If there is a day in contemporary American life that in any way approaches the Day of Hate in George Orwell’s dystopian 1984, it is April 15. We have holidays that make us come together as a country via our shared history or our admiration for its great figures (Presidents Day, Martin Luther King Jr. Day). But it’s only on April 15 that we are brought together by shared loathing.
But I won’t participate in the collective scream. Over the last several years, I’ve come to have an amazing regard for the government’s collection arm. Not because of all the wonderful things that government does that the IRS makes possible, but because my experience has been that of all the many organizations you can owe money to, the IRS may now be the most rational and easiest to deal with. Other financial institutions in my life arouse in me only indifference (at best, as with my bank) or annoyance and a vague sense that they are looking for a way to rip me off.
But the IRS I have come to view with something approaching affection. For each of the last several years, I have owed the IRS money at tax time. And each time, rather than hauling me off to prison, the IRS has done its best to make my life easier.
This love does not extend to state tax departments. A number of years ago, I moved to California and promptly began to have my wages garnished by the California Franchise Tax Board on the theory that since I had not paid any taxes to California the previous year, I must owe them money.
I called up the Tax Board, ready to explain that I didn’t owe California any money from that year because I hadn’t earned any money in California. This was because in that year I didn’t live in California. The bureaucrat on the other end of the line told me that my explanation was fine as long as I lived in another state.
“Yes,” I said, “I lived in Washington, D.C.”
“So you lived in the state of Washington?”
“No, not Washington state. Washington, D.C.”
“Yes, Washington, D.C.”
A pause, then the triumphant response: “That’s not a state!”
I finally resolved the issue by hanging up, calling back, and getting another state employee more willing to accept the possibility that the District of Columbia, while not a state, still falls comfortably in the zone of “places that are not California.” For each of the next five or six years, I counted myself lucky that I had to have no further interactions with the tax authorities beyond filing the standard forms and getting my refund.
Unfortunately, the time came when this was finally no longer the case. Three years ago, I found myself looking at a tax bill that—no matter how aggressively I estimated the size of my home office, and however many times I went over my phone bills to make sure to count every call that was “business related”—was well beyond my ability to pay on April 15. Or Oct. 15. Or in any period that would somehow let me hope the IRS wouldn’t notice. This kept me up at night, as I envisioned the proverbial jackbooted thugs of the IRS seizing my bank account and hounding me into some modern-day version of debtor’s prison. I began having fantasies that somehow Grover Norquist and his posse would dismantle the tax system.
This, however, did not happen, and so I found myself again on the phone with a functionary of the government’s revenue-generating apparatus. I expected to have to beg and plead to keep whatever small amounts of cash I might have kept on hand to pay my rent.
But the reality turned out to be different. Years of IRS-collection horror stories and a powerful drumbeat of anti-tax rhetoric had, by the time this happened in 2005, transformed (or maybe cowed) the IRS into becoming a surprisingly customer-focused organization. It became clear after just a couple of minutes on the phone that I was not going to be treated as a scofflaw but as a client, and a surprisingly valued one at that. Yes, I was told I would have to pay interest and penalties. But the sum of those came to somewhere around 9 percent, a rate better than what I was paying on most of my credit cards. And the payments could be stretched out over a surprisingly long period, long enough that the monthly payment would put only a very moderate dent in the unsupportable standard of living I still wanted to maintain.
This was a win-win situation. The collection authorities got a pretty good rate of return on their money as long as I kept up my payments, and I got to pay my tax bill on fairly reasonable terms (and without the credit-card fine print about how the interest rate could change at any time for any reason). If it was possible to have a favorite creditor, for me, the IRS was it.
The next year I again found myself owing money (though this time, less) to the IRS, and I did exactly what you think. I called them up again, wondering whether it was possible just to add this new year of back-tax payments on to the slowly diminishing sum I owed. And, lo, indeed it was. Not only was it possible, but it could be done without even raising the monthly payment. So I gave the IRS its modest $45 fee for setting up a “new” payment plan and settled back into my regular mode of financial irresponsibility.
This had exactly the result you might expect: Last year, I yet again owed money to the federal government, this time a truly spectacular sum. I picked up the phone to call the IRS then put it down. Poured myself a scotch, drank it, picked up the phone again, put it down again. After several days of this, I finally reached the point where I could see no option other than making the call and throwing myself on the tax authority’s mercy.
So again I found myself talking to a stunningly sympathetic federal employee, who told me that, yes, the situation was very serious. I would have to come up with a new payment plan.
“So, how much do I need to pay?” I asked.
“Well, how much can you afford?” he asked. His tone was grave enough that I envisioned a year of living on spaghetti and ketchup.
We went around like this for a couple of minutes, as I subtly tried to discern exactly how low a monthly payment would be acceptable. Clearly, I wasn’t the first person to have tried to figure out exactly where that minimum was, and there wasn’t going to be an answer until I ventured at least a guess about how much I could afford. So I did and came out with a number that I really could comfortably afford—which I was sure was going to be way too low.
It wasn’t. Two more minutes, another $45 fee, and I had set up a new plan. This one let me stretch out my payments over an even longer period. Now, there are certainly those who will be shocked at the notion that I would actually want to stretch out my debt to the IRS for years in the future. These are the people to whom almost all financial advice is geared. They are not the people who have a running balance on their credit cards sufficient to pay a year’s tuition at a prestigious private university. In other words, those people are not me. And if you are reading this on April 15 while putting a stamp on the thin envelope with your extension request and wondering how you’re going to pay your taxes, they are not you.
If you fall into the category of the irresponsible and cash-flow-troubled, there is rarely going to be a financial column that offers you any advice. The people who have let their finances slip into a state of disarray and are the ones in most urgent need of financial advice do not get it. Or the rare times when they do, it is the kind of advice—tighten your belt, plan better for next year—that they are sure not to follow this year for the same reasons that they didn’t follow it last year or the year before. The magic of the IRS payment plan is something that you’re expected to find on your own, and only if you let things go way off the rails.
So if you’re sitting at your computer wondering when the IRS will come for you, know that in this new customer-centric age of collections, you can go to them without quaking in terror. Yes, next year or the year after or some year in the future, you will get your act together and be in the black on April 15.
But if you’re wondering what the hell you’re going to do in the here and now, then calling up the IRS might be a much better option than emptying out your bank account or maxing out your credit cards. Fortify yourself with a drink if you need to, but know that owing money to the government is not the end of your life as you know it but, potentially, the beginning of a surprisingly amicable financial relationship.