How compensate client for delayed refund - my mistake?

[Rapid Robert]

Long time client, both business and 1040 returns, signed up for health insurance through the exchange for one month only, Dec 2018. Rest of year was covered with S-corp shareholder health insurance, so I didn't notice the one month change, plus I managed to overlook the 1095-A that client provided to me. Client has large refund almost $20K -- five kids w/ refundable Child Tax Credit, plus for various reasons even though AGI was $130K, tax liability was zero, so all withholding comes back in the refund. Now IRS is holding refund because of missing Form 8962.

What would you offer this client by way of compensation for my error? Interest on delayed $20K for two months would be about $100, but I'm pretty sure he was counting on having that money sooner for other reasons than just investment. On the other hand, the fact that he could get direct deposit of refund is pretty unusual, since IRS will normally insist on paper check for refunds over $10K when tax liability is zero.

[ATSMAN]

When I screw up I offer my client reimbursement for interest and penalty, free 1040X or whatever is required to fix the problem and one additional of free tax prep.

So far most have told me ok. just do our tax prep free and pay the interest because I got the penalties waived. They have stuck with me since.

[Rapid Robert]

To clarify, there is no penalty or interest involved. Client is still going to get the full refund eventually, just not as quickly as expected -- maybe two months' delay. And the refund was a special handling case even without my error, IRS does not normally direct deposit refunds in taxpayer's situation.

[kamckinley]

To clarify, there is no penalty or interest involved. Client is still going to get the full refund eventually, just not as quickly as expected -- maybe two months' delay. And the refund was a special handling case even without my error, IRS does not normally direct deposit refunds in taxpayer's situation.

Paper checks would take 4+ weeks, right (not sure, asking)? So the refund would have been delayed anyway, I'm not sure you need to offer anything in this situation.

[TAXNJ]

How is the interest “....Interest on delayed $20K for two months would be about $100....” ? Sounds like a good deal.
Give the client a small gift.

[spanel]

Offer some or all of the prep fees back. No interest on the refund.

Chris

[kathyc2]

Since this is a long term client you probably have a pretty good idea of how they see this. My policy is that clients pay me to prepare their returns accurately. In situations where I screw up I either refund 50 or 100% of my fees. In this case I would go 50% unless client used their time to track down why their refund was delayed in which case it would be 100%.

[Twin Turbo Z]

When I screw up I offer my client reimbursement for interest and penalty, free 1040X or whatever is required to fix the problem and one additional of free tax prep.

So far most have told me ok. just do our tax prep free and pay the interest because I got the penalties waived. They have stuck with me since.

Same here. As long as its not an astronomical mistake. If thats the case then an added gift card to Red Robin !! Yummm !!! Just kidding. But OMG Im looking forward to next Tuesday and a burger there !!

[kathyc2]

Actually, won't an amended return need to be filed? If IRS is saying 8962 is required, it would appear they received APTC. Taking that into account, it seems like the tax/refund would change.

[spanel]

Actually, won't an amended return need to be filed? If IRS is saying 8962 is required, it would appear they received APTC. Taking that into account, it seems like the tax/refund would change.

One would think, however all the IRS wants in these circumstances is the 8962 and 1095 faxed to them.

Chris

[Lion]

If they've already paid you, I would offer a discount for NEXT year in hopes of retaining the client. If the client hasn't paid you, put your discount on THIS year's invoice. And, if they act like they're leaving over this, refund some fees and say Good Bye after you fax the forms to the IRS.

[ATSMAN]

>>> ...... Red Robin !! Yummm !!! Just kidding. But OMG Im looking forward to next Tuesday and a burger there !!

I have already made my list of eating joints and watering holes to go starting Wednesday!

[Rapid Robert]

One would think, however all the IRS wants in these circumstances is the 8962 and 1095 faxed to them.

Chris

Yes, that is basically it. The question still is, will they hold it up because I sent the follow-up info to them, as the 3rd party designee, and the taxpayer/spouse didn't sign the response? I spelled out the whole thing in a clear paragraph on the fax cover sheet, and included the relevant forms and schedules to show that there was no change to the tax liability or refund. After all, if taxpayer had signed Form 8879 and then I made the same changes to the return before filing, I would not need to get a new 8879 signature. When taxpayer initially contacted IRS by phone, they never told him anything about a signature requirement, but the IRS web site for this issue does mention signatures.

Now I should probably get a POA on file, I was too optimistic to do it sooner than this.

Client was not upset about delay when we talked on the phone. I will probably give a small discount on next year's tax prep (already billed and paid for this year when filed).