Overpayment from PY actually owed on amendment

[Margaret CPA in OH]

Client showed overpayment for 2021 and applied to 2022.  Amended return shows 2021 actually had small balance due.  For amended return does client actually owe and must pay money not received or have underpayment penalty for not paying estimated payments thought covered by (nonexistent) overpayment applied?  Never had one of these before so any help welcomed!

[WITAXLADY]

me, I would just pay the 2021 owed and go from there.

sometimes IRS overlooks. Add small interest amount..

D

[Lee B]

Good question which may not have a good answer because of how long it's taking the IRS to process amended tax returns.

Since it's a small balance I would probably go ahead and pay it.

[Slippery Pencil]

I believe once the irs applies the overpayment, they won't change it.  You have to pay the balance on the amended return.

[Margaret CPA in OH]

Thanks for replies.  So I should consider the money applied for 2022 returns and carry on. 

They have not received a notice, probably CP2000, from matching the 1099.  And the amended return can be e-filed and paid with direct debit so think not such a long process time.

Always something...

[Lee B]

2 hours ago, Margaret CPA in OH said:

Thanks for replies.  So I should consider the money applied for 2022 returns and carry on. 

They have not received a notice, probably CP2000, from matching the 1099.  And the amended return can be e-filed and paid with direct debit so think not such a long process time.

Always something...

Unfortunately Margaret, even though you efile  your clients amended tax return, the IRS still processes all amended tax returns manually.

So it will be at least 5 months, probably longer before this return gets processed.

[Margaret CPA in OH]

Thanks, but the money will be direct debit as soon as e-filed so, assuming the 'overpayment' was applied but not there yet, there will be some money in IRS pockets.  I guess we will have to see how it is sorted out with late payment, etc. when the love letters arrive.

[joanmcq]

I amended my 2021 return in December and got the refund already..

[jklcpa]

On 3/10/2023 at 2:59 PM, Margaret CPA in OH said:

Client showed overpayment for 2021 and applied to 2022.  Amended return shows 2021 actually had small balance due.  For amended return does client actually owe and must pay money not received or have underpayment penalty for not paying estimated payments thought covered by (nonexistent) overpayment applied?  Never had one of these before so any help welcomed!

 

On 3/11/2023 at 3:13 AM, Slippery Pencil said:

I believe once the irs applies the overpayment, they won't change it.  You have to pay the balance on the amended return.

 

Reviving this as I have the same issue with a new client, so thank you for the post and answers that followed.  Very helpful right now as I also have this with a new client.  

The former preparer missed including income for an entire brokerage account that created a false overpayment on 2021 that was applied to 2022.  Those '21 earnings and tax effect will certainly not be insignificant amount if the '21 earnings are like that of the '22 TY, it should be somewhere in the $35-37,000 range.