Amending for Error

[JohnH]

Trying to help a young person straighten out a problem and I'm not sure about the next step. I'd appreciate any input, including speculation about what to do next.

This taxpayer decided to file through one of the free services, but she got very confused. Although she had only worked a little over half the year, she erroneously entered her annual salary of $70K, rather than the $40K she actually earned. Then she compounded the problem by failing to enter ANY withholding for federal or state. Thinking she had a $3,600 refund coming from state, she then entered her bank account information. Imagine her surprise when the state drafted $3,600 from her checking account. (Good thing she had overdraft protection).

When she asked her dad (my client) to help her figure out what was wrong, he immediately recognized the problem. He also noticed that a Federal draft for $11K is also on the way. He loaned her the $11K to cover the Federal draft if it shows up, in order to avoid the confusion and fees for a returned draft. But so far nothing has hit the bank account from Fed.

The first step is easy. We file an amended state return with the correct figures and request a refund of the actual refund she was due plus the additional $3,600 they drafted. That isn't a problem. But I can't figure out what to do on the 1040X since the $11K hasn't been drafted yet - as of today. Do I assume it will eventually be drafted and enter it on line 15 (additional tax paid after return was filed), or do leave line 15 blank? The actual withholding will show properly on line 11 either way, but my dilemma is what to do about line 15, which will also affect line 21 (amount you want refunded).

I know IRS will probably eventually get it straightened out regardless of what when we enter, but I can envision a number of scenarios where more confusion might erupt no matter what entry I make on line 15.

Any words of wisdom here?

[Burke]

Just as my own private rule, I never file an amended return until the refund (and or payment) has processed. I would wait. If she efiled, it shouldn't be long. In fact for that amount of money, I would close the bank account before it got there.

[FEDUKE404]

Report the facts as best known

I find these facts a bit hard to swallow - someone making $40k for "part of the year" can be so....let's be kind here....totally clueless??

There is, to most folks, a significant difference between "direct deposit" and "bank debit."

In answer to your question: I'm also rattling around an amended 2011 return dealing with additional payments (new client just automatically paid what the CP2000 notice said....he actually was due a refund with "the facts" on the table) and NCDOR has not yet done their "me too!!" imitation.

I would probably include both bank drafts as payments, along with a suitable explanation ("paid in error" or something similar). No human being will likely process either the IRS/NCDOR amended returns until several weeks hence, so the current $11k payment date is almost moot. You still need to show the before/after figures from the original return (that should be a hoot!) anyway.

Also, FWIW, NCDOR requires you to attach a copy of IRS Form 1040X, so you are kinda boxed in.

(I'm still shaking my head on this newbie. Recent college grad? Dare I even ask from where? )

FE

[BP.]

a Federal draft for $11K is also on the way

Is there a date scheduled?

http://www.irs.gov/uac/Pay-Taxes-by-Electronic-Funds-Withdrawal:

Call IRS e-file Payment Services at 1-888-353-4537 to inquire about or cancel a payment. Cancellation requests must be received no later than 11:59 p.m. ET two business days prior to the scheduled payment date.

[FEDUKE404]

Plan B

Just as my own private rule, I never file an amended return until the refund (and or payment) has processed. I would wait. If she efiled, it shouldn't be long. In fact for that amount of money, I would close the bank account before it got there.

Hmmm....I'll have to ponder on that one.

Essentially "write a bad check" to both the IRS and NCDOR ?

One would think there is a better scenario........

FE

BTW: If this college kid "authorized" a debit via efiling, a debit date would have to be provided. (And sorry about prior comment...cannot be NC return...you cannot authorize state debit with efile.)

[JohnH]

I find these facts a bit hard to swallow - someone making $40k for "part of the year" can be so....let's be kind here....totally clueless??

There is, to most folks, a significant difference between "direct deposit" and "bank debit."

In answer to your question: I'm also rattling around an amended 2011 return dealing with additional payments (new client just automatically paid what the CP2000 notice said....he actually was due a refund with "the facts" on the table) and NCDOR has not yet done their "me too!!" imitation.

I would probably include both bank drafts as payments, along with a suitable explanation ("paid in error" or something similar). No human being will likely process either the IRS/NCDOR amended returns until several weeks hence, so the current $11k payment date is almost moot. You still need to show the before/after figures from the original return (that should be a hoot!) anyway.

Also, FWIW, NCDOR requires you to attach a copy of IRS Form 1040X, so you are kinda boxed in.

(I'm still shaking my head on this newbie. Recent college grad? Dare I even ask from where? )

FE

I know - it is pretty hard to believe. But I assure you it happened. Dad sent me printouts from the ezTaxReturn.com site, along with their email response to his inquiry. They basically told him there was nothing they can do, but they were nice enough to send him links to download amended returns. The state is California - she is a graduate of a big name college out there. Dad was embarrassed by what has transpired, but I think I understand her reasoning. She assumed that the government already has her real info transmitted from the employer electronically and that all she had to do was register with IRS & they would do the rest of the calculating.

BP: Thank you very much for the link and phone number. I'm going to have the client tell his daughter to call it right away. Cancelling the draft would be the best of both worlds all the way around - wonder why the exTaxRetun people didn't know about that?

[BP.]

ezTaxReturn.com . . . exTaxRetun people

ez...ex
prophetic typo, or just a sly observation?

[Jiggers]

And you should have a steep fee for fixing this mess.

[ChEAr$]

Hmmm....I'll have to ponder on that one.

Essentially "write a bad check" to both the IRS and NCDOR ?

One would think there is a better scenario........

FE

BTW: If this college kid "authorized" a debit via efiling, a debit date would have to be provided. (And sorry about prior comment...cannot be NC return...you cannot authorize state debit with efile.)

My software, Drake, and maybe most others, automatically use April 15th as default for the draft date.
Use eServices to determine if return is on record yet so you can call PPO to help straighten things out In fact forget about
eServices, call them now for advice.

[JohnH]

ez - ex -> slight difference there, isn't it?

Ordinarily the fee to fix this would be steep. But we all have special situations, and in this case it's in my best interests to make Dad the hero. Nobody would object to paying (Dad or daughter), but in IMHO the gratis service will pay bigger dividends in the long run.

[JohnH]

I'm letting the daughter do her own calling - part of the lesson to be learned I think.
I already sent them an email with the phone number BP provided.

That's good to know that Apr 15 is the default date - she let everything else default so hopefully she didn't change this when she filed

[FEDUKE404]

Dealing with dates

My software, Drake, and maybe most others, automatically use April 15th as default for the draft date.
Use eServices to determine if return is on record yet so you can call PPO to help straighten things out In fact forget about
eServices, call them now for advice.

Not sure about any "default date" issues, but I always tell my clients to pick a date for any balance due debit to be NLT April 8th. That way, in case something goes awry, it can be repaired before the payment deadline has arrived.

That day will be a popular debit date for my clientele. Some do choose an earlier date, just to get it over with. And some push it as close to April 15th as possible. But it's their choice entirely!

It should be noted that the four "automatic" debit dates you can establish, at time of efiling, for upcoming 2013 federal estimated tax payments are fixed. There is no selection possible with those, although of course you can cancel any of the payments should unusual circumstances arise after the initial selection is made.

Although I have not yet efiled any federal extensions, IIRC (from last year) that a debit requested via an efiled Form 4868 will also automatically use the April 15th date except for those "out of the country" when a June withdrawal is justified.

As for making phone calls to any government agency, ESPECIALLY about refund issues, that is way way way down on my list of priorities.

FE