$3,000.00 IRS Refund Check Error?

[PATAX]

Client just received a $3,000.00 even refund check from IRS... It appears that it is in error... Client, MFJ no kids, standard deduction, NO RRC, NO EIC, NO Health insurance penalty, NO unemployment comp., owed money on the return and paid it... No letter was received yet to explain the $3,000.00 check... I analyzed the return and the estimates paid and the economic impact payments and so forth and I cannot figure out why they received this check... I advised client not to cash the check and to wait for the letter from IRS to explain refund check.... Has anyone else experienced this or have a possible explanation... Thanks in advance for your help...

[BobKamman]

Were any of the ES payments in the last couple years for $3,000 ?

[PATAX]

No they weren't... That was the first thing I checked...check also says 12/20.. return was e-filed about 2 or 3 weeks ago... I hope they get a letter from the IRS but with the way the mail is who knows when they will get it... This one has me puzzled...

[PATAX]

My hunch is it could be an input error on the IRS part, i.e. the client was given credit for someone else's estimated tax payment... I know this is rare but this did happen to me years ago.. a client mailed their return in and when the IRS inputted the schedule C income number on page 1 they accidentally inputted it on the capital gain line. They sent the client a refund check and said that I used the incorrect tax method, i.e. did not use the favorable capital gain tax rates... I had client return the refund check and eventually the i r s agreed with me...

[dkh]

@PATAX  The mess going on within the IRS has me frightened.  I had client call yesterday regarding a letter received from IRS.   Letter thanks taxpayer for January correspondence - funny neither taxpayer nor I have sent any correspondence.  IRS says they need more time to review the information but in the meantime taxpayer can pay his tax bill to avoid future penalties and interest !!   Taxpayer is now in a panic.  Asked me if he should send a check..... OMG for what ?   He doesn't owe them anything!

[PATAX]

Yep sounds like a big mess to me too... They are rushing now to get caught up plus they have to handle the new monthly CTC Advance payments... I think in time everything will be cleared up and my experience with them is that they are honest...

[Just-Lisa-Now-]

I just came in to find a copy of pages 2 and 3 of a notice that a client dropped through he mailslot...he wrote on it, "For your records, I paid it!"

Please dont pay things before I look at them!! Lord knows what kind of junk IRS is sending out....this looks like they disallowed his RRC, but according to the RRC worksheet, it sure looks like he qualifies for that additional $388.
Ugh!

[IRonMaN]

Evidently the IRS has started sending out the fourth round of stimulus payments.  Under the terms of the new program, you can keep the money only if you don't tell anybody that you got the check.  Unfortunately, since they told you they got the check, they are now required to send it back.  Rules are rules😁

[PATAX]

I can remember being able to go a whole year without receiving any notice or letter Etc from the IRS, and I am not  old... now between the IRS, the States, and the local entities even my bottle of Tylenol has a headache...

[dkh]

Ahhhhhhhhhhhh   WHY do clients do that ?!?!?!       

[ejdtaxman]

Yes, this happened to a client of ours. long story short we filed an amended return for client's daughter, she owed about 13k on the 1040X. We could not e-file because original return filed in different software. So we mailed it in and told client to pay the 13k for daughter, and he did so electronically. 

a couple months ago dauughter received a refund check for 14k and has no idea why. We tell her not to cash it and hold on to it. 

She signed 2848 so we can call practitioner hotline. turns out even though return was mailed in October, it didn't post to account until May and has not even been processed yet. And payment hadn't been processed until April even though sent simultaneously with return (in october). lol

So we were instructed to mail the check back to some "refund inquiry unit" in Philly, write VOID on the endorsement line, and include a letter with a short explanation of why sending back. 

I suspect it will be the same situation with your client but you should call the hotline first to verify. perhaps there is another issue. 

the number is 866 860 4259 and choose option 2. make sure you have a signed 2848 on file or ready to fax. 

[PATAX]

Thanks a million for your response and the information... The thing that really has me puzzled is that it is an even $3,000... return was e-filed and accepted about 3 weeks ago... 

[ejdtaxman]

you said she owed money on the return and paid it, did she owe 3k? 

I don't know much about the stimulus round 4 payments coming out but that sounds like another explanation. did you tell client to look at description on check, if it has EIP on it that solves the mystery. 

[PATAX]

They owed $1,909 with the 1040-v and they promptly mailed that check... their 2020 estimates that they paid were $1,950 each for the first three estimates and $2,300 for the fourth estimate for a total of $8,150 paid in 2020 estimates...

[ejdtaxman]

more likely a stimulus check then. 

have them sign 2848 and call to see whats going on. or if you have on file already you could just order a transcript and see whats up. 

[PATAX]

Bottom of check states: "ANDOVE   12/2020 TAX REFUND 30"

[ljr]

It doesn't matter how many times you tell them if you get a letter don't panic - call me BEFORE you do anything but do they listen? ? ? ? ? ?

[ljr]

my thought is something is wrong with the estimated payments - that is always what it turns out to be when I get this. Client forgets to tell you about a check they sent in or it has happened IRS misposts a check. I've had it where client sends in Q4 of prior year later than January and IRS applies it as another Q1 current year payment. Then the letters for prior years shortage show up.

[Just-Lisa-Now-]

State of CA did this to me last year, I sent my 4th qtr ES payment with the 4th qtr voucher and 4th qtr 2019 written on the check, and they credited it as a 1st qtr 2020.

[PATAX]

You're exactly right... It usually is the estimated payments...

[BobKamman]

You should always go back to the previous year (2019) also.  Was there a credit-elect on the 2019 return?  Were any of the 2019 payments for $3,000?  

[PATAX]

2019 1040 V was for $895 which the client paid... The 2019 estimates where $1,800 each quarter for a total of $7,200... all estimates were paid...

[BobKamman · Accepted solution]

This discussion reminded me of the guy who received a $491,000 erroneous refund from IRS -- paid back some of it but was sued for the rest, and won his case (probably now being appealed) because IRS waited too long.  See the blog post here:

https://procedurallytaxing.com/late-filed-erroneous-refund-suit/

What must have happened is that someone else's payment was credited to his account.  Remember, IRS doesn't cash those checks.  They go to a private lockbox, like checks you send for your mortgage or credit card.  I have a client who once worked for a bank operation in Dallas that processed these IRS checks, and she tells me I don't want to know everything that happens in those paperwork sweatshops.  The whole idea is for the government to be able to brag about reducing its size, so they get rid of 5,000 civil servants and replace them with private enterprise that hires 6,000 to do a worse job.  

[PATAX]

Thanks for the information and the link..