No Tax Loophole Here - NBC Chicago

No Tax Loophole Here

Decades-old tax debts coming to light



    No Tax Loophole Here
    Some people are being notified of decades-old debts, thanks to a new computer system that finds once "invisible" taxpayers.

    Can you remember what your life was like in 1979?

    Diane Crittenden says she was newly married, working as a legal secretary and finally earning enough money to travel. But beyond that, not much else.

    But now the State of Illinois remembers, and out of the blue, she said she received a letter notifying her of a tax liability that's three decades old.

    "I had never been contacted in any way by the State of Illinois that I was in default, for any tax, until I got this notice," Crittenden said.

    The confusingly-titled letter was the state's way of keeping the $739 refund Crittenden said she was due, for a 1979 debt she'd never heard about.

    "I learned that they have a new computer system that goes back -- and I quote -- 'To the beginning of time,'" she explained.

    It seems that 30 years ago, Crittenden allegedly underpaid on the income tax she filed with her now ex-husband. The state says in its old computer system, Crittenden was "invisible" because she was the secondary filer on returns with her ex-husband. Thirty years later, the new system links her to that old debt, penalties and all.

    But because she has no records that go back 30 years, she has no defense.

    On the federal level, the Internal Revenue Service tells taxpayers to keep their tax record for three years, but up to seven for special circumstnces. In Crittenden's case, it appears that state is placing a much greater burden on its residents.

    And according to Martin Kamenski, a Certified Public Accountant, the way the state is handling the cases "is frankly appalling."

    "I tell all my clients to keep their documents for seven years and then destroy them afterward. It's what's required by the federal government. It's what's required by a majority of states in the country and it's never been an issue to date. The fact that may not be enough is pretty outrageous," Kamenski said.

    Due to confidentialy rules, the state says it's unable to discuss the matter publicly, but "the lesson for taxpayers is to deal with issues, and not think that ignoring them will make them go away.

    On the flip side, some taxpayers are now receiving checks for the refunds they were due while invisible to the state.