Over Refund from the IRS?

Question

I have a friend that told me that they received an approximate $4000 over-refund from the government this year. They were supposed to get a refund for like $4000, but got a check from the IRS for somewhere north of $8000. They asked what I thought they should do- I told them that in addition to doing the right thing, they were highly likely to get caught if they didnt return the money. I suggested they get a CPA to guide them through the process of returning the $$ to the IRS. This was a married couple, and I know the wife wanted to return the money- but Im pretty sure the husband did not. Im 99.9% sure they just kept the money in the end. So now here we are about 4 months after they got the $$, and Im pretty darn sure they kept it, and I know they havent heard a thing from the IRS. What are really their odds of being caught? Am I just going to look like an alarmist for telling them that they were almost certain to be caught, when in reality, they werent?

No, they did not receive an explanation at all from the IRS, and didnt have any job changes or large capital gains. Please note- this same thing actually happened to them last year as well, but the amount they received was a couple hundred dollars more (which they also kept, and have not been caught for). The husband does his taxes by hand. It would not suprise me at all if he intentionally writes illegibly in the hopes of creating a situation like this (he's just that kind of guy- not the most ethical or bright).

Answer 1

No, you are not an alarmist. The check that they received should have come with an explanation of why they changed the amount of the refund check. They should have a conversation with their CPA about it if the IRS found reason to give them additional money back. If the check is in fact an error, they will have to return the money. It is not likely that the IRS will find it until they file their taxes next year. But the IRS can come back and amend their taxes for three years, which means that they have at least this long to discover the mistake. They can also charge penalties and interest on the money.

Answer 2

They probably received a letter explaining why the refund was much larger. It is possible to get that much more, for example, if a taxpayer switched jobs and paid excess Social Security and Medicare. The IRS would correct such an error.

Or, they may have had large capital gains and didn't use the correct computation.

So I wouldn't worry about it. If the IRS made an error an overpaid them, the IRS will ask for the money back. But I don't believe the IRS made an error.

Answer 3

They should have gotten a letter from the IRS telling them why it was different from what was shown on their return. If not, it would be a good idea for them to call the IRS and ask. If it's a mistake, eventually it would be caught (odds about 99.99%) and they'll have to pay it back, with interest.

Writing illegibly probably wouldn't do this - there would have to be more than one line misread for the same wrong amount, since the IRS computers check the math and kick out any return that doesn't total properly.

Answer 4

When the IRS discovers an error, they will ask for the excess refund to be returned. If it is not returned promptly, the IRS will begin to charge interest. The IRS, when it audits the return again, may still feel your friends are entitled to the refund. I would not worry about it at this point. However, if your friends think the refund was in error, they should keep the funds handy (don't spend them just yet) so they can be sent back if the IRS calls.

Answer 5

It is not that unusual for the filer to make mistakes on the tax forms and the IRS makes the adjustments - usually result in smaller refund.

However, it is not impossible for the revision to raise the refund. Are you sure this "over payment" is a result of mistake by IRS? As to the possibility of getting "caught", it all depends on where the error was made.

It would be advisable, however, to contact the IRS and inquire....

Answer 6

I think the IRS WILL catch their error. Although,it may be a year or two before they figure it out. Then, I believe they will take it back from future refunds or send them a bill. Personally, I think I would just give it back. Better to give it back on your own terms, than to have the IRS send you a bill. However, I think you gave your friends excellent advice in seeking the advice of a CPA.

Answer 7

100% guarantee that they will be caught. And if they cashed the check knowing it was not correct, then the IRS will hit them with penalties and fines that start from the moment they filed their return.

So, if the IRS catches them 2 years from now, this couple will owe the overpayment, interest for 2 years, and IRS-levied fines.

Answer 8

Believe me! If the Gov overpaid, they will find them! No need to be "pretty sure", be very sure! And, then they will be in trouble financially when the GOV demands the money back with possible interest or penalty. They assume that "adults" should know better, keep good records, etc. Your friends stole from the Gov, in other words, by keeping money they KNEW was not rightfully theirs.

Answer 9

the government always finds a way in the end. they may be slow but the will figure it out. your friends will end up being auditted and they will not like that.

Answer 10

You cant go to jail for some one over paying you. you cant even be slapped on the but. Its not your Responsibility to make sure the Government or any branch of it has there **** together. This is just one more shining example of why the bone heads shouldn't even be allowed to tax you in the first place!