One of the few things that make the tax process bearable for most of us is that we get refund checks. Most of the time, those refunds correct and are just what we had been eagerly awaiting.
But occasionally, the amount on an Internal Revenue Service (IRS) check is not what we expected.
In some cases, it’s less than we figured on our 1040s. Every now and then, it’s more.
Regardless of whether the refund discrepancy is in or against your favor, there is a process is place to resolve the matter. That way, even if you or the tax collector aren’t necessarily satisfied with the eventual amount, you’ll at least understand the mathematical misinterpretation.
Receiving the wrong amount can cause a lot of anxiety, but don’t panic. There’s usually a logical explanation for why you and the IRS came up with different numbers.
The IRS will send you a written explanation for the unexpected amount, but sometimes the explanation doesn’t accompany the check. Such coordination of cash and comment is particularly difficult with directly deposited refunds, which are likely to show up unexplained in your account first before the IRS can notify you of the mix up.
There are four main reasons as to why you may be refunded an incorrect amount:
- Math errors were made in computing your tax bill.
- Incorrect credit or deduction claims were made.
- Estimated tax payments were not credited properly.
- Other federal debts, such as a student loan, are collected.
Since the letter and check usually don’t arrive simultaneously, you can always call the IRS if you get a refund check and have questions about the amount.
The main IRS toll-free number is (800) 829-1040 or (800) 829-4059 (TDD) for the hearing impaired. You also can call or visit your local Taxpayer Assistance Center; to find the nearest location, use the IRS’ interactive locator page.
According to experienced tax pros, the best time to call is about an hour before the IRS office is scheduled to close. Mornings are usually very busy, but no matter when you call you’ll probably be be put on hold for a least a few minutes.
So what should you do with this check in the wrong amount?
As you’re waiting for the explanation letter to clear up the refund issue, you also have to decide what to do with the more, or less, money you received.
“It’s usually not a problem to cash it, especially if it’s a smaller difference” says Bob D. Scharin, senior tax analyst for the Tax Accounting business of Thomson Reuters.
In fact, if the check is less than you expected and it turns out that you were correct, once you and the IRS resolve the matter in your favor, the agency will make up the difference (plus a bit of interest if it takes more than 45 days to correct the error) and send you another check for the balance due.
If, however, the difference is larger or your refund is much more than you believe you should have received, it’s generally a good idea to hold off cashing the check or spending the money until the issue is resolved.
“Recognize that you could be asked to send it back if the amount is more than you expected,” says Scharin. That’s easier to do if you still have all the IRS’ mistakenly refunded money in hand.”
JDKatz, P.C. is a full-service law firm focused on tax law and estate planning. We are dedicated to minimizing your existing liability and risks while providing valuable tax planning to streamline your tax issues in the future. Please call us at 301-913-2948 to schedule an appointment to meet with one of our trusted attorneys.