I was wishing for a windfall, but what should befall the windfall?

June 25, 2015 12:43 PM

The IRS made a mistake hugely in my favor. Yay! But I called them! Now what?

In April, I filed my taxes with the check for what I owed. The IRS deposited my check. I had claimed many thousand in deductions in 2014, although I still owed money.

But I recently got a letter saying I owed no taxes and got a check for (to me) a nice chunk of change. Tons; I could live nicely on it for several months. Not just a letter -- a check, too. I was stunned, thrilled, and then pessimistic.

After calling IRS and waiting on the phone nearly 2 hours, I gave my identifying info, and an IRS employee (I got her "badge number") looked at the info and explained the reason for the check -- their error. I asked if I should send it back, what do I do? The call cut off from their end.

I mentioned all this to family member.

His response: "Cash the check!" I told him I'd called, explained (with my data!) and got cut off, and he said the IRS has bigger things to worry about than a poor schmuck with a taxable income of less than $32,000. At worst I could "consider it a low-interest loan" until and if they came back for the money.

My question is: What are the odds that this has now been flagged after I called, or would be flagged? Cash it and fear they'll be after me eventually? Return? I need that money!

posted by anonymous to Work & Money (40 answers total)

I mentioned all this to family member.

His response: "Cash the check!" I told him I'd called, explained (with my data!) and got cut off, and he said the IRS has bigger things to worry about than a poor schmuck with a taxable income of less than $32,000. At worst I could "consider it a low-interest loan" until and if they came back for the money.

I'm sorry, and I'm going to say this in the kindest way I possibly can, but this family member of yours is an idiot.

This is not your money. You know it's not your money. I think you asked this question to give yourself some accountability here and to quiet all those little (but the monies!!!<3) voices playing thorough your head right now. I get it. Still not your money.

Don't cash the check.

Take some responsibility here, call the IRS back (or go to one of their local Taxpayer Assistance Centers in person), and get this resolved.
posted by phunniemee at 12:48 PM on June 25, 2015 [46 favorites]

"Cash the check!"

Ha. Ha. No. I don't know what the penalties are for something like this, but there will be penalties, financial or otherwise. Not to mention, it's dishonest since you know the money isn't rightfully yours.
posted by dortmunder at 12:48 PM on June 25, 2015 [8 favorites]

You did the right thing the first time by calling them. The fact that the phone didn't quite work isn't a free "Well, you tried!" pass.
posted by Etrigan at 12:49 PM on June 25, 2015 [11 favorites]

Jesus Christ, don't cash the check.

Odds are, they would have found out anyway and asked for the money back eventually. With interest. But now, after giving them your tax information and explaining the problem, you want to, what? Spend money you won't be able to return? This is borrowing all kinds of trouble.
posted by lydhre at 12:53 PM on June 25, 2015 [6 favorites]

Don't kick yourself for making the call. They would absolutely have found out, and demanded the money back, possibly with interest. Getting it resolved sooner is better for you.
posted by Mchelly at 12:54 PM on June 25, 2015 [11 favorites]

After calling IRS and waiting on the phone nearly 2 hours, I gave my identifying info, and an IRS employee (I got her "badge number") looked at the info and explained the reason for the check -- their error.

It's not really clear here if they were saying the refund was because the IRS made an error, or that the refund itself was in error. You need to call them back and get a solid answer on what's going on, why they sent this check, and what you're supposed to do about it.
posted by prize bull octorok at 12:55 PM on June 25, 2015 [4 favorites]

Even if the IRS somehow lost track of the call, they will eventually discover that you've been overpaid and will want that money back. No ifs, ands, or buts. It may be next year, or five years from now, or 20 years from now, but they will catch up to you.

Call them back or go see them in person, and get this resolved. Do not cash that check, do not deposit that check, do not collect that money. That will end poorly for you.
posted by ralan at 12:56 PM on June 25, 2015 [3 favorites]

I'm not going to make any pointless moral arguments, I'd just like to point out what I think is probably pretty obvious: the law is one hundred percent on the IRS's side here. It may be their mistake, but you are not entitled to benefit from their mistakes. They're entitled to recover the money, even if it takes them years to notice it, and you will get in big trouble if they ask for it and you can't immediately repay it.
posted by mister pointy at 1:02 PM on June 25, 2015

His response: "Cash the check!" I told him I'd called, explained (with my data!) and got cut off, and he said the IRS has bigger things to worry about than a poor schmuck with a taxable income of less than $32,000.

