I filed my taxes early, then received a letter from the IRS saying that I had made a mistake on my taxes and would be getting back $700 more than I thought because of the child tax credit. They said a letter was on the way explaining why I was eligable for this extra money. I could not find any errors on the form. Meanwhile I got my refund. Said letter never arrived.
Now they’ve sent me a bill for the $700 plus interest. WTF? Can they charge me interest for their screwup? The bastards don’t pay me interest for the loan I give them all year, but charge me interest for $700 they screwed up and sent me for a month? What happens to me if I just pay back the $700?
A few years ago I received a letter from the IRS letting me know I had made an arithmetic error on my return and owed them $5 plus penalties and interest (maybe a dollar and change). I reviewed my return carefully and discovered I had indeed made an arithmetic error in their favor, not mine! They owed ME $5! What did I do? I sent them the 6 bucks they asked for. Believe me, the difference was not worth the hassle I was in for if I contested.
The IRS is not a petty bully. Particularly the modern IRS. Communicating with the IRS in good faith to complete an accurate set of taxes will not cause them to mark you for future audits or some other form of harassment.
They sent me a letter a few years back saying that they reviewed my return and owed me six hundred and some odd dollars. They went on to further explain that since the three-year period for claiming this money had expired, they wouldn’t give it to me. Easy come easy go!
Interest is paid to whoever had the use of the funds. Indeed, if they audit you and you get a refund, they will pay you interest. They do not pay you interest on your witholding as you don’t pay interest if you owe*. Neither “owes” anyone until 4-15.
But don’t get silly with this. It’s not entirely even handed. If you owe a significant amount for a couple of years, you will get charged The Estimated Tax Penalty, which is really Interest. You usually get one year “free”, thus if you didn’t owe last year but got a windfall and owned next, you’d get the penalty waived.
According to my Bro, the EA- if you need a **Tax Attorney **(as opposed to a EA or CPA) then it is likely you have done something rather foolish (or have very weird taxes). But OTOH, anyone with complicated taxes needs a Tax Professional. IMHO. He sez the IRS is neither evil or a bully. They are human bureaucrats, doing the whim of Congress. They can be petty at times.
I just had an interesting occurance. Late January the IRS sent me a letter informing me that I owed thousands of dollars on an inheritance, which while it was true, I hadn’t gotten until tax year 2007. I sent documentation proving when I’d recieved it and got a letter in return that I was wrong.
Sheesh! I wanted the matter resolved before filing 2007 taxes so I went ahead and sent them the money and filed my taxes.
A few days ago I got an IRS check for the full amount of my taxes, plus a months’ interest!! No explaination.
So, now what do I do? The check is still sitting here on my desk, I figure if I don’t cash it, they can’t charge me any more penalties or interest because they are still in control of the money? If I do cash it and put it in my money market account until they decide the want it back, the piddling amount of interest wouldn’t likely come close to what they are going to charge me. Ahh me!
That’s what the Law sez, I was telling you what usually happens. If you do get hit with the ETP, and you did not owe the year before, write that out and assuming your case is not unusual, the IRS will *usually *waive the penalty.
As your IRS cite sez "b. 100% of the tax shown on your 2006 tax return. "
* http://www.vernonjacobs.com/estimated-tax.htm
The other choice is to base your current estimate on the total amount (100%) of taxes you owed (before deducting any payments) in the prior tax year. So, if your total federal income tax and self employment tax for 2002 was $16,000 (in excess of any withholding), you can make three quarterly payments of $4,000 during 2003 and one on January 15, 2004 and you will owe no penalties for underpaying your 2003 estimated taxes. *
I’m not following this logic at all. I have no use of my withheld funds, but I don’t get paid interest.
The parallel makes no sense. If I owe you money on April 15th, of course I wouldn’t pay interest before that date. But if I had to pay you small increments the entire year preceding April 15th to make sure you got your money, then you had use of a large quantity of my money, well in advance of when it was due.
I think he meant neither owes interest until the 4/15 date. Thus, if you overpay your withholding by, say $500, you don’t get interest on the over-withheld moneys. However, if you underwithhold by $500, you don’t pay interest on that amount (unless, of course, you end up subject to the under-withholding penalty).
This thread jogged a WTF? memory.Somewhat similar to the OP,but
Back in the 70’s a friend received a cheque from the IRS payable to his full name and SSN in the amount of $5k and change. No explanation was given.He had been a W-2 employee for the tax year and all years prior.No SE, 1099’s or other income.
After pondering a course of action he cashed the cheque and life went on.
Does this happen regularly? (Hope it’s my turn soon!) Can the IRS claim their money back?