The shock for the accountant's customers has turned to horror as the ATO has come after them demanding full payment of taxes they believed they had already paid. “They [the ATO] are saying, ‘tough luck, cough up’," says Alex*, one of the victims who spoke to Fairfax Media. "We have been robbed of this money. The ATO are saying, ‘we understand that'; they’re patting you on the back and robbing you at the same time. Loading “These are not millionaires [being chased]. They’re hard-working small and medium businesses - they used a registered tax agent and were ripped off. There’s been suicide attempts, mental breakdowns, marriage and family breakdowns." It’s another David and Goliath story, Alex says, illustrating the ATO's tough treatment of innocent and honest taxpayers, following similar allegations raised in a joint Fairfax Media-Four Corners investigation last week.

There isn't one client who is not under a doctor’s care, Alex says. “People have suffered massive pyschological stress.” Since the three-part investigation, hundreds of taxpayers have contacted Fairfax Media with further evidence of questionable ATO treatment. They reveal: the tax office has sent threatening letters to taxpayers claiming they had not provided their tax file number when that was not the case; that small businesses are facing demands for immediate payment of "overdue" GST when they are not in arrears; and that the ATO has itself asked for patience as it has battled to make payments it owes on workers' superannuation.

These problems follow the joint investigation's revelation of heavy-handed tactics including the widespread freezing of people's bank accounts, inadequate compensation and lack of recourse when the tax office makes mistakes. The investigation prompted an immediate Treasury review from Revenue and Financial Services Minister Kelly O'Dwyer who said she was "deeply concerned" about the allegations raised. Opposition Leader Bill Shorten has signalled he might go further and call for a parliamentary inquiry when Parliament resumes next month. Bankruptcy worries But that's little comfort for Alex and the other victims of an unscrupulous tax agent. The victims are not being treated as a group scenario, Alex says, but on an individual basis. It's a tactic he suspects the ATO is using to try and recover more money.

Some individuals have settled and may have paid in order to do so. Some are still negotiating and Alex says they are being pressured by the ATO to sell property, or take out loans to pay the arrears, some of which date back years and come with penalties. Others are seeking external legal advice on whether they can get compensation. "But everyone has to pay," Alex says. "There’s people that will just go bankrupt." Alex’s business revenue has dropped 90 per cent because he has been too stressed to work. He is now trying to get mediation with the ATO to resolve the dispute. "The ATO rang me and asked me if I’d sell my property," he says.

"The ATO would have earned far more money from me had I been able to [keep normally running] my business. I'm absolutely traumatised." Tax barrister Graeme Halperin says it is worrying that the ATO has no mechanism in place to deal with taxpayers left out of pocket by a crooked tax agent even if the agent gets deregistered and jailed. Barrister Graeme Halperin. Credit:Eddie Jim "If that trust and faith breaks down, and the taxpayer suffers financially as a result of being cheated or disadvantaged by an unscrupulous tax agent, the ATO makes no allowance," he says. "[The small business] cops it in the neck. They are a double victim, and pay twice over."

The ATO confirmed to The Sydney Morning Herald and The Age that when people have been unwittingly dudded by their adviser, the ATO will still pursue the taxpayer for the money. "We will always work with affected taxpayers to correct their past tax returns, and get their tax affairs in order," an ATO spokeswoman said. "While affected taxpayers will usually need to repay any tax owing with interest, we generally reduce or eliminate penalties for those who work with us to correct their returns." Tax file number unknown The ATO's hardline approach can be especially confronting when it mistakenly accuses taxpayers of failing to meet their obligations.

Nurse Susan Jarnason is one of the flood of victims to come forward following the joint investigation claiming to have received a shock demand from the ATO as the result of an error. Susan Jarnason is another taxpayer who has had issues with the ATO. Credit:Jessica Hromas She was one of an unknown number of taxpayers to receive a strongly worded form letter directing them to provide a correct Tax File Number (TFN) or face having the top tax rate applied to her wages. The letter says the TFN provided by Ms Jarnason did not match the ATO's record and that "unless you fix this within 14 days your payer will have to deduct tax at the top rate".

Ms Jarnason says her TFN, which the ATO uses to track every working Australian, has not changed in 25 years. When she rang the ATO to tell them that, she says the person on the phone "explained [it] away by saying, 'oh yes, a bunch of wrong letters were sent out you can disregard that'." "It was quite a threatening letter," she says. "It made me lose confidence in them." The ATO spokeswoman says the letters were sent as part of the establishment of a new payroll reporting system for employers with more than 19 staff. The ATO stopped sending the letters when it realised it could solve "discrepancies" in another way but didn't say how many had been sent.

There are other concerns about whether the tax office's systems are as robust as they should be. One taxpayer in the property industry who faced a GST obligation received a letter titled: "Pay your debt or be referred to a collection agency". One recipient of just such a letter, who wished to remain anonymous, said he found the letter "intimidating" as it was the first correspondence he had received from the agency. "It incorrectly states that I have an overdue tax debt, that interest is accruing, and that legal action will soon be commenced, when in fact the due date for the tax was still two weeks away," he says.

The ATO spokeswoman defended the approach saying that letters and other approaches, such as mobile phone text messages, were an efficient way to prompt action. "We don’t write letters to intimidate people," she says. "Debt recovery actions do not start until after the debt falls due." The ATO did not divulge how many such letters it sends. Superannuation mess The cases have come to light as the ATO has itself had issues making payments it owes due to system problems.

The ATO operates a clearing house for small business where it collects superannuation and then distributes it to hundreds of thousands of employees. But in recent weeks the system has frozen meaning payments for 19,000 workers were delayed - some by almost three weeks. The ATO wrote to businesses in mid-April advising them of the issue saying it was working to process the backlog. It also stated it would not punish employers who had issues paying superannuation on time due to the glitch.

A small retailer using the service, who wished to remain anonymous, said hundreds of dollars worth of super payments had not been paid to his employees' super funds several weeks after he paid the money to the ATO. "So it is three weeks where money should have been in their super accounts but it has not been, and so any interest they were going to earn on their super, they have not earned." He said he contacted the ATO and it expects the issue to be resolved by week's end, but until it is fixed the system will not allow processing of any other new transactions. "The system only allows for one payment to be outstanding at any time," he said. "I have spoken to the ATO two times [this month] and they they say, 'yeah, yeah we know, it’ll be fixed’ - the care factor was zero."

The ATO says 95 per cent of the affected payments were passed to the employees within 20 days and the remainder of the payments would be paid by Friday. "A number of payments were delayed, and the ATO has sought to address this as a matter of priority." The Inspector-General of Taxation Ali Noroozi thinks the ATO makes mistakes in about 5 per cent, or one in 20 cases - a claim the ATO has disputed. The issues surrounding the ATO's treatment of smaller taxpayers has prompted calls for greater scrutiny. The ATO has resisted this push, saying greater scrutiny is unnecessary. Kate Carnell wants greater powers to investigate small business complaints against the ATO. Credit:Louis Douvis