Wrong refund amount

[Earl]

Had a client to receive a refund check that was $300 more than the refund computed on the tax return. Checked all information on returns and can find no reason for the extra $300.

My only thought at this time is that they threw in the Rebate Recovery Credit. However, the client received more stimulus last year then they would be eligible for this year.

I know that the correct procedure would be to return the check and ask for a corrected one but I hesitate since this delays the refund that is rightfully the clients and I do not trust that a new check would be mailed with correct amount which would necessitate additional correspondence with IRS to get it resolved.

Any suggestions on how you would handle this? If check should be mailed back what address would be appropriate to sent it to.

[JohnH]

Since the excess is only $300, I'd be inclined to tell the client to cash the check but keep in mind that may have to return the $300 at some point in the future. Thensend IRS a letter asking why the extra $300 was sent. (or maybe even wait and see if IRS ever sends a correction letter) If it later turns out that the client was not entitled to the $300, they may have to send it back with an extra $4 - $5 of interest.

If the excess was $3,000, my answer might be different because the amount of interest at stake would be more significant.

[ChEAr$]

Refund checks

which differ from the proposed (by taxpayer!) amount always arrive before the letter showing
the correction.

Keep the check until the letter arrives, then you'll know whether client can cash it or needs
to return it and tell IRS of THEIR error!

[Earl]

Check was received back in April so do not expect any letter from IRS showing reason for change which adds to belief that it stems from the Recovery Rebate Credit.

Still wondering where correspondence should be sent. Should use address where tax return was filed? Check came from AUstin. Is there an address there to use?

[ChEAr$]

Still,

Check was received back in April so do not expect any letter from IRS showing reason for change which adds to belief that it stems from the Recovery Rebate Credit.

Still wondering where correspondence should be sent. Should use address where tax return was filed? Check came from AUstin. Is there an address there to use?

before the check is cashed, ask IRS a statement of account. Practitioners' hotline is
best place for this. If you write a letter, be prepared to wait 12 weeks.

But don't send it back until you know what happened.

[OtisMozzetti]

Track it down

Checked all information on returns and can find no reason for the extra $300.

My only thought at this time is that they threw in the Rebate Recovery Credit. However, the client received more stimulus last year then they would be eligible for this year.
...

Even though I might think there is no reason for the additional $300, there might be some reason. I would start with two procedures:

1. First, find out whether IRS paid a Recovery Rebate Credit or not. Get a no-charge transcript of the 2008 return and/or ask the IRS what if any RRC was paid.

2. Second, I would go through the Recovery Rebate Credit "Worksheet" (which is two pages long!) found in the file providing detailed instructions to Form 1040 that can be downloaded from the IRS website. Use the IRS website lookup tool to find out what economic stimulus payment they consider to have been paid during 2008.

EA in California

[Burke]

Sometimes it is because of an old estimated tax payment (or credit from last year's tax return) that the TP has forgotten about. If the ETP was not credited correctly in the first place, it could have been floating around in limbo-land for more than a year. A transcript should be a starting place. In fact, it could be someone else's estimated tax payment that had the wrong SSN on it.

[FEDUKE404]

Perhaps ...

...a new bundle of joy arrived in 2008??

Sounds very much like a RRC issue with the "round" dollar amount.

Income issues for 2007 might have had the first run of the RRC reduced from what 2008 actually allowed, but it is unlikely that alone would create an exact $300 change.

Did you work through the RRC worksheet for line 70 of Form 1040 very carefully??

Another issue is that some tax software requires an action on the preparer's part to insert the RRC amount from 2007 onto the 2008 worksheet (line 28?). As others have noted, that amount is readily retrievable at the IRS website.

FE