit bad tied up his 1996 $800 refund. "The people in Houston," Hale says, "did their best, but they did not solve my problem." They did, however, manage to explain the issue and give Hale a course of action to end the rigmarole. His reward when he submits the proof of payment? He'll get his 1996 refund check and erase the balance, penalties and interest the IRS thought he owed.

You don't have to wait for an open house to get the IRS's ear. Each district has a taxpayer advocate and a problem-resolution office designed to provide assistance to taxpayers whose problems are not resolved through normal IRS channels. (In Houston, for example, the problem-resolution officer cleared up more than 3,500 cases in 1997.) You can also talk to someone in the office of the IRS's chief taxpayer advocate. Call 800-829-1040 to refer your problem either to your district advocate or to the national advocate's office.