Refund adjusted by IRS

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Topic Author
t24b350
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Refund adjusted by IRS

Post by t24b350 »

I never had this kind of problem before. I always use turbotax to prepare tax. Now the refund comes back less.

IRS says "We changed the amount of tax reported on your tax return because the tax rates on Qualified Dividends and Capital Gains are generally lower than the standard rates. It appears your tax was not computed using these rates or the amount of tax was computed incorrectly."

Any idea?
HomeStretch
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Re: Refund adjusted by IRS

Post by HomeStretch »

Consider pulling out your Federal tax return and recomputing the tax liability on Qualified Dividends and Capital Gains to see whether TurboTax or the IRS is correct.

First verify that you entered this information from your Forms 1099-B and -DIV correctly into TurboTax. If you made a data entry error (such as entering S/T capital gains as L/T gains or non-qualified dividends as qualified dividends) that would cause a refund reduction by the IRS.
Last edited by HomeStretch on Sat Apr 10, 2021 10:01 am, edited 1 time in total.
crre
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Re: Refund adjusted by IRS

Post by crre »

speaking from experience: check the math to see if you agree or disagree. if you disagree, write them a letter telling them so and explaining why. if you disagree and are correct, they will send you the remainder.
weirdsong1
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Re: Refund adjusted by IRS

Post by weirdsong1 »

I've encountered other bad math on tax software in the past, so it's not out of the realm of possibility.
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David Jay
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Re: Refund adjusted by IRS

Post by David Jay »

I vote for "typo" by the OP (projecting from my own experience).

Plus, neither the IRS or TurboTax are new at this...
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quantAndHold
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Re: Refund adjusted by IRS

Post by quantAndHold »

I’ve never had the IRS slurp up my refund, but I have fat fingered returns and had them tell me I was wrong. My recommendation would also be to go back and recalculate things for yourself. You probably do have a typo or some, but the IRS will always take the worst possible interpretation of what you did, so they probably have it wrong, too.
Jeev1
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Re: Refund adjusted by IRS

Post by Jeev1 »

Just sharing my exp if it helps;
I had a typo on dependents name and IRS adjusted (reduced ) the refund amount. The letter I received did not say how to respond so I called them to confirm if I should file amendment. The agent on other side was able to explain the issue and also correct it right away. I did receive the relayed refund four weeks later.

Assuming IRS is right, the details they received directly from bank or brokerage does not match with tax filed.

My 2 cents;
1. Recalculate as other posters suggested
2. Try calling, if you able to get hold of someone and they can explain the issue
Topic Author
t24b350
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Re: Refund adjusted by IRS

Post by t24b350 »

Thanks all for the suggestions. An IRS notice will be sent out next week and I will post outcome later.
Topic Author
t24b350
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Re: Refund adjusted by IRS

Post by t24b350 »

I received IRS notice.
After some calculation, I figured out that in IRS calculation, my $4707 qualified dividend is not computed as taxed at 15%. Instead, IRS treats it as normal income.
I clearly specify this in my tax return as qualified dividend in 1040 box 3a.
How can IRS make such a mistake? How can I fix it?
jebmke
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Re: Refund adjusted by IRS

Post by jebmke »

t24b350 wrote: Tue Apr 20, 2021 11:13 am I received IRS notice.
After some calculation, I figured out that in IRS calculation, my $4707 qualified dividend is not computed as taxed at 15%. Instead, IRS treats it as normal income.
I clearly specify this in my tax return as qualified dividend in 1040 box 3a.
How can IRS make such a mistake? How can I fix it?
Normally the letter they send you (typically some form of CP letter) specifies how to respond if you do not agree with their adjustment.
Stay hydrated; don't sweat the small stuff
H-Town
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Re: Refund adjusted by IRS

Post by H-Town »

t24b350 wrote: Tue Apr 20, 2021 11:13 am I received IRS notice.
After some calculation, I figured out that in IRS calculation, my $4707 qualified dividend is not computed as taxed at 15%. Instead, IRS treats it as normal income.
I clearly specify this in my tax return as qualified dividend in 1040 box 3a.
How can IRS make such a mistake? How can I fix it?
Is 4707 reported as qualified dividend on your 1099 statement? Is your marginal tax bracket qualified for 15% rate? If so, just write a letter to the IRS and enclose the 1099 statement.
Time is the ultimate currency.
scophreak
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Re: Refund adjusted by IRS

