IRS Collections Aren’t Child’s Play

QUESTION: My mother insists that she saw a short article some time ago talking about the IRS going after the piggy banks of little kids whose parents owe the government money. I think she was dreaming. Can you settle this?--N. N.

ANSWER: Some say this is a nightmare, all right. But your mother wasn’t dreaming.

The story she saw probably was the one about a 10-year-old girl whose $694 savings account was seized by IRS agents trying to settle a financial score with the girl’s father. He owed the IRS about $1,000 but was unemployed and couldn’t pay. So the agency tapped the little girl’s bank account instead.

An irate Sen. David Pryor (D-Ark.), chairman of a subcommittee that oversees the IRS, demanded an explanation from IRS Commissioner Lawrence B. Gibbs. The incident, Gibbs assured the senator, was nothing more than “a one-time occurrence.”

But before long, Pryor reports, a similar horror story came to his attention. This time, the IRS raided savings accounts belonging to the three children of a farmer who had been forced to sell his farm and all of his equipment and told the IRS that he had nothing left to pay his taxes. The agents collected $173.

Pryor fired off an angry letter demanding that Gibbs disclose the agency’s policy on these kiddie raids. He says he is also considering legislation--”to protect the piggy banks of American children.”

Q: I spent the weekend doing what for me is always the most dreaded chore of the year: digging up receipts and figuring my tax bill. As always, I did it myself--mostly because I’m too cheap to hire an accountant. But this year’s calculations were particularly difficult, and I don’t feel absolutely confident that I did some things correctly. Is hiring an accountant to retrace my steps the only way to put my concerns to rest? Or do you know of someone who might be willing to just glance over what I’ve done and not charge me an arm and a leg?--W. V.

A: Actually, you should have no trouble whatsoever finding a tax practitioner to give your return the once-over. Accountants say this service has become increasingly popular over the last three years or so, as the tax laws have become more difficult to interpret. Preparers don’t mind, because the work is straightforward and the money is easy.

Just select the names of three or four preparers and ask for an estimate to review the return you’ve already prepared. Some may charge you for a full hour’s labor even if they finish the assignment in a few minutes.

Q: I’m confused about mortgage points. I had always thought they were tax-deductible. In fact, I’m sure I have taken them as deductions in the past. But now I’m hearing talk that they aren’t, and it is important to me because I have a bid in on a new house. Is this the doing of tax reform?--G. B.

A: Congressional tax reformers get the blame for this, but not quite in the way you think.

Responding to what it apparently thought was the intent of lawmakers, the IRS last year barred taxpayers from deducting certain mortgage points.

These up-front service fees--which run from 1% to 7% of the mortgage, depending on market demand and the borrower’s credit rating--remain tax-deductible on new mortgages. But, beginning with 1986 tax returns, they no longer are deductible on home mortgage refinancings where the proceeds are used for something other than home improvements.

First came the howls of protest from homeowners. Then started the angry calls and letters from congressmen, who insisted that they never intended such discrimination against mortgage refinancing.

It isn’t yet clear what will become of this skirmish. Lawmakers from New York, Idaho and Arkansas, saying that they speak for some 200 members of Congress, have formally asked the Treasury Department to re-allow the writeoffs until clarifying legislation can be passed. And Rep. Sherwood Boehlert (R-N.Y.), has introduced a bill to stop the discrimination.