Making Work Pay Credit

[Bees Knees]

I just had a client where the IRS made an error in calculating Schedule M. Line 2b of the earned income worksheet is suppose to net all Schedule C businesses of both the husband and the wife, including net losses.

The IRS ignored the husband's net loss from Schedule C and only included the wife's net profit from her Schedule C. This made the credit larger than what it was suppose to be.

Anyone else run across this problem? The return was e-filed, and my software calculated it correct. I wonder if there is an IRS glitch in their system.

[Bees Knees]

BTW,

Never, never, never, never, never, never, never, never call IRS with regard to disagreeing with their change. After 64 minutes of being on hold, explaining why I am right and they are wrong, and the IRS guy finally agreeing that I calculated the return correctly and the IRS did not, he said he was not authorized to make any adjustments with regard to three Schedule Cs. He even asked me why my client filed three Schedule Cs. Well duh, because there were three different Schedule C businesses. He said he put a note in the file and said I would have to write a letter explaining why I disagree with the IRS adjustment.

I should have just done that in the first place. I should have known better.

[ChEAr$]

We tax pros are so "hard wired" to want everything to come out exactly right. However I guess this is one case where it's better to let sleeping dogs lie.

What would I have done? Hmmm.. let me think on that. (grin

[Jesse]

From NATP newsletter

I think this was March's

The IRS was made aware of several issues regarding errors in the computation of the Economic Recovery Payment on Schedule M. The IRS has told NATP that they were experiencing programming problems which caused incorrect computations and errors in some taxpayers’ refunds. The IRS has assured NATP that the errors have been corrected and the problems solved. There is no word yet on how or when taxpayers who received too much of a refund will be required to return the money to the IRS.

[Burke]

I think this was March's

There is no word yet on how or when taxpayers who received too much of a refund will be required to return the money to the IRS.

My guess is it will never happen. Just like the first economic stimulus credit under Bush.

[BOB W]

Husband & wife collecting SS (age 68). Husband is collecting a non-qualified deferred compensation (W-2 only box 1 income no SS or Med included). He gets a letter that they are entitled to additional refund for the "Make Work Pay". It said that if you agree do nothing and the refund will be sent, call if you disagree.

[outwest]

My partner had two just like yours Bees...

and I had one where the IRS didn't pick up the nontaxable combat pay. I was able to get the combat pay item fixed thanks to the 3rd party designee check box.

Sigh...

As an aside, the agent I talked to was a former financial auditor with a private accounting firm (8 years). He explained that as a financial auditor, he didn't spend any time on taxes and choose to come up to speed in the customer service side. He figured he could move to the audit function anytime with his background. I would guess he's right, sounds like a perfect recruit for the corporate audit group with some additional tax training.

[JG EA]

Bees, I had something similar. Husband's profit C was calculated and Wife's loss C was not by the IRS. They wrote a letter saying a mistake was made on their return because EIC was figured incorrectly.

I called the number on the IRS letter as 3rd party and they held the phone going over the results 3 times at least. The first couple of times they said, yes they had done it correctly. I pointed out each time how they had not taken the loss C into consideration. Finally they agreed and told me when the client could receive the rest of their return.

When that date came - no money - So, I called the TPH and they looked it up and found where they had agreed with me but forgot to cut the check!

When the money finally came in the taxpayer gave it all to me. ($60 or so). She said I had too work way to hard for that.

This year I have the same thing (almost) happen. Except it is a difference of almost $3000. They took into consideration the Schedule C but didn't take into considereation a huge loss on a general partnership. In calling the IRS they first agreed with me, but why the lower refund? They looked further and said some numbers didn't show up on the return when efiled? What? All the numbers on page 1 were correct but the E2 didn't. Anyway, they said since numbers didn't show up I'd have to amend to get the rest of the refund.

How do I amend I ask when I cannot duplicate the erroneous result they came up with. No possible combination of numbers would produce the result they had. But with the new ammended form I just put the result they had and any possible pages that changed as a result. I am waiting to see how this all comes out.

I wonder if the client will give all the refund this time?

[equinecpa]

Just had a client send me an email informing me that they received a letter from the IRS saying they were eligible for a Schedule M refund. I opened their return -Schedule F losses exceed Line 7 income and they have a NOL for the year-no earned income. I don't think they are eligible for the credit.

Do you think the IRS will actually refund the money and then ask for it back?

[AJsTax]

Do you think the IRS will actually refund the money and then ask for it back?

YES!!
On another discussion page I have been following a discussion about our Amish clients that were issued refunds of MWP that were not eligible on Sch C income because they have chosen to be exempt from FICA taxes. A lot of them have received an extra $800 and the IRS has stated that they will be expected to return the excess.

[Gretel]

Yep, probably with interest and penalty, since "our fault" doesn't really exist in the vocabulary of the IRS.