Weird income tax issue - receiving tax refund checks I didn't ask for (in wrong amounts, too)

[engineernerd]

Can anyone guess why the IRS keeps issuing refund checks for tax years where I asked for the refund to be applied to the next year? It seems to have started with my 2017 return.

Is it relevant that I don’t pay estimated taxes? In other words, is this option to roll your refund forward only available to payers of quarterly estimated taxes?

Is it relevant that I have been filing quite late? As I understand it, if you don’t owe taxes you have three years from the due date to file without losing your refund (after that your refund is forfeit). I have been filing close to that three year deadline (don’t ask), though I have recently made an effort to catch up.

Other ideas - ?

I have been voiding these refund checks and sending them back, but am wondering if there’s something I'm not understanding about all this.

 

[Al18]

I never heard of this problem before. Maybe this is some type of scam. I would call the IRS asap and ask for the fraud department.

 

[engineernerd]

I never heard of this problem before. Maybe this is some type of scam. I would call the IRS asap and ask for the fraud department.

I'm pretty sure these are real government checks. The IRS has acknowledged my return of some of them without any mention that they were scams.

 

[SevenUp]

Is it relevant that I have been filing quite late? As I understand it, if you don’t owe taxes you have three years from the due date to file without losing your refund (after that your refund is forfeit). I have been filing close to that three year deadline (don’t ask), though I have recently made an effort to catch up.

For example, did you put a number on line 36 of your 2021 form 1040 (https://www.irs.gov/pub/irs-prior/f1040--2021.pdf) that you filed in 2024?

If so, note that that line was meant to apply to your 2022 payments, so the IRS may be assuming that because 2024 is well past 2022, that line doesn't apply.

 

[engineernerd]

For example, did you put a number on line 36 of your 2021 form 1040 (https://www.irs.gov/pub/irs-prior/f1040--2021.pdf) that you filed in 2024?

If so, note that that line was meant to apply to your 2022 payments, so the IRS may be assuming that because 2024 is well past 2022, that line doesn't apply.

You have the right idea conceptually, though I stopped doing this after my 2019 Form 1040 and asked for a refund on my 2020 Form 1040. My big problem is that after they send me refund checks for 2017 or 2018 or 2019, I appear to owe them taxes, penalties and interest for 2020! Grrr.

 

[SevenUp]

My big problem is that after they send me refund checks for 2017 or 2018 or 2019, I appear to owe them taxes, penalties and interest for 2020! Grrr.

And adding injury to insult, are those refund checks that you voided, and the IRS said, "thank you very much"?

 

[Texas Proud]

Just throwing out a thought.... you cannot apply a refund to a 'future' year if you have not filed on time... IOW, if you file 2017 taxes in 2020 you cannot apply refund to 2018 taxes... now, this is a guess so YMMV...

My question is.... since you are voiding the checks what is the IRS doing? They might think that they do not owe you anything since they paid it... hope you do not lose that money...

 

[SecondCor521]

If you file a tax return for a past but open year, you certainly should be able to apply the refund to the next year. So filing a 2022 return and applying the refund to the 2023 tax year should work just fine. Statements to the contrary above are, I believe, inaccurate.

Estimated taxes and filing late have no impact on the issue AFAIK.

OP, all I can comment on is that I did file a tax return for a trust about two years ago and asked for the refund to be applied to the next year. This tax return was filed properly and on a typical time line (in the spring). Rather than applying the refund to the next year, the IRS sent a refund check for the full amount of the refund.

Rather than argue with the IRS, we just deposited the refund check back into the trust and proceeded as if we wanted the refund check in the first place. Annoying they didn't respect our request, but less annoying to go along than to try to argue with the IRS.

I think it would have been better for you to deposit the refund checks and move forward. Now that you have voided them and returned them to the IRS, I'm not sure where you stand.

I sincerely doubt that voiding the checks would result in the IRS zeroing out your account. You probably still have those refunds due you, but the IRS will probably wait for you to ask them to reissue the checks. If you filed on time, I don't know if there is a timeliness requirement in asking for the checks to be reissued. At some point the IRS may turn the funds over to your state's escheat department; you could check there as well.

 

[engineernerd]

Rather than argue with the IRS, we just deposited the refund check back into the trust and proceeded as if we wanted the refund check in the first place. Annoying they didn't respect our request, but less annoying to go along than to try to argue with the IRS.

I think it would have been better for you to deposit the refund checks and move forward. Now that you have voided them and returned them to the IRS, I'm not sure where you stand.

Yeah. It's too late for me to follow this advice, unfortunately. I have to do battle now, if I don't want to pay penalties and interest for 2020 despite being ALWAYS overpaid at the IRS.

 

[SecondCor521]

Yeah. It's too late for me to follow this advice, unfortunately. I have to do battle now, if I don't want to pay penalties and interest for 2020 despite being ALWAYS overpaid at the IRS.

