Amended Return

[Terry D EA]

I am amending a return for a client for TY 2008 that the IRS refigured due to the return being incorrectly prepared. This return was prepared using Turbo Tax by the client's son-inlaw. Several mistakes were made, the client received a refund over and above what the actual refund should have been. The client is paying back the difference with the amended return. Will the IRS calculate penalties and interest on that money? My first thoughts are yes because the client has had the money they were not entitled to in the first place. If they will charge interest and penalties, would you let the IRS figure these or try to calculate them yourself? Personally, I prefer to let the IRS calcualte the penalties and interest. However, won't the interest clock be running while they are reviewing the amendment? How to handle this? Should the client include the difference and wait to hear what, if any, additional amounts are owed or should we try to calculate the interest and penalties and inlcude that amount with the payment? Thanks in advance

[Terry D EA]

If it helps, the difference owed is 870.00 and this is the 2008 tax return.

[mcb39]

Yes, there will be interest and penalties. The interest should stop accruing the day that you respond to the notice; ie; file the amended return. You possibly will be able to get the penalty abated, but not the interest. I always let the IRS do the calculations of the interest. If you look at the CP notice, it should say that the amount of interest is figured up to a certain date, by which time you should be responding to the notice. Hope this helps.

[Kea]

Yes, they will charge interest (and possibly penalties - not as sure on that one). I generally have the client pay the difference in the taxes and wait for the bill for the interest. The interest is a moving target based on when IRS gets the check. I prefer them to send the bill so that you have a specific amount and a due date. I will sometimes give the client an idea as to the approximate amount. Also, I have heard of cases where the interest is small enough that the IRS does not bother to bill for it (it costs them more to process the billing than the interest they could get). But that is usually when the client is paying for the current year before 4/15.

I'm sure others can chime in with better answers.

[JohnH]

I'd tell them to pay the tax and wait for IRS to send a bill for the interest and (if any) penalties. I might also tell them to expect the bill to be about $120 to $150. If they want to include an extra $100 in their payment, then the balance due after all the dust settles will be less by that same amount. Whatever small interest difference there may be due to not paying the precise amount with the amended return isn't worth what you'd charge them to do the exact calculation. (my answer would be the same if they owed $8,700, except I'd shift the comma. If they owed $87,000, it might be worth doing a more precise calculation)