Should This Client File

Technical topics regarding tax preparation.
#1
Posts:
51
Joined:
27-Feb-2015 6:33am
Location:
Pennsylvania
Client prepared own 2018 return and made an error related to health insurance. Client had health insurance for all of 2018 through the Marketplace but indicated on the return she did not have insurance in 2018 and calculated a shared responsibility payment of $884. Had client filed return correctly, she would have paid an APTC repayment of $1,300 as income was higher than she anticipated when apply for healthcare in 2018.

Original return showed a refund of $555. Client never received the original refund. Client received notice that IRS recalculated return adding in the $1,300 APTC but did not remove the $884 shared responsibility payment. IRS claims client owes $745 (555 original refund - 1,300 APTC). I amended the return and show a refund of $139 (555 original refund + 884 shared responsibility payment - 1,300 APTC). Amended return was filed in July 2020 and has not yet been processed.

Client does not want to file 2019 ($2,106 refund) or 2020 ($2,708 refund) for fear IRS will take the $745 plus penalty in interest. Client is owed $6k+ factoring in the $1,400 stimulus.

How would you advise this client to proceed? File and hope IRS does not reduce the refund by $745 + P&I or wait until the 2018 amended return is processed? If client files and IRS reduces refund by $745 + P&I, how likely is it IRS will unwind this correctly once the amended return is processed?
 

#2
CathysTaxes  
Moderator
Posts:
3557
Joined:
21-Apr-2014 9:41am
Location:
Suburb of Chicago
Since 2018 amended was paper filed, I would not wait until it's processed before completing 2019 and 2020. If client is worried about owing money have her set that on the side when she receives her 2019 and 2020 refund.
Cathy
CathysTaxes
 

#3
Posts:
51
Joined:
27-Feb-2015 6:33am
Location:
Pennsylvania
Thanks Cathy. Client doesn't really owe for 2018. IRS says she does but until they process and agree to the amended return, the concern is her refund will be reduced by the amount IRS says she owes (but doesn't) for 2018.

Client made error on original return. IRS adjusted but their adjustment is incorrect. Client is owed $139 but IRS says she owes $745. If they take the $745 from her 2019 or 2020 return, that makes an already messy situation even worse in trying to get that back.
 

#4
Posts:
190
Joined:
23-Apr-2014 10:14am
Location:
Upstate NY
What's wrong with waiting for 18 to be processed? If she getting refunds for 19 and 20 there's no penalties to worry about.
 

#5
Posts:
51
Joined:
27-Feb-2015 6:33am
Location:
Pennsylvania
Based on my most recent conversation with the client this past weekend, it appears she may be having some money issues. Client will be 65 next month and plans to retire and start collecting SS. Physical demands of the job are taking a toll. Only earned $17k last year working retail and $12k in unemployment.
 

#6
Posts:
351
Joined:
4-Sep-2015 10:11pm
Location:
Florida
Because the IRS isn't processing much of anything right now. Good luck getting any response from them. I efiled a 2019 return in Oct 2020 that still isnt processed.
 


Return to Taxation



Who is online

Users browsing this forum: ajt1970, Anderly, Coddington, dellpaul, eric1032, Frankly, Google [Bot], Google Adsense [Bot], GSTaxTalk, JAD, JoJoCPA, JR1, lckent, MAPCPA60, SALYstrikesagain, Seaside CPA, TheGrog, wallbobbyc and 206 guests