As a reasonable person: NO, do not do this.

As a tax lawyer: NOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO, do not do this.

What are the odds that this has now been flagged after I called, or would be flagged?
It doesn't matter if it's flagged from the call. Eventually, the IRS' very old computer will catch up with you.

Seriously, among all ideas I've ever heard in my life, this is possibly one of the worst. Do. Not. Cash. The. Check.

Did you call the IRS main number or the number on the notice? Are you sure it's a legit notice and not a phishing scam?

IANYL TINLA etc
posted by melissasaurus at 1:04 PM on June 25, 2015 [24 favorites]

A quick look at this page suggests that legally [IANAL], you would be in the clear investing it until they notified you that you needed to repay it. It also appears that because it is under $50,000, you would not owe interest.

But I very well could be wrong, and you might owe interest and penalties, and it could be a huge amount of stress. Plus, not cashing it would be the right thing to do.

That said, you wrote "I need that money!" If waiting to repay it would make your life much easier, and if you are sure you could repay it very quickly without difficulty when they contacted you, I wouldn't condemn you for keeping it until the IRS asks for it back.

If you do want to be proactive, I wouldn't waste two hours on the phone again. You can just write them (see IRS mailing addresses here; "You may also use your appropriate "Where to File" address for other written correspondence with the IRS.") That also gives you a paper trail.

(Note that melissasaurus is a tax lawyer; I am not. Weight our responses appropriately.)
posted by Mr.Know-it-some at 1:04 PM on June 25, 2015 [1 favorite]

Not only could they demand the money back, they know exactly where your bank accounts are and can just take it back one day, even if they don't get all of it and they leave you with a $0 balance.
posted by rhizome at 1:09 PM on June 25, 2015 [1 favorite]

Your family member is very stupid and should not be listened to. You should call the IRS number you find on their website and ask them what to do, as it could very well be a non-irs-related scam. There is zero chance that they will "overlook" you because of your income. What will happen is that time will go by and you will think you got away with it. And then they will come after you like a shark who smelled chum. I would sooner rip off the mafia than the IRS because at least the mob will just kill you outright.
posted by poffin boffin at 1:11 PM on June 25, 2015 [5 favorites]

In my experience a government agency that overpays you isn't going to want their original check back, they're going to bill you for whatever you actually owe and in that eventuality you're going to need to have the money from the check in your account in order to pay them. The main thing you should do right now is talk to the IRS and get a definitive answer, but if for some reason this drags out, I would absolutely cash the check (and leave it untouched in an interest-bearing savings account) before it reaches its expiry date. But IANYCPA; IANYTL. Call the IRS back.
posted by prize bull octorok at 1:13 PM on June 25, 2015 [1 favorite]

Just an FYI from personal experience this year: the IRS overpaid my refund by nine (NINE) dollars this year. I made under $50K in taxable income this year. I got a letter in the mail this month asking for their NINE dollars back.
posted by late afternoon dreaming hotel at 1:13 PM on June 25, 2015 [20 favorites]

Payment of taxes is not Monopoly. There is no such thing as a "Bank error in your favor" when it comes to the IRS. The IRS will likely ask you at some point to void the check and return it.
posted by DarlingBri at 1:28 PM on June 25, 2015 [2 favorites]

I'm with melissasaurus here. Are you 100% positive it's not a phishing scam?

Now that you've called, I wonder if some fake demand notice shows up asking for some random value that's 80% of the check ("oops, you did get a refund just not as large!") and you pay them out of your personal account thinking the deposit will clear before the payment does. Then bam - the check bounces.
posted by JoeZydeco at 1:31 PM on June 25, 2015 [1 favorite]

I'm pretty sure that the IRS doesn't observe "finders keepers" rules.

Your relative is, crazy-pants-bananas.

"He said the IRS has bigger things to worry about than a poor schmuck with a taxable income of less than $32,000."

