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Tax Man Comes A Dozen Years Later
LOVELAND, Oh: (Howard Ain) How long do you have to keep your tax records?
The Internal Revenue Service recommends about seven years for federal taxes. But a local woman was surprised to find it's a lot longer for your state taxes.
Local 12 TroubleShooter Howard Ain shows us what happened when a bill collector told her she owed thousands of dollars in penalties.
Jeanine Schmidt, of Loveland, was contacted by a bill collector one day telling her she owed four thousand dollars, from a business she owned years ago.
Jeanine Schmidt: "It was a home-based transcription business. Basically, that's what it was, transcribed medical records for doctors, patients."
Schmidt's company, JMS Medical Services, operated for 10 years, until 2003. The bill collector told her...
"I owe 4-thousand dollars for a delinquent franchise fee from the tax year 2001. He said this was a franchise fee of 50 dollars that was delinquent from 2001. This was fees, late filing fees and interest and other filling fees that had accrued since 2001."
Schmidt disagreed and contacted her accountant to get tax records going back that far to show she didn't owe any taxes.
Howard Ain: "After several phone calls, the bill collector finally sent Schmidt this letter in which they proposed a settlement, not of 4-thousand dollars, but of just 819 dollars."
But Schmidt says she owes no money at all. She wants to know why the tax department is able to go after her 12 years later.
Schmidt: "I have no idea how many years now. I thought it was 7. He told me its forever."
State workers say they sent Schmidt a letter in 2002, but she doesn't recall receiving it. So, I contacted the Ohio Department of Taxation. A supervisor reviewed her prompt tax filing over the years and decided to drop all fees and penalties.
The big thing to remember here is, with state income tax, there is no statute of limitations. They can bill you as far back as they want. So, you should save your state tax and payment records forever.