# IRS charging interest for their mistake? **URL:** \ **Category:** Factual Questions\ **Created:** [April 28, 2008, 7:16pm UTC](https://boards.straightdope.com/t/irs-charging-interest-for-their-mistake/447259 "2008-04-28T19:16:17Z")\ **Posts on this page:** 19\ **Page:** 1
**Author:** ![masterofnone](https://avatars.discourse-cdn.com/v4/letter/m/4bbf92/32.png) [@masterofnone](https://boards.straightdope.com/u/masterofnone)\ **Post date:** [April 28, 2008, 7:16pm UTC](https://boards.straightdope.com/t/irs-charging-interest-for-their-mistake/447259/1 "2008-04-28T19:16:17Z")
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? ---
**Author:** ![Shodan](https://avatars.discourse-cdn.com/v4/letter/s/9f8e36/32.png) [@Shodan](https://boards.straightdope.com/u/Shodan)\ **Post date:** [April 28, 2008, 9:56pm UTC](https://boards.straightdope.com/t/irs-charging-interest-for-their-mistake/447259/2 "2008-04-28T21:56:44Z")
> [@](#): > > What happens to me if I just pay back the $700? They charge you interest plus penalties on the interest. Yes, it’s unfair. Regards, Shodan ---
**Author:** ![Harmonious\_Discord](https://avatars.discourse-cdn.com/v4/letter/h/74df32/32.png) [@Harmonious\_Discord](https://boards.straightdope.com/u/Harmonious_Discord)\ **Post date:** [April 28, 2008, 10:19pm UTC](https://boards.straightdope.com/t/irs-charging-interest-for-their-mistake/447259/3 "2008-04-28T22:19:55Z")
It sounds like a case for television news. Sometimes the news reporters are the most effective way to fight injustice. ---
**Author:** ![flex727](https://avatars.discourse-cdn.com/v4/letter/f/258eb7/32.png) [@flex727](https://boards.straightdope.com/u/flex727)\ **Post date:** [April 29, 2008, 1:33am UTC](https://boards.straightdope.com/t/irs-charging-interest-for-their-mistake/447259/4 "2008-04-29T01:33:44Z")
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. ---
**Author:** ![threemae](https://avatars.discourse-cdn.com/v4/letter/t/5f9b8f/32.png) [@threemae](https://boards.straightdope.com/u/threemae)\ **Post date:** [April 29, 2008, 1:52am UTC](https://boards.straightdope.com/t/irs-charging-interest-for-their-mistake/447259/5 "2008-04-29T01:52:37Z")
[QUOTE=flex727] 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. [/QUOTE] 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. ---
**Author:** ![Sue\_Duhnym](https://avatars.discourse-cdn.com/v4/letter/s/91b2a8/32.png) [@Sue\_Duhnym](https://boards.straightdope.com/u/Sue_Duhnym)\ **Post date:** [April 29, 2008, 2:56am UTC](https://boards.straightdope.com/t/irs-charging-interest-for-their-mistake/447259/6 "2008-04-29T02:56:30Z")
[QUOTE=threemae] 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. [/QUOTE] HAHAHAHAHA. Oh, you poor delusional soul. Says me, who has a tax attorney for a reason. ---
**Author:** ![threemae](https://avatars.discourse-cdn.com/v4/letter/t/5f9b8f/32.png) [@threemae](https://boards.straightdope.com/u/threemae)\ **Post date:** [April 29, 2008, 5:26pm UTC](https://boards.straightdope.com/t/irs-charging-interest-for-their-mistake/447259/7 "2008-04-29T17:26:08Z")
[QUOTE=Sue Duhnym] HAHAHAHAHA. Oh, you poor delusional soul. Says me, who has a tax attorney for a reason. [/QUOTE] Cite? ---
**Author:** ![Rachm\_Qoch](https://avatars.discourse-cdn.com/v4/letter/r/a8b319/32.png) [@Rachm\_Qoch](https://boards.straightdope.com/u/Rachm_Qoch)\ **Post date:** [April 29, 2008, 10:12pm UTC](https://boards.straightdope.com/t/irs-charging-interest-for-their-mistake/447259/8 "2008-04-29T22:12:49Z")
[QUOTE=flex727] 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. [/QUOTE] 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! ---
**Author:** ![Harmonious\_Discord](https://avatars.discourse-cdn.com/v4/letter/h/74df32/32.png) [@Harmonious\_Discord](https://boards.straightdope.com/u/Harmonious_Discord)\ **Post date:** [April 29, 2008, 10:34pm UTC](https://boards.straightdope.com/t/irs-charging-interest-for-their-mistake/447259/9 "2008-04-29T22:34:38Z")
[QUOTE=Rachm Qoch] 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! [/QUOTE] So it was the IRS going “Neaner, Neaner, Neaner..You can’t make me!” ---
**Author:** ![Sue\_Duhnym](https://avatars.discourse-cdn.com/v4/letter/s/91b2a8/32.png) [@Sue\_Duhnym](https://boards.straightdope.com/u/Sue_Duhnym)\ **Post date:** [April 29, 2008, 11:58pm UTC](https://boards.straightdope.com/t/irs-charging-interest-for-their-mistake/447259/10 "2008-04-29T23:58:14Z")
[QUOTE=threemae] Cite? [/QUOTE] Cite? On my tax situation? On the internet? Yeah, no. :rolleyes: ---
