Amended tax return problem 1040x

[mortac8]

I am shooting in the dark here hoping someone can advise me.

Back in late July, I filed an amended tax return from 2016 because I forgot to deduct $3500 of IRA contributions. Later I realized that I am ineligible to do so because my AGI is too high (married filed jointly). I just got a refund check for ~$1050 from the IRS.

How do I revert this? Do I cash the check then file another amended return back to what it was originally and pay them back? I am not really sure what to do. I tried the IRS help line but I keep getting navigated to a message saying that no one is available to help when it's not "tax season".

[Davistax]

Amend the return & return the check uncashed with the amended return.

[Kevin8696]

Amend the return & return the check uncashed with the amended return.

Concur. Do another 1040x that amends the first 1040x and send the check back with the second amended return.

[MarkNYC]

There are a couple of issues to consider.

First, if you "forgot" to deduct the IRA contribution on your original tax return, I take that to mean you did not file a Form 8606 to reflect the nondeductible contribution, in which case you should file the 8606 with the 2nd amended return.

Second, returning the uncashed IRS refund check with the 2nd amended return seems practical, but it has the potential to result in unwanted correspondence. Let's assume the $1,050 refund check includes interest, so the tax refunded was around $980. The 1st amended return showed $980 tax overpaid - to be refunded. The 2nd amended return, if prepared properly, will show $980 additional tax due. The IRS may not treat the $1,050 uncashed returned check, made out to you, as a payment of a new tax liability of $980.

It's possible that the IRS may reconcile the account without correspondence if you send back the uncashed check with the 2nd amended return, but I have my doubts. The cleaner way would be to cash the check and send actual tax payment (plus same interest received) with the 2nd amended return.

[Gill]

Cash the check and file an amended return with your personal check. You'll drive the IRS and yourself nuts if you return their check.
Gill
Edit: Just noticed Mark's post above. Glad he agrees.

[jebmke]

I agree with Gill and Mark. The IRS really doesn't do "netting."

[mortac8]

There are a couple of issues to consider.

First, if you "forgot" to deduct the IRA contribution on your original tax return, I take that to mean you did not file a Form 8606 to reflect the nondeductible contribution, in which case you should file the 8606 with the 2nd amended return.

Second, returning the uncashed IRS refund check with the 2nd amended return seems practical, but it has the potential to result in unwanted correspondence. Let's assume the $1,050 refund check includes interest, so the tax refunded was around $980. The 1st amended return showed $980 tax overpaid - to be refunded. The 2nd amended return, if prepared properly, will show $980 additional tax due. The IRS may not treat the $1,050 uncashed returned check, made out to you, as a payment of a new tax liability of $980.

It's possible that the IRS may reconcile the account without correspondence if you send back the uncashed check with the 2nd amended return, but I have my doubts. The cleaner way would be to cash the check and send actual tax payment (plus same interest received) with the 2nd amended return.

The tax overpaid on my amendment was exactly $980.

So I do another amended return showing 980 due... then how do I calculate what i owe them? It it just exactly the amount I received ($1050)? And do I just include a personal check in my new amended return?

Thank you all so much!

[MarkNYC]

There are a couple of issues to consider.

First, if you "forgot" to deduct the IRA contribution on your original tax return, I take that to mean you did not file a Form 8606 to reflect the nondeductible contribution, in which case you should file the 8606 with the 2nd amended return.

Second, returning the uncashed IRS refund check with the 2nd amended return seems practical, but it has the potential to result in unwanted correspondence. Let's assume the $1,050 refund check includes interest, so the tax refunded was around $980. The 1st amended return showed $980 tax overpaid - to be refunded. The 2nd amended return, if prepared properly, will show $980 additional tax due. The IRS may not treat the $1,050 uncashed returned check, made out to you, as a payment of a new tax liability of $980.

It's possible that the IRS may reconcile the account without correspondence if you send back the uncashed check with the 2nd amended return, but I have my doubts. The cleaner way would be to cash the check and send actual tax payment (plus same interest received) with the 2nd amended return.

The tax overpaid on my amendment was exactly $980.

So I do another amended return showing 980 due... then how do I calculate what i owe them? It it just exactly the amount I received ($1050)? And do I just include a personal check in my new amended return?

You should file a 2nd amended return showing $980 additional tax due. Then you have 3 choices for the payment to include with the amended return:

1. Send check for $980 and wait for IRS to assess interest, which should be slightly more than the $70 interest they paid you. (maybe $5 - $7)
2. Send check for $980 tax plus $70 interest, same as they paid you. They might not assess you for the few extra dollars.
3. Add the few extra dollars to the $1,050 so the check total is $1,056.

Make sure to write your SSN and "2016 1040-X" on the check.