Post by scophreak »

t24b350 wrote: Tue Apr 20, 2021 11:13 am After some calculation, I figured out that in IRS calculation, my $4707 qualified dividend is not computed as taxed at 15%. Instead, IRS treats it as normal income.
I clearly specify this in my tax return as qualified dividend in 1040 box 3a.
What does the 1099-DIV say? Is this amount listed as qualified or non-qualified? You may have listed as qualified in TurboTax but the IRS may have changed the designation if the 1099 designates the dividend as non-qualified.
Topic Author
t24b350
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Re: Refund adjusted by IRS

Post by t24b350 »

scophreak wrote: Tue Apr 20, 2021 11:37 am
t24b350 wrote: Tue Apr 20, 2021 11:13 am After some calculation, I figured out that in IRS calculation, my $4707 qualified dividend is not computed as taxed at 15%. Instead, IRS treats it as normal income.
I clearly specify this in my tax return as qualified dividend in 1040 box 3a.
What does the 1099-DIV say? Is this amount listed as qualified or non-qualified? You may have listed as qualified in TurboTax but the IRS may have changed the designation if the 1099 designates the dividend as non-qualified.
Yes, it is qualified. Basically it is dividend from CSCO and V.
Topic Author
t24b350
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Re: Refund adjusted by IRS

Post by t24b350 »

H-Town wrote: Tue Apr 20, 2021 11:33 am
t24b350 wrote: Tue Apr 20, 2021 11:13 am I received IRS notice.
After some calculation, I figured out that in IRS calculation, my $4707 qualified dividend is not computed as taxed at 15%. Instead, IRS treats it as normal income.
I clearly specify this in my tax return as qualified dividend in 1040 box 3a.
How can IRS make such a mistake? How can I fix it?
Is 4707 reported as qualified dividend on your 1099 statement? Is your marginal tax bracket qualified for 15% rate? If so, just write a letter to the IRS and enclose the 1099 statement.
Yes and Yes.
jebmke
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Re: Refund adjusted by IRS

Post by jebmke »

When I have responded to CP letters I prepared a statement showing them that the line I originally reported on the return was correct as filed and provided a copy of the relevant documents (1099) with the numbers highlighted. In more complicated situations I provided detailed reconciliations of items on the return but that doesn't sound relevant here. Once an actual person receives your explanation they should eventually handle it and you will get a reply from them. Be prepared for this to take months given the current situation at the IRS.

The notice you received should have an address and instructions on how to respond.
Stay hydrated; don't sweat the small stuff
Topic Author
t24b350
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Re: Refund adjusted by IRS

Post by t24b350 »

I called the IRS number listed in the notice. It was a long wait and a long talk as well.
Basically what I find out is that in IRS database, 1040 3a shows 0. In my filing, it is 4707.
I filed by paper so could it be an error in input?
The IRS rep agreed to reverse and sent me the difference.
However, she said the reversal was subject to review and they might ask for more info or audit.
HomeStretch
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Re: Refund adjusted by IRS

Post by HomeStretch »

Consider responding timely to the IRS notice at the address given in the letter. Your response should document your conversation with the IRS agent (include date of call and name of agent). Send it certified mail so you have delivery tracking.
Topic Author
t24b350
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Re: Refund adjusted by IRS

Post by t24b350 »

HomeStretch wrote: Wed Apr 21, 2021 3:16 pm Consider responding timely to the IRS notice at the address given in the letter. Your response should document your conversation with the IRS agent (include date of call and name of agent). Send it certified mail so you have delivery tracking.
Sure, will do that. Thanks for the advice.
Jeev1
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Re: Refund adjusted by IRS

Post by Jeev1 »

t24b350 wrote: Wed Apr 21, 2021 12:31 pm I called the IRS number listed in the notice. It was a long wait and a long talk as well.
Basically what I find out is that in IRS database, 1040 3a shows 0. In my filing, it is 4707.
I filed by paper so could it be an error in input?
The IRS rep agreed to reverse and sent me the difference.
However, she said the reversal was subject to review and they might ask for more info or audit.
I would suggest to check ‘tax records or transcripts’ on irs gov in few weeks. If they reversed it, you may be able to see it (I am not sure how long it takes any change to reflect).
In the meantime like others suggest, prepare a written response. I would note in the response you spoke with someone etc.
Katietsu
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Re: Refund adjusted by IRS

Post by Katietsu »

If you are using Turbotax to prepare the return, is there a reason that you are unable to file electronically? The type of input error you experienced is not uncommon. Given the current situation, I would not be surprised if such data entry errors had increased in frequency. Glad you were able to reach someone.
Topic Author
t24b350
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Re: Refund adjusted by IRS

