IRS ignores overpayment applied to 2017

Technical topics regarding tax preparation.
#1
JAD  
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2 of my clients have received notices from the Kansas City office assessing 2017 tax when there was an overpayment. The difference is the application of the 2016 overpayment to 2017. They have not recognized that overpayment. Clients have not received any notices adjusting the 2016 overpayment. I have a very small practice, so the fact that the IRS has ignored the overpayment for 2 of my clients is not insignificant.

The first notice arrived in April, and that client is further along in the process. When responding, we obtained transcripts for 2015, 2016, and 2017. There were no discrepancies with the returns that I filed. I sent a letter, with the transcripts, and asked the IRS to either correct the account or explain why they are ignoring the 2016 overpayment.

Yesterday, I received the IRS's response. They said that they were enclosing the 2015 - 2017 transcripts and that we should find the discrepancy! They said that the client should have received notices adjusting the accounts.

Suggestions? I am thinking about sending one more letter, notifying them that I will be contacting taxpayer advocate if they won't provide the support for their adjustment.
 

#2
dave829  
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If the 2016 account transcript shows that the overpayment was applied to 2017, and the 2017 account transcript doesn't shown the overpayment from 2016, then I would contact the Taxpayer Advocate Service. You have notified IRS of the problem, and they decided to do nothing. Time to contact TAS.
 

#3
lucyko  
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"They said the client should have received notices adjusting the accounts "

From recent personal experiences I have had with IRS on similar matters they are way behind on correspondence to taxpayers. Why don't you take the simple approach and call IRS Practitioner Hotline (1-800-8294933) to get this resolved. In my opinion I think it's a waste of time to contact Taxpayer Advocate because they will say you haven't exhausted all the steps to resolution . I think there is a good chance your issue has already been resolved but your client hasn't received the correspondence
 

#4
JAD  
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I've been trying to avoid making the call because there was another thread where someone said that the IRS was delving deep into intrusive questions to authenticate us before discussing the situation. In addition, the last couple of times I have called, it has not been helpful. In one case, a client was assessed a $300 underpayment penalty when he had had more than the total liability applied from the prior year. I was instructed to file a 2210. It was ridiculous.

Thanks for the responses.
 

#5
lucyko  
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If you have set-up your tax software defaults as "Third Party Designee " you should have no problem speaking to IRS Practitioner Hotline since this return relates to the current year 2017 . If so, you can discuss with IRS without a POA . This technique has come in handy for me many times and saved many hours of frustration for me and my clients . This approach only works for the current year thru I believe December 31.
 

#6
JAD  
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Yes, I have that set up, and I have a POA also. The issue, per another thread, is that the IRS is now getting super intrusive when authenticating us. I haven't called in in a while, and I will give it a try.
 

#7
lucyko  
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That has not been my experience and I used the third party designee about 10 days ago to resolve a rather thorny issue .
 

#8
makbo  
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JAD wrote:In one case, a client was assessed a $300 underpayment penalty when he had had more than the total liability applied from the prior year. I was instructed to file a 2210. It was ridiculous.

Not sure it was ridiculous. An overpayment applied is just like making an estimated payment. If you don't provide the actual dates and amounts of the estimated payments made, I think the IRS might not handle the details automatically.

More importantly, didn't your software generate the 2210 automatically, or at least provide a diagnostic?
 

#9
Jake  
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On my personal return I always have a carryover. I just like loaning the Govt money at 0% interest. I feel it is my patriotic duty. The program does not generate a 2210 or provide a diagnostic. So far no problems.
 

#10
lucyko  
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You were probably assessed the $300 underpayment penalty, even though the carryover amount was more than the prior year liability, because you did not follow the "safe harbor method " which requires you to have at least 110 % of the prior year liability as the minimum carryover amount . I bet your clients AGI went up substantially in the following year. .
 

#11
makbo  
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Jake wrote:On my personal return I always have a carryover. [...] The program does not generate a 2210 or provide a diagnostic.

I for one never implied that a carryover of a refund would be the thing that triggers a 2210 or diagnostic.
 

#12
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I would just call Practitioner Priority line as well, and tell them the issue (that the overpayment was not applied) and that you are the preparer. They should be able to help you.

I had this issue with a NC return this year. I called them and was able to determine the problem. The fact that client filed MFJ the previous year, and single (spouse died) for 2017 was the problem. Overpayment was sitting in the joint account, and had to be transferred to the single account. You would think these days they could link by social security numbers!
 

#13
JAD  
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The $300 assessment was on an amount applied from 2015 to 2016 that covered the whole 2016 tax. Clients are super wealthy and it is not possible to estimate their taxable incomes because of the volatility of realized gains. They are cool with the 0% interest and not being bothered with details like estimated tax payments. There was no reason for the penalty assessment. Yes, I now automatically generate the 2210.
 

#14
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JAD wrote:Yes, I have that set up, and I have a POA also. The issue, per another thread, is that the IRS is now getting super intrusive when authenticating us. I haven't called in in a while, and I will give it a try.


They will ask for you SSN and your Date of Birth. I am not sure if that qualifies as "super intrusive".
 

#15
JAD  
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No it doesn't, and everything is sorted out now. There is another thread where someone on this board was asked questions that went as far as his wife's work. He was not happy at the level of questioning.
 

#16
tshonk  
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Our tax partner called the IRS last week for a client in which he had POA and the IRS asked for his wifes maiden name and birthdate.
 

#17
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In addition to my SSN and DoB, I have been asked for my middle initial and my wife's SSN on occasion. What my wife has to do with anything is beyond me (and her). The questions asked would indicate that they have a full copy of the TR available to them. If so, that is not a need-to-know basis.
 

#18
irc162  
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And then we all are left to wonder if that info, as well as anything else we choose to discuss, is being broadcast live on the Howard Stern show.

http://procedurallytaxing.com/taxpayer- ... -the-hein/

https://www.hollywoodreporter.com/thr-e ... er-1093454
 

#19
makbo  
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SumwunLost wrote:In addition to my SSN and DoB, I have been asked for my middle initial and my wife's SSN on occasion. What my wife has to do with anything is beyond me (and her). The questions asked would indicate that they have a full copy of the TR available to them.

Do you really think the IRS phone support agents are given a full copy of the return and given free creative rein to ask whatever tricky questions they think will reliably prove your identity? Questions they just make up on the fly, while you're on the phone? Come on...

I suspect it's more like there are a few dozen data elements that have been selected by some people with common sense, and a subset data set has been created just to capture those particular data elements. Then, the phone support person gets prompted automatically to ask certain questions as prompted by the software, based only this subset, which they can't browse at will.

Which scenario is more likely, and why? Is thrill of browsing random citizen tax returns supposed to be one of the perks of being an IRS agent?
 

#20
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Makbo, we don't know what the phone support agents have access to. I think we should be told. It is common knowledge that there is a list of eight or nine items that they can ask about. The fact that I am asked to confirm my middle initial (which appears on my tax return, but not on my PTIN or Treasury Card) could quite easily indicate that they have access to, at least, the first two pages of the return.
 

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