is anyone experiencing audits from clients with miscalculated rebates?

[lucrecia]

Ive already had 6 clients come in with a letter from the IRS stating they need to give back a certain rebate amount. I would open their file to check for the automatic recalculation and find out that the rebate calculation would be wrong. But yet again the UCE calculation would give them a refund to offset the payback rebate amount. This is crazy folks. Its a mess.

[Just-Lisa-Now-]

I have not had anyone call with any type of letter....your post seems light in details...were these people that said they didnt get the advances so you added the RRC to the return?

[dascpa]

I am not answering your question but understand there is a difference between an "audit" and a calculation letter, or other type of IRS letter.  I only mention it because clients freak out at the word "audit" and many times blame the tax preparer when it's a 1099 mismatch, a request for more information or calculation adjustments.

[lucrecia]

Well what im trying to say is proseries has a miscalculation on the RRC

[Just-Lisa-Now- · Accepted solution]

yes, Proseries was popping up with an erroneous message disallowing the RRC for any returns that ha RRC on them, thats not the same as getting an IRS letter though.....so what did IRS send your clients?

[BobKamman]

As @dascpa notes, "audit" is not the best word to use for this. 

Were these returns filed in early February?  The program has probably been updated since then, so it would be difficult to track the cause. Are your clients being told they owe money?  Or is their refund being reduced or increased?

Is there a "CP" number on the notice they received, so we can watch for it with other clients and questions?

[lucrecia]

Ok so, MFJ with a 19yo dependent. RRC1= 2400, RRC2= 1200, dependent didnt qualify for RRC1-2 right? Proseries calculates RRC 1,100 to towards the refund. Weeks later IRS sends letter wanting 1,100 back. 

[lucrecia]

Yes, early february, i know all the updates werent there yet. But man this is crazy

[sjrcpa]

So you efiled what you knew was an incorrect return?

Then IRS gave an incorrect refund based on that incorrect return?

And now IRS wants it back?

[lucrecia]

No, i did not know it was incorrect because the software automatically calculates the RRC when CORRECTLY inputted right??

[Just-Lisa-Now-]

Ohhh, there was something early in the season with dependent teenagers where the software was computing incorrect RRC, that's probably what has happened. 

Most preparers noticed the error and corrected it themselves, but Im sure some slipped though.

[PATAX]

Lucrecia, I haven't had any issues with that yet nor have I heard of other tax preparers having that issue... But I do not like to file returns too early... it is a good idea to wait a little bit to let any issues be corrected especially if the return is not a simple one... Good luck

[lucrecia]

Right, but yet again the UCE recalculation gave them more refund of like 2,800. So im wondering if the client still needs to pay back the 1,100? Or would the IRS do an another recalculation based on UCE? 

[BobKamman]

@lucrecia " Or would the IRS do an another recalculation based on UCE? "

Yes, eventually.  They won't recalculate RRC because it appears the taxpayers already received the full amount to which they are entitled.  But they will recalculate tax, and perhaps other credits, based on UCE.  That's not going to happen until July at the earliest, so it depends on whether your clients want to ignore a few notices with increasingly threatening language churned out by the ol' IRS computer.  You might be able to freeze the notices by filing an amended return, which is permitted but not encouraged, or even making a phone call to ACS and explaining the situation.  

[sjrcpa]

Also, before I efile a return I check it against the pdf copy that I gave to the client. If there are differences I investigate.