Post by t24b350 »

Katietsu wrote: Wed Apr 21, 2021 10:05 pm If you are using Turbotax to prepare the return, is there a reason that you are unable to file electronically? The type of input error you experienced is not uncommon. Given the current situation, I would not be surprised if such data entry errors had increased in frequency. Glad you were able to reach someone.
Yes, I could but you know old habit is not easy to change. Maybe next year.
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Harry Livermore
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Re: Refund adjusted by IRS

Post by Harry Livermore »

HomeStretch wrote: Wed Apr 21, 2021 3:16 pm Consider responding timely to the IRS notice at the address given in the letter. Your response should document your conversation with the IRS agent (include date of call and name of agent). Send it certified mail so you have delivery tracking.
+1
Prior to employing a CPA, I did my taxes by hand. Maybe I used TT in the last year before forming my LLC and hiring the CPA. Getting a notice like you did was almost routine back then, and I would sift through everything, and gosh darn it, the IRS was right every time (I'm not saying they are in your case, you have clearly found the error)
Did you jot down the name of the rep with whom you spoke?
I would send the letter now, and check the transcripts later (as suggested by Jeev1, but not wait to send the letter)
Yes, as Katietsu asked, why file paper if you were using TT? I'll admit if I were still doing my own taxes, I probably would have resisted filing electronically all these years (if I am being honest with myself)
Cheers
bwalling
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Re: Refund adjusted by IRS

Post by bwalling »

HomeStretch wrote: Wed Apr 21, 2021 3:16 pm Consider responding timely to the IRS notice at the address given in the letter. Your response should document your conversation with the IRS agent (include date of call and name of agent). Send it certified mail so you have delivery tracking.
In my experience, mail (certified or not) is a goes to a black hole when you send it to the IRS. Things are solved over phone calls, even though the notices generally say to use certified mail and not to call them.

I once responded to a situation with certified mail (twice), and wound up with a date in tax court for "non response". I called them, they keyed in the correct cost basis, and case closed. It took two hours on hold, but it got it resolved. According to the person I spoke with, they had no record of mail from me at all, even though I had certified mail tracking receipts going to the address they gave me for response.
Topic Author
t24b350
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Re: Refund adjusted by IRS

Post by t24b350 »

Harry Livermore wrote: Thu Apr 22, 2021 6:06 am
HomeStretch wrote: Wed Apr 21, 2021 3:16 pm Consider responding timely to the IRS notice at the address given in the letter. Your response should document your conversation with the IRS agent (include date of call and name of agent). Send it certified mail so you have delivery tracking.
+1
Prior to employing a CPA, I did my taxes by hand. Maybe I used TT in the last year before forming my LLC and hiring the CPA. Getting a notice like you did was almost routine back then, and I would sift through everything, and gosh darn it, the IRS was right every time (I'm not saying they are in your case, you have clearly found the error)
Did you jot down the name of the rep with whom you spoke?
I would send the letter now, and check the transcripts later (as suggested by Jeev1, but not wait to send the letter)
Yes, as Katietsu asked, why file paper if you were using TT? I'll admit if I were still doing my own taxes, I probably would have resisted filing electronically all these years (if I am being honest with myself)
Cheers
Thanks, Harry. I do get her ID number.
Topic Author
t24b350
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Re: Refund adjusted by IRS

Post by t24b350 »

bwalling wrote: Thu Apr 22, 2021 6:14 am
HomeStretch wrote: Wed Apr 21, 2021 3:16 pm Consider responding timely to the IRS notice at the address given in the letter. Your response should document your conversation with the IRS agent (include date of call and name of agent). Send it certified mail so you have delivery tracking.
In my experience, mail (certified or not) is a goes to a black hole when you send it to the IRS. Things are solved over phone calls, even though the notices generally say to use certified mail and not to call them.

I once responded to a situation with certified mail (twice), and wound up with a date in tax court for "non response". I called them, they keyed in the correct cost basis, and case closed. It took two hours on hold, but it got it resolved. According to the person I spoke with, they had no record of mail from me at all, even though I had certified mail tracking receipts going to the address they gave me for response.
I sent in a certified mail yesterday, with copies of form 1040 and 1099-DIV. I may call again in a month to check.
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t24b350
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Re: Refund adjusted by IRS

Post by t24b350 »

I get the refund from IRS, with some tiny interest. Also received notice CP21B regarding the change.
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