Tax Refund Discrepancy: Caleb and Sadie's Journey

The notice was in regard to their 2020 tax return, claiming that Caleb and Sadie’s tax refund had been adjusted.  

The couple was originally supposed to receive a $30,000+ refund, but the letter noted that Oregon would only be issuing them a $10,000 refund – a $20,000 difference in what the couple believed they were owed. Naturally, Caleb and Sadie did not agree with this enormous adjustment. Fortunately, they remembered they had purchased Audit Defense for their 2020 tax return. They immediately went to our website, created an account, and started a case. 

Shortly after they submitted their request, one of our tax professionals, Lance, was assigned to their case. He reviewed the notice and immediately determined the discrepancy: the State of Oregon believed that Caleb and Sadie were residents of Oregon and, in turn, determined they owed additional taxes. Lance called Sadie to discuss this and determine what had happened in the 2020 tax year. Sadie explained that she was confused by this notice as she and Caleb had spent the majority of that tax year living in California. Lance understood their situation and sent the couple a list of the documentation that would be needed to prove their residency in California for the 2020 tax year.  

Caleb and Sadie dutifully gathered all their documents, such as lease agreements, vehicle registration, and driver’s licenses, to prove that their primary address was in California. Lance compiled the information they provided, drafted a letter to the State of Oregon, and sent the proposed response to our Quality Control team for review. Once QC approved the response, Lance forwarded the documentation to our Administrative Services department, who sent it off to the State of Oregon for their review. Lance then called Sadie to let her know the status of the case. He told her that a response had been sent to the state and informed her that it typically takes state taxing agencies anywhere from 45 – 90 days to respond. Once she and Caleb received a response from the IRS, they were instructed to call Lance as soon as possible. 

Around the 90-day mark, Caleb and Sadie did receive a response from the State of Oregon. They forwarded it to Lance but, upon his review, he quickly determined that there was, again, a discrepancy in the tax that was withheld and that their tax refund still should’ve been much higher than what the State of Oregon was claiming. He requested that Caleb and Sadie send over their W-2s and put together another response. Once Quality Control approved the response, it was forwarded to the AS Department who sent it off to the state. Lance advised Caleb and Sadie again that it would probably take some time to hear back, but to reach out to him as soon as they received any correspondence. 

About four months later, the couple did receive a follow-up letter from the State of Oregon, saying they were still disallowing the claims Lance made in the most recent response. The letter did not include details on why they disallowed the claims, so Lance informed Sadie of this update, and let her know that another letter would likely be coming. Unfortunately, the letter did not arrive as quickly as expected, so Lance began to make follow-up calls to the agency, leaving voicemails for both the examiner and their manager. Weeks eventually turned into months, when Lance was finally able to get in contact with the new examiner. Lance chatted with her to check on the status, and was informed she would get back to him after reviewing the case. After a few more months of waiting and additional follow ups, Sadie and Caleb received another letter – this time, the State of Oregon was denying they owed any refund to the couple and, instead, claimed they owed additional tax. In this new letter, they were claiming the tax due was related to a retirement distribution. 

Again, Caleb and Sadie gathered the documentation they used to prepare their 2020 tax return and submitted it to Lance for review. In the meantime, Lance began to investigate the tax law, determining what the rules were regarding retirement distributions – specifically during the Covid era. Many tax changes occurred during the pandemic and Lance wanted to see if any of those tax changes would apply to Caleb and Sadie’s specific situation. After reviewing the case law and Sadie and Caleb’s documentation, Lance determined that the couple should still be receiving a refund of about $20,000, contrary to what the state was claiming. For the third time in this case, a response was prepared, sent to QC and once approved, it was forwarded to AS to send to the State of Oregon.   

Unfortunately for Caleb and Sadie, the State of Oregon returned with another letter, and another request for documentation. One of Caleb’s employers was located in the State of Oregon and this was proof to the state that Caleb, in fact, did live there. However, Caleb insisted that he was only working for that particular employer right up until Covid hit, and he lived out of state from April to December of 2020. More documentation was requested, which was forwarded, again to the State of Oregon. 

Six months passed and the State of Oregon had still not responded to the most recent documentation that had been sent. Lance reached out to the taxing agency to check on the status, and they confirmed that they had received the response but had not yet reviewed it. Over the course of several days, Lance continued to call the agency to ask them to expedite the review of the case and was transferred from examiner to examiner. Eventually, he asked the case to be escalated to a manager. After she had a chance to review the case, Lance explained the position of the taxpayers: Shortly after Covid, they moved out of state and remained there, as demonstrated by various lease and purchase documents. The manager continued to disagree with Lance’s stance; because they still maintained a residence in the State of Oregon, even though they no longer lived there, they were considered to be residents. She also stated that the case had been closed and there was no further dispute to be had. At this time, Lance requested the case be appealed. He reached out to his manager, George, to determine the next best steps. 

Together, Lance and George worked on a new response on behalf of the taxpayers – but this time, the case would go to appeals. Unfortunately, these types of cases can take anywhere between 6-12 months to be resolved. Lance reached out to Caleb and Sadie to let them know the next steps.  

Around the 6-month mark, Lance met with the Senior Auditor and they agreed to schedule a conference with a mediator the following week. However following the conversation, the examiner reached out to Lance again to see if they could resolve things without going through a mediator. He expressed to Lance that he was impressed by his diligence, explaining that most tax representatives are typically not as “zealous” as Lance had shown himself to be, and that it showed he really cared about his position to represent taxpayers. Over the next several days, Lance and the examiner exchanged the previously submitted documentation. After reviewing the documents, the examiner went to his supervisor’s supervisor and requested they approve a final refund of $25,000. This request was approved! 

Lance reached out to Caleb and Sadie to tell them the good news. Even though the refund was $5,000 less than they believed they were owed, Lance encouraged them to accept this proposal.  

Caleb and Sadie eagerly accepted, and expressed their appreciation to Lance. Not only had he fought for them at every turn, but he had educated them along the way so they could hopefully avoid something like this happening again in the future. At the end of the case, what the members had to say about Lance was short, but sweet: “Lance, you’ve been amazing!” And now, if the members ever receive a letter from their tax agency again, they know who to call!