**Author:** ![DrDeth](https://avatars.discourse-cdn.com/v4/letter/d/b487fb/32.png) [@DrDeth](https://boards.straightdope.com/u/DrDeth)\ **Post date:** [April 30, 2008, 2:21am UTC](https://boards.straightdope.com/t/irs-charging-interest-for-their-mistake/447259/11 "2008-04-30T02:21:31Z")
[QUOTE=masterofnone] 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? [/QUOTE] 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. ---
**Author:** ![bare](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/bare/32/471_2.png) [@bare](https://boards.straightdope.com/u/bare)\ **Post date:** [April 30, 2008, 6:04am UTC](https://boards.straightdope.com/t/irs-charging-interest-for-their-mistake/447259/12 "2008-04-30T06:04:44Z")
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! ---
**Author:** ![flex727](https://avatars.discourse-cdn.com/v4/letter/f/258eb7/32.png) [@flex727](https://boards.straightdope.com/u/flex727)\ **Post date:** [April 30, 2008, 3:28pm UTC](https://boards.straightdope.com/t/irs-charging-interest-for-their-mistake/447259/13 "2008-04-30T15:28:52Z")
[QUOTE=DrDeth] 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. [/QUOTE] This is NOT correct! You don’t get one year “free”. Here is the correct information: [QUOTE=IRS] Who Must Pay Estimated Tax If you owed additional tax for 2006, you may have to pay estimated tax for 2007. General Rule You Must Pay estimated tax for 2007 if both of the following apply. You expect to owe at least $1,000 in tax for 2007, after subtracting your withholding and credits. You expect your withholding and credits to be less than the smaller of: -------a. 90% of the tax to be shown on your 2007 tax return, or -------b. 100% of the tax shown on your 2006 tax return. \*Your 2006 tax return must cover all 12 months. --------\* Certain taxpayers with higher adjusted gross income must substitute 110% for 100%. Refer to Chapter 2 of Publication 505, Tax Withholding and Estimated Tax, for the income amounts that the higher percentage applies to. [/QUOTE] [Cite](http://www.irs.gov/faqs/faq9.html) ---
**Author:** ![DrDeth](https://avatars.discourse-cdn.com/v4/letter/d/b487fb/32.png) [@DrDeth](https://boards.straightdope.com/u/DrDeth)\ **Post date:** [May 1, 2008, 2:13am UTC](https://boards.straightdope.com/t/irs-charging-interest-for-their-mistake/447259/14 "2008-05-01T02:13:12Z")
[QUOTE=flex727] This is NOT correct! You don’t get one year “free”. Here is the correct information: [Cite](http://www.irs.gov/faqs/faq9.html) [/QUOTE] 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](http://www.vernonjacobs.com/estimated-tax.htm) T_he 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. \* ---
**Author:** ![UltraVires](https://avatars.discourse-cdn.com/v4/letter/u/ecccb3/32.png) [@UltraVires](https://boards.straightdope.com/u/UltraVires)\ **Post date:** [May 1, 2008, 10:29am UTC](https://boards.straightdope.com/t/irs-charging-interest-for-their-mistake/447259/15 "2008-05-01T10:29:59Z")
[QUOTE=DrDeth] 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. [/QUOTE] 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. ---
**Author:** ![masterofnone](https://avatars.discourse-cdn.com/v4/letter/m/4bbf92/32.png) [@masterofnone](https://boards.straightdope.com/u/masterofnone)\ **Post date:** [May 1, 2008, 1:48pm UTC](https://boards.straightdope.com/t/irs-charging-interest-for-their-mistake/447259/16 "2008-05-01T13:48:42Z")
[QUOTE=jtgain] 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. [/QUOTE] That’s exactly what I thought when I read **DrDeth’s** post also. I’m just going to pay them their interest and be done with it. ---
**Author:** ![DSYoungEsq](https://avatars.discourse-cdn.com/v4/letter/d/c6cbf5/32.png) [@DSYoungEsq](https://boards.straightdope.com/u/DSYoungEsq)\ **Post date:** [May 1, 2008, 4:12pm UTC](https://boards.straightdope.com/t/irs-charging-interest-for-their-mistake/447259/17 "2008-05-01T16:12:26Z")
[QUOTE=jtgain] 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. [/QUOTE] 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). ---
**Author:** ![DrDeth](https://avatars.discourse-cdn.com/v4/letter/d/b487fb/32.png) [@DrDeth](https://boards.straightdope.com/u/DrDeth)\ **Post date:** [May 2, 2008, 1:54am UTC](https://boards.straightdope.com/t/irs-charging-interest-for-their-mistake/447259/18 "2008-05-02T01:54:44Z")
[QUOTE=DSYoungEsq] 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). [/QUOTE] Right. You owe _taxes_ as you earn income. ---
**Author:** ![Carson\_O\_Genic](https://avatars.discourse-cdn.com/v4/letter/c/cdc98d/32.png) [@Carson\_O\_Genic](https://boards.straightdope.com/u/Carson_O_Genic)\ **Post date:** [May 2, 2008, 9:38am UTC](https://boards.straightdope.com/t/irs-charging-interest-for-their-mistake/447259/19 "2008-05-02T09:38:36Z")
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?