The Internal Revenue Service is investigating a bizarre case in which hundreds of taxpayers were wrongly flagged as having received millions of dollars in income from a north suburban car dealer, according to the dealer and an attorney for three of the people affected.
Skokie Motor Sales — which operates as Sherman Dodge Chrysler Jeep Ram at Howard Street and Skokie Boulevard in Skokie — says it doesn’t know how the errors occurred. It says the amounts of misreported income were as high as $8 million.
The dealership’s financial controller says about 300 taxpayers were affected.
In one case, a Beach Park couple who had bought a car at the dealership in 2017 discovered that an IRS Form 1099 was on file with the tax agency under the husband’s name and the wife’s Social Security number. It indicated that Russell Fritz and Carmen Ortiz-Fritz had been paid $4.1 million by Skokie Motor Sales — a huge sum that the couple never received and didn’t want to have to pay taxes on.
Form 1099 is used to report income earned outside regular employment. There are various types of 1099s, covering freelance income, dividends, interest and other earnings.
The $4.1 million on the Fritzes’ IRS record came from a 1099-MISC form. The “MISC” type of document is for miscellaneous income, such as from prize winnings or awards.
The couple hadn’t won any prize. But they say they ended up with a big and costly headache.
Ortiz-Fritz says she was getting their small company, Business Wired Technology, ready to do government work when her tax preparer called to point out the $4.1 million mistake.
The couple say they spent several weeks trying to straighten out the wrong information and, as a result, missed a crucial deadline to get financing for a government project they’d won.
They say they ended up having to bow out of the project — and losing about $55,000.
“It’s been a freakin’ nightmare,” Ortiz-Fritz says.
Another taxpayer, Majidah Saleem of Chicago, worked at Sherman Dodge for about one week toward the end of 2017 before quitting. Yet, in December, Saleem got a letter from the IRS informing her that a 1099-MISC had been filed showing she had received $3.4 million from the dealership in 2017.
Saleem initially worried the IRS might come after her for taxes on the huge sum. She disputed the filing and is hoping it gets resolved.
“I’ve just been waiting,” she says.
An IRS spokesman in Washington declined to comment on the cases, citing federal taxpayer privacy rules.
But a spokeswoman for Sherman Dodge and a tax attorney representing the Fritzes and Saleem say the IRS has told them it has opened an investigation.
Lissa Druss, hired by the dealership to speak on its behalf, says anyone who has gotten an erroneous Form 1099 should contact Sherman Dodge and ask for a letter stating that the reported income is incorrect.
Druss says that not all of the 300 or so people and business that have been affected by the mixup are Sherman Dodge customers or employees — adding to the mystery of how their names and Social Security numbers became linked to 1099s for purported income from the dealership.
“The attorneys for the dealership have talked to the IRS, and there was literally a glitch in the system,” Druss says. “We’ve been told by the IRS that it was a glitch on their end.”
Chicago tax attorney John Buchmiller, who is representing the Fritzes and Saleem, says the IRS told him the incorrect 1099s will be flagged by the agency as invalid. Anyone who got one should dispute it and file their taxes without including the 1099 income, Buchmiller says.
“The IRS will recognize it and not collect on it,” he says.