It's not clear to me the timing of what happened. Did you file the 2017 through 2019 returns in a timely fashion AND ask for those refunds to be applied forward AND but for the IRS ignoring your request you would not owe the penalty?

If so, you can always ask for the penalty to be abated. You also might be able to file for a first time abatement if 2020 was the first year you were underpaid. There are also four safe harbors that you might be able to qualify for for 2020 - you can google "safe harbors" and read about those - and they would exempt you from any underpayment (but not late payment or late filing) penalty.

I'll reiterate that you probably need to contact the IRS and ask them to reissue those checks that you voided. Voiding them is probably not enough to get the IRS to change their minds and apply the refunds forward as you had requested. If you don't want to contact them, another option is to get your tax transcripts for those years from irs.gov and see if there are still pending refunds.

So yeah, do battle with the IRS if you want to, but I suggest you change your war tactics to ones that are more likely to be successful, and also probably much less stressful and time consuming for you.

 

[aja8888]

Doing battle with the IRS will make you crazy.

It took me over three years to get the IRS to admit, in writing, that they lost a 2017 Solo 401K final return I filed on time. I got them to cancel the $15,000 penalty also. What a war, never again.......

 

[SecondCor521]

Doing battle with the IRS will make you crazy.

It took me over three years to get the IRS to admit, in writing, that they lost a 2017 Solo 401K final return I filed on time. I got them to cancel the $15,000 penalty also. What a war, never again.......

Agreed. I made one mistake on my tax return about three years ago, which the IRS caught and I agreed. It still took another two calendar years, multiple exchanges in writing, and finally involving my Congressperson to conclude the issue.

 

[pacergal]

It sounds like you are filing late taxes by three years? (ie file 2020 taxes in 2023?)
Then asking to utilize refund for taxes the next year, which is actually previous years?

That could be confusing and possibly why IRS just sends you the check.
Can you not keep the check and use it to pay taxes due when you file the next years taxes?

 

[engineernerd]

It sounds like you are filing late taxes by three years? (ie file 2020 taxes in 2023?)
Then asking to utilize refund for taxes the next year, which is actually previous years?

Yes, essentially. "On time" for the 2020 return is October 15, 2021 (if you filed a time extension), but you are still entitled to your refund if you file by 3 years after that, i.e. October 15, 2024.

I filed my 2020, 2021, and 2022 returns a couple of months ago, trying to get caught up.

That could be confusing and possibly why IRS just sends you the check.
Can you not keep the check and use it to pay taxes due when you file the next years taxes?

No. Problem is, one, the refund checks are for the wrong amount (less than what they should be, in 2017 for a clearly bogus reason and in 2018 and 2019 for no explained reason at all) and two, I needed part of the 2019 refund to avoid being underpaid in 2020.

The problem with filing so late is that if I can't get them to apply my 2019 refund to 2020, I'll instantly be FOUR YEARS late paying that money. Don't even want to think about what that total will be with penalties and interest...

 

[engineernerd]

Thanks, aja8888 and SecondCor521! You give me hope that this might eventually work out OK.

But maybe I'll try to get a reality check from a tax attorney, just to know if I'm as much in the right as I think I am.

 

[2retireearly]

Not to sound rash, but it seems you created quite a confusing mess, by always filing 3 years, sometimes checking a certain line to put refund into 'next year's, that would be somewhat moot, as next year's taxes weren't filed for years. Others are blaming the IRS, as is the popular thing to do, but, it seems it is your mess. So good luck with that. Sorry, but I do think this seems very confusing, and the IRS may have done their best with their refund checks..that you voided...I'm glad you are not going to be filing the 3 years in arrears anymore. And I hope this becomes rectified. Good luck.

 

[engineernerd]

Not to sound rash, but it seems you created quite a confusing mess, by always filing 3 years, sometimes checking a certain line to put refund into 'next year's, that would be somewhat moot, as next year's taxes weren't filed for years. Others are blaming the IRS, as is the popular thing to do, but, it seems it is your mess. So good luck with that. Sorry, but I do think this seems very confusing, and the IRS may have done their best with their refund checks..that you voided...I'm glad you are not going to be filing the 3 years in arrears anymore. And I hope this becomes rectified. Good luck.

I think it wasn't confusing at all, because each year's Form 1040 was filed almost exactly one year after the previous one, same as would be the case if I'd filed each one by the due date.

I could see it being a bit annoying, since they would have to process an old Form 1040 at the same time as the normal rush of current ones from everyone else.

But what would you have done, if the first refund they sent (contrary to my request) was clearly TOO SMALL, and came with no explanation of why, and every prior year they had honored the roll-forward requests?

I did call a tax attorney, who said that if my tax form wasn't filed timely, the law does not require the IRS to honor my request to apply my refund to the following year's taxes. But surely they have to pay a correct refund?

 

[freedomatlast]

But what would you have done, if the first refund they sent (contrary to my request) was clearly TOO SMALL, and came with no explanation of why,

Maybe call and ask for an explanation?