Sam Stout's mother, Frances, passed away in 2009. As executor of her estate, the Hartford man researched her assets, went to probate court and paid hundreds of thousands in estate tax to both the Internal Revenue Service and the State of Connecticut.
But it's what happened last year that set him on a course to contact the NBC Connecticut Troubleshooters.
Last June, Stout received a letter out of the blue indicating his family had $32,000 coming to them in a "lost asset."
"I thought it was good news. I contacted the state they said they had the shares of Wellpoint, Inc.," Stout said.
They were in his late mother's name, so he had to go through probate yet again.
He owed $4,400 in back taxes on the $32,000, because it was part of the estate.
But Stout said the state was looking for more: $3,300 in interest.
"Why should I pay interest on money I didn't even know I had?" Stout asked.
The state charged him 1 percent per month on the unpaid liability, dating back to March 2010, when he paid the original tax bill on his mother's estate.
According to the State Treasurer's office, the law requires that securities are sold on receipt. The state holds it as "unclaimed property" and invests the money until the rightful owner comes forward to claim it. That, said Stout, seems like "double dipping."
"If you have money you don't know you have, the state's making money on it and if you go to get it, they're going to charge you for it," Stout said.
Longtime estate attorney Paul Bourdeau has no relationship with Stout or his family. He said the Internal Revenue Service has a three-year statute of limitations so the Feds don't even ask for back taxes, let alone interest, when something like this happens.
"If you had sent the IRS the amended return after the three year closure, they would not have accepted it. They would have sent your return back, sent your check back and said you're home free," Bourdeau said.
Bourdeau said Connecticut law is less clearcut, but he believes Stout has a strong case for an appeal.
"I think he could go to the DRS and said the statute of limitations has run, you didn't have the right to collect this tax and it should be refunded, together with the interest I paid," Bourdeau said.
The NBC Connecticut Troubleshooters contacted the Department of Revenue Services on Stout's behalf.
Commissioner Kevin Sullivan responded with a statement that reads:
"It's our duty to all other taxpayers that we collect what's legally due, including penalties and interest, when any taxpayer acts erroneously or knowingly attempts to evade the law. But DRS never wants to penalize taxpayers for trying to do the right thing. Based on what you have told me about this case, because I cannot legally disclose anything specific, there's room for further review and the taxpayer should contact my office."
Commissioner Sullivan said that if you do hide assets or income from the state, the DRS can reach back in audit and charge penalties and interest that could can add up to even more than the tax itself.