That statement has no bearing on the IRS's ability to find the money, demand it back and their legal right to it. The logic that they have bigger fish to fry is….jesus, that's so flawed.
posted by furnace.heart at 1:32 PM on June 25, 2015 [4 favorites]

FWIW, that check isn't "from" the IRS. It's from me, and your Grandma, and your friend who now has subsidized health insurance, and the anonymous of the future (you) who also has subsidized health care and isn't killed by terrorists in 2035. All those people are sorry that their elected officials aren't 100% perfect, but they all need that money.
posted by amtho at 1:45 PM on June 25, 2015 [6 favorites]

My worthless stepdad cashed a check given to him in error. He now has a felony conviction. Just FYI.
posted by BlahLaLa at 2:15 PM on June 25, 2015 [7 favorites]

I would put that money in the highest interest account you can,
Sit on it, and when the IRS asks for it back, at least you may have made
A little something on interest. This happened to my father years ago- for quite a lot money. Eventually they asked for it back, but my dad felt like he'd gotten a little something out of it.
posted by Rocket26 at 2:16 PM on June 25, 2015 [1 favorite]

"he said the IRS has bigger things to worry about than a poor schmuck with a taxable income of less than $32,000"

Yeah, this logic doesn't really hold up. On the one hand, yes, it would a lot of trouble for the IRS to, say, initiate an audit. But, that's not what they're going to do here. Their automatic systems will (eventually) figure out that their accounts are messed up, they'll figure out that a check was sent out in error, and they're going to send a form letter asking for their money back. When you can't and/or don't send the money back, things will likely get unpleasant. No auditors required.
posted by mhum at 2:17 PM on June 25, 2015 [1 favorite]

When you called, did you call a number listed on the check, or on the correspondence? Yup, could be an elaborate scam with a worthless check that you'll then need to "pay back" somehow with real money, at which point the bank will discover the original check is fake.

You might want to call the IRS at a number that you know to be genuine to ask about the whole thing.
posted by BillMcMurdo at 2:30 PM on June 25, 2015 [13 favorites]

It sounds like you're doing it already, but - make sure you keep records: what # you call, when, who you spoke to, what they said, copies of correspondence, etc.

You may never need them. But if you're ever called to account for any of this, at the very least you'll have a slight psychological advantage in being able to say stuff like "On June 14th, 2015, I called 123-456-6789 (IRS Tax Questions) and after 2 hours on hold, I spoke with Amber Rain, badge #2382394 ...."

Also: Nthing the suggestion that you need to contact the IRS again (and make sure it's not some kind of weird phishing thing) and get some kind of definitive answer.
posted by doctor tough love at 2:47 PM on June 25, 2015 [1 favorite]

I got a letter from the IRS, once, detailing a $2 arithmetic error on my tax return in their favor. They're going to ask for the money back.
posted by hwyengr at 2:49 PM on June 25, 2015 [4 favorites]

It's been a few years, but you shouldn't just get a check with no warning like that. You get a notice stating your overpayment with some details (in the asker's case the detail would be ~$0 income vs stated $32,000) and you use that to get the check sent or maybe it automatically comes a few weeks later. Just like when you underpay, the money changes hands later than the notice so you have time to dispute the details before money goes where it shouldn't. So I think it's a scam and would follow the steps for suspicious mail here: http://www.irs.gov/uac/Report-Phishing
posted by michaelh at 2:57 PM on June 25, 2015 [6 favorites]

1) Make sure it's a legit check from the IRS and not a scammer
2) Make sure your assumptions are correct and they don't legitimately owe you the money after all - it's possible! Consult a tax professional if it's worth it.
3) Do not cash a check for money you aren't actually owed- this is a crime.
posted by drjimmy11 at 3:24 PM on June 25, 2015

I once owed the IRS roughly $10,000 due to a tax error. They basically said "Either you pay us $250 a month until this is paid off, or we will take it out of your paycheck automatically."

Don't mess with owing them money.
posted by tacodave at 4:33 PM on June 25, 2015 [2 favorites]

This sort of thing happened to me in Australia with a $400 overpayment from our IRS. I called them up, spent ages on hold. Had to fill out forms and fax them in, which they claim they didn't receive, redid it, and got a new letter from them confirming that yes, they made a mistake and owed me a further $400. Which was the opposite of true.

So then I had $800 in overpayment. I called them again, and was told I had to jump through all those hoops again and I just... Didn't.

