Amend Return for Form 7202 Credits for Sick Leave and Family Leave for Self Employed Individuals?

[tbamaze]

I have a customer that wants to file Form 7202 for 2020 and 2021.  They were self employed and unable to work due to covid.  I did not prepare their taxes during those years.  Is an amended return required or can I complete the form with relevant information and file?

[George4Tacks]

If NO RETURN HAS BEEN FILED then just file. If a prior return by ANYONE  then file amended.

[tbamaze]

I have some additional information from the client and I am skeptical because I do not know if they would get any money back. The client owed back taxes of $55k between 2017-2021 and settled with the IRS on the amount they would pay ($100) and the offer was accepted. They worked with a tax company to file the tax returns and it was calculated that they owed federal for 2020 and 2021 (approx. $3,600 each year).  

Even if they qualified for the 7202 credit would the IRS pay them since they had such a large tax bill that was settled?  

The client said they got a call from a tax company saying they could get them an estimated $27,000 related to this credit if they paid them a large fee.

My gut tells me to let sleeping dogs lie and if the IRS settled for $100 the client should be happy with that but I wanted to give the client an informed answer........

[sjrcpa]

"The client said they got a call from a tax company saying they could get them an estimated $27,000 related to this credit if they paid them a large fee."

That's from an ERC mill. Tell client to run away.

[tbamaze]

Yes I agree they should avoid that company.  My question is if I did the work could I get them a refund on the credit or would IRS say no because they owed large amount and settled.

[sjrcpa]

What does the OIC acceptance letter say?

The last one I saw said "Under the conditions of the offer, we will keep any refunds or
credits you may be entitled to for 202X or for earlier tax years,
including refunds you may be entitled to receive in 202Y for any
overpayments you made toward tax year 202X or earlier tax years . We
will apply any refunds or credits to your liability, not to your
accepted offer ."

X is the year the offer was accepted. Y = X+1.

So probably no refunds will be received by client.

[tbamaze · Accepted solution]

Thanks for pointing me in the right direction the Offer Terms in the OIC says:

As part of Form 656 they agree not to file an amended return for tax years included on the Form 656 and return any refunds received if an amended return is filed for tax years before the Offer in Compromise acceptance.