Santa Clara, California, attorney Todd Rothbard got a sober letter from the IRS a few weeks ago. Sorry, it read, you miscalculated your taxes. We owe you $284,603.
Rothbard shook his head and laughed. “No, no, no,” he thought. He made a quick call to his accountant and they agreed he’s not owed a cent. For days, he tried and failed to reach the IRS.
This week, a second envelope arrived with a check for a little more than $285,000 — presumably, it included interest on the money he doesn’t think he deserves.
“I’m pretty scrupulous,” said Rothbard, who runs a busy property rights law firm with about two dozen employees. “There’s no way I’d miss $285,000.”
The IRS handles between 17 and 18 million individual tax returns in California every year. It sends millions of letters to state residents. Sometimes, they admit, they screw up.
“This kind of thing does happen,” said IRS spokesman Raphael Tulino, while declining to comment on the specifics of Rothbard’s case. “There’s no question the IRS — and taxpayers — make mistakes.”
Rothbard agreed: “They’re nuts.”
Rothbard’s annual income places him in the highest state and federal tax brackets and has not varied dramatically in recent years, he said. He makes quarterly estimated tax payments and usually ends up owing a small amount at the end of the year.
Rothbard, 71, is a sometimes cranky but thoughtful conservative who favors free markets and limited government. “I wondered how many other people they’ve done this to,” Rothbard said. “There goes the national treasury.”
But in this case, the levers of government seemingly worked in his favor.
The IRS letter sent on Jan. 4 said the agency reviewed his tax return and determined he had miscalculated and overestimated his alternative minimum tax, qualified business income deduction and his overall rate. The IRS changed three tax computations on his 2019 return.
The agency adjusted his refund accordingly, it said, and told Rothbard to expect a check within 4 to 6 weeks.
But Rothbard says the only error was by the IRS. He doesn’t want to cash the check, only to have government accountants recognize a mistake.
Rob Seltzer, a Los Angeles CPA, did not review the return but said miscalculations by professional accountants are exceedingly rare. Calculations are done by sophisticated tax software, leaving little room for human error. And Rothbard would have noticed if he overpaid or accidentally made an extra payment.
“It’s bizarre,” said Seltzer, who specializes in business services for wealthy entertainment clients. “That just doesn’t happen.”
A more common, but still unusual, IRS error is failing to credit a taxpayer with a payment, he said.
The January letter was just the beginning of the frustrations for Rothbard. He called an 800 number on the letter several times to settle the issue. He got no further than an automated message saying the IRS complaint line was not accepting complaints at this time.
After he received the check, he drove from his South Bay, California, home to the IRS office in downtown San Jose. Two guards met him at the door. Sorry, they told him, you’ll have to make an appointment. They gave him another number and a website address and turned him away.
Tulino suggested making an appointment, acknowledging the heavy volume of correspondence. “You have the right to appeal anything the IRS has assessed,” he said.
Rothbard runs a successful law practice serving landlords and property managers, typically handling hundreds of landlord tenant disputes and evictions a month. He’s running out of patience.
He finally reached an IRS agent this week. In a brief conversation, the agent told him they would review the case and get back to him within 30 days.
“Giving money back,” Rothbard said, “is not easy.”