The IRS owes me $, can I offset that if I pay taxes for my 2021 return?

[cyber888]

I have an adjusted tax return (May 2021) since my accountant made an error and the IRS owes me money. It's now 10 months and the IRS have not refunded me. Can I deduct that if I file my 2021 tax return now ?

 

[scrabbler1]

The only way I think you could do that would be if, in the amended return, you had designated that return's refund to be applied to your 2021 taxes. Then, in your 2021 return, you would post that amount as part of the amount of estimated taxes and amount applied from the previous year's return. I know I applied a small refund from my original 2020 return to be applied to my 2021 return.

Now, what would happen if, by some strange chance, the IRS processed your 2021 return before your 2020 return? They shouldn't, surely, as there are some ways a later tax return depends on amounts shown in the previous year's return.

 

[cyber888]

Now, what would happen if, by some strange chance, the IRS processed your 2021 return before your 2020 return? They shouldn't, surely, as there are some ways a later tax return depends on amounts shown in the previous year's return.

Well, they have not process my 2021 return when I call them and in their website. So, I'm going to check on the day I file my 2021 tax return if they process it or not.

 

[PaunchyPirate]

You can certainly do what you're asking about. But the IRS will not automatically link the two situations together. You will eventually get your refund (hopefully) and you will eventually get a bill for the tax due (plus penalties) for 2021. How far apart those two happen is out of your control.

 

[Aerides]

I have an adjusted tax return (May 2021) since my accountant made an error and the IRS owes me money. It's now 10 months and the IRS have not refunded me. Can I deduct that if I file my 2021 tax return now ?

I would not, I think you're asking for trouble. They might process your 2021 before they finish your prior one, since that had a correction. And then bill you and treat you as overdue this year. Then penalties and interest - try getting that corrected without hours of headache...

Unless the current tax bill is so big it will cost you to pay it, simpler to pay it now and wait on the refund on the other.

 

[Crewer]

DS got his refund for 2021 taxes yesterday. I read they are hiring many people to catch up with the backlog; maybe it's working.

FWIW, I now always apply overpayments to the next year but I'm in my 70s and have estimated tax payments anyway. I also try to have a very low overpayment. I actually think owing a bit is better in terms of identity theft protection since anyone filing claiming to be me would owe but I hope that is no longer a thing with new IRS requirements.

 

[ocean view]

Scrabbler, I believe, is correct. The IRS will only apply refunds to the next tax year if you selected that option on your prior year return. Otherwise payments live in separate tax year buckets.

You mentioned using an accountant last year. What does your accountant say on this?

 

[Midpack]

I'm sure there would be a long wait, but I gather calling the IRS and asking isn't an option? Would be nice to have a name and date of an IRS person you talked to in case there's a mixup. I wouldn't assume anything, nor would I act on advice from a well intended stranger online. YMMV

 

[cathy63]

I have an adjusted tax return (May 2021) since my accountant made an error and the IRS owes me money. It's now 10 months and the IRS have not refunded me. Can I deduct that if I file my 2021 tax return now ?

Here's what should probably happen if you try this.

You e-file your 2021 return. The IRS processes it in about 3 weeks. You schedule a payment for the 2021 amount due, less the 2020 refund, to be processed on April 18, 2022. The IRS accepts the payment and calculates the interest and underpayment penalty and opens a claim against you for the remaining amount. They will send you a letter, but won't do anything to seize your assets until you've ignored them for a few years. They could hold up passport renewals or garnish any other government payments you expect to receive though.

Eventually the IRS gets around to processing your amended 2020 return (I am guessing you filed that on paper, because it's only taking about 5 months to process amended returns now, or else you have something really complicated that requires special handling). They see you have a refund due. They look at their records and see they have an open claim, so they use the refund and the interest thereon to satisfy as much of the claim as possible. You will probably still owe something because the penalties and interest you owe on the 2021 underpayment are likely to add up to more than the interest the IRS owes you on the 2020 refund. They will send you a letter telling you how much you still owe and you pay it then.

So, if you are sure you won't need any government services while there's an outstanding penalty against you; and if you are willing to pay the penalties for being late on 2021 taxes; and if you are willing to bet that the IRS won't finish the 2020 amended return and issue the refund before they accept the 2021 payment -- then this could work out in the end. Of course, if they do issue the 2020 refund before April 18, then you can always go online and schedule a second payment to pay the remainder of the 2021 tax in a timely fashion.

Have you gone online and used the "where's my amended return" tool? What does it say? https://www.irs.gov/filing/wheres-my-amended-return