Jul
15
2008

  Mysterious IRS Refund

I got an unexpected refund check from the IRS. It's from 2005, but we owed money on that balance and already paid it. I know that if you cash a check from the IRS that is incorrect, and they later correct it, you'll owe interest and penalties on the amount you took from the date you cashed the check. So I called to find out what's going on.

The agent was reasonably helpful, and faxed my "transcript" for 2005 to me. But the only description for their adjustment is "prior year tax abatement" and the amount, with no other description.

I don't find this reassuring. Especially since I amended our 2006 returns and am expecting a much larger refund on that. After trying to decipher the 2005 transcript, I decided to call about the 2006 refund to make sure that was coming along ok. Thankfully, yes. They said I should have it within a month.

My 2007 refund, on the other hand, was another story. Terry and I had made our estimated payments and filed for an extension as married-filing-joint, but we actually filed the returns married-filing-separate. Which is fine, I read the rules before I did this. But the IRS had messed up, and not applied either the extension or the payments to my return at all, only Terry's. So the agent said my account showed a huge balance due and also a large "failure-to-file" penalty. But she did see that Terry's return had way too much applied to it, and made the adjustment to split our estimated payments, plus noted on my account that I had a valid extension, got rid of the erroneous penalties, etc. I was glad I bothered to call about 2007, I was only expecting a $28 refund and ordinarily wouldn't have waited on hold to find out where it was. It's just that my suspicions were aroused when I got the unsolicited 2005 refund so I checked on everything.

I guess I'll call back later in the week to get some more information about 2005, and if they don't have any more details, I'll just ask them to make a note in my file that I did call to confirm the accuracy of their calculations before I cashed the check. That should ensure I don't pay any penalties if they reverse their largesse in the future.

They don't run a tight ship over there, they've made errors on my returns more years than not. Fortunately, the worst part of getting it all corrected is usually the phone hold time, once on the line the agents are surprisingly helpful. This is in contrast to the agents who answer when you just have a question-- I've usually had to get hold of a supervisor to get a decent answer about various technical questions I've had over the years. But when it comes to just correcting mistakes, they just tap tap tap into their computers while you're on the line with them and *poof* the amounts due disappear.