It can be scary to receive a tax bill but imagine receiving one that you couldn’t repay in a million years. Literally.
That’s exactly what happened to Giles Hembrough, who works as a railway signal tester in Bristol, England. Hembrough received a letter from Her Majesty’s Revenue and Customs (HMRC), which is more or less the equivalent of our Internal Revenue Service (IRS), suggesting that he might owe a great deal more in tax. How much more? According to Hembrough, the tax notice from HMRC said:
Although we are changing your tax code you may still not pay enough tax by 5 April 2017. We think the amount you owe HMRC is £14,301,369,864,489.03.
We will let you know if this amount is right when we look at your tax return for the year.
That works out to $18,482,375,344,372.36 (US). To put that amount in perspective, for the fiscal year 2015, the United State’s federal budget reached $3.8 trillion, or about five times less.
Hembrough said that it would take him 369 million years to pay off that much in tax on his current salary.
Luckily, that won’t be an issue. Hembrough, who assumed that the discrepancy had something to do with a recent change to his tax code, called HMRC to discuss the error. He says the woman who answered the phone checked his records and advised, “Oh that is a big amount – it looks like someone has fallen asleep on the keyboard!” She assured him that the error would be corrected.
A spokesperson for HMRC later clarified, “These are not bills, but simply statements showing the customers current PAYE coding position. They are generated by recent activity on a record. Anyone who needs help with their coding notice should talk to us.”
Of course, Hembrough should have had confidence that the mistake would be discovered and corrected relatively quickly, but that’s not the general feeling for taxpayers when forced to deal with HMRC. Similar to our IRS, HMRC has been slammed for its service to taxpayers, including long wait times on the phone. Looming staffing cuts at HMRC threaten to make the situation worse, a complaint IRS shared in 2015 when, due to budget cuts, only about 37.6% of calls were answered with taxpayers waiting, on average, 23.5 minutes; due to additional funding for this tax season, IRS telephone service improved in 2016.
So what went right this time? Hembrough began by doing something I tell taxpayers is the most important step: he opened the mail. That sounds easy but it’s often the step that many taxpayers ignore because they’re too scared of what they might find. Let’s face it: it can’t get much worse than an $18 trillion tax bill.
Next, follow Hembrough’s lead and follow-up. Hembrough called the HMRC, the equivalent of IRS. You may not have to reach out by phone, depending on what your own notice says. It could be an informational letter or it could be a notice of adjustment, advising that you need to pay what you owe or work something out. Occasionally, you’ll receive a notice of deficiency, which may require a bit more effort. You won’t know until you open the mail and read the letter.
And here’s the real takeaway from Hembrough’s tax snafu: you can fix the problem if you address it. Ignoring a potential tax problem won’t make it go away and usually makes it worse. Whether you need to make a payment, call the IRS, or hire a tax pro, you should take steps to resolve the problem quickly. Your ability to fix the problem – even when it’s not your fault – may be time-dependent (the IRS likes deadlines).
