Refund of calculated penalty

[clarkd01]

I have had 2 clients who received letters from the IRS along with refund checks for the amount of their penalty which was system calculated.  The letter states the refund is due to "miscalculated" tax penalty.  Is there an issue with the calculations through the system?

[Jim-from-Ohio]

were they in California or another area with natural disasters?  IRS waived some penalties for certain states, most notably California

[clarkd01]

Nope, Michigan.

[PATAX]

I think similar questions have been asked. Do a search on this forum.

[clarkd01]

The older string I found was back in 2019 which states to check the box for the IRS to calculate the penalty if it is under $100.  Both clients penalty was well over $100 level.  This does not answer why the system is calculating the penalty incorrectly though.

[Just-Lisa-Now-]

what tax year are they for?

[clarkd01]

both cases are for 2023

[IRonMaN]

The search function sucks, but there have been a number of posts over the last couple of months with clients that are pleasantly surprised by receiving unexpected refunds for calculated penalties.

[Jim-from-Ohio]

I did a few searches looking for the recent post and could not find them.  I am in Ohio and a few of my clients got that same penalty reduction letter..they called.. asked about it.. told them the IRS gave a break on the penalty.. client was happy. The End. 

[clarkd01]

So you believe the system is calculating the penalty correctly and the IRS is just being kind.  Hard to think that is all there is to it.  🙂  Thank you.

[Jim-from-Ohio]

Some things are not worth the time to investigate in the heat of tax season. 

[taxiowa · Accepted solution]

What is happening is the client paid before the due date.  You listed the due date as the date the client will be paying.  Thus the IRS realized the client paid one month earlier than the date you listed.  Hence the refund of miscalculated tax penalty.  Always ask client when they will be paying if subject to penalty and enter on form.  If you go back and change on your computer to date paid you will find the difference.

Intuit always defaults to due date as date paid on form 2210.  You have to change to actual date paid!

[garman22]

shit, im sorry. I didnt know by me clicking best answer would show as accepted. That was NOT my intention. I just liked this answer.

[IRonMaN]

Apology accepted 😕😕😕

[BobKamman]

Well, I'll never get credit now for the best answer, but there's this:

State Tax Relief for Tax Year 2023

In late August 2023 severe storms, tornadoes, and flooding impacted nine Michigan counties. On February 15, 2024, the Internal  Revenue Service (IRS) announced tax relief for individuals and businesses related to this event. Treasury is following the actions of the federal government by providing state tax relief through extensions, which result in penalty and interest waivers.

https://www.michigan.gov/taxes/2023-federal-disaster-area-relief 

[garman22]

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@BobKamman wrote:

Well, I'll never get credit now for the best answer, but there's this:

Hahaha! See, Bob got screwed! Bad Mikey Bad!!! 

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