Three years later they realised what had happened. I didn't get charged any penalties, but I got a very angry letter, along with warning that my tax return will undergo extreme scrutiny forever after. The two years since then, this does seem to be the case as both times they caught minor errors I made and sent me a letter about them (and paid out the difference as the errors meant I had got less deductions than I should have so yay, I guess.)
posted by lollusc at 4:34 PM on June 25, 2015

Also, to be precise, in my case the reason I think I didn't get penalties was that when I called them, even the second time, they didn't think they had made an error. The forms I had to fill out were for explaining why I thought they were wrong to pay me the $400, then $800. In your case the person on the phone immediately said that yes, they had made a mistake. So you can't even hide behind the fig leaf of "well I decided you must know what you were doing after all."
posted by lollusc at 4:41 PM on June 25, 2015 [1 favorite]

Now if this were a bag of cash that McDonald's handed you instead of your Big Mac I would probably be like "KEEP IT" because I am a terrible person. However, even *I* am going to tell you to NOT keep this money. Only bad things will happen!
posted by masquesoporfavor at 4:43 PM on June 25, 2015

This reads like a scam to me. Did the check and the notice come in the same envelope? I have been dealing with a LOT of tax stuff lately and every single refund check that I have received that's not for a nominal amount has been preceded by several weeks by a letter informing me of said refund. I'm not a tax lawyer, or an accountant, or anyone in any position to give you professional advice on this, but in my personal experience, the IRS does not send correspondence in the same envelope as checks. PLEASE make sure this isn't a scam by calling the number for the IRS on their website and not the one on the notice, and do NOT cash the check.
posted by bedhead at 4:45 PM on June 25, 2015 [1 favorite]

I would get in touch with the IRS again and find out what the status of your refund check is. And if disconnected, I would call again, and again, until I get a definitive answer. I'd also log the times of my calls and whom I spoke with. I might even follow up with a certified, return-receipt letter to document everything.

Because whatever the outcome, getting clarity ASAP and documenting this will provide some comfort if the IRS later changes its mind and tries to say you were a bad actor.
posted by zippy at 4:46 PM on June 25, 2015

And echoing what other people say, I would call the IRS number on their website to make sure this isn't some weird check cashing scam.
posted by zippy at 4:47 PM on June 25, 2015

This sounds like it could be a scam. Contact the IRS via phone and/or letter that you find on their official website-- not in the letter-- and ask them again. Don't give up until you get instructions about what to do.

If this is legit, and an error, you do NOT want to commit fraud by cashing the check now that you've been told or have reason to believe it's an error.
posted by J. Wilson at 4:49 PM on June 25, 2015

I work for a taxing authority (not the IRS)

Not only will they ask for the money back (and they WILL ask for the money back), if you don't act to resolve this quickly they very well could attach penalties and interest to the money they sent you. You might get those cancelled, if you can prove that you acted in good faith to return the money. If you just cash the check and sit on the money while you wait to hear from them, they WILL NOT cancel your penalties and interest.

So what initially looks like a windfall could end up costing you money. And possibly a criminal charge, as mentioned above.

I would not cash the check; set it aside.

I would send a certified letter, like, yesterday, with the relevant details, including the date that you called and were cut off (and including the employee's name and employee number).

After you mail that letter, continue trying to call. Get names and employee numbers. Get direct phone numbers, and email addresses. Escalate to a supervisor if you need to. Whatever they tell you to do, ask them to follow up with a summary of your conversation in writing, either via letter or email. Ask for specific instructions as to who to send the check to (I.e. a name) and their direct mailing address, not the generic P. O box.

Seriously, don't wait; do all of this today.
posted by vignettist at 4:54 PM on June 25, 2015 [5 favorites]

Couple of thoughts. Like lots of people, I use Turbotax. Turbotax got hacked early this year, I was notified about identity theft sorts of concerns. Does OP use Turbotax? If one had the info from this hack, it would be really easy to make a convincing scam.
And if it is a scam, the check will probably bounce sooner or later.

The other thing is experience in dealing with the IRS. I didn't pay taxes for a couple years, I was getting paid by an international organization. Well, that didn't help, they caught up with me just as I started grad school. I agreed to pay so much a month. So I'd pay ahead when I got my student loan checks, so many months till next check times X a month, so mail in X times months dollars.

Late in my second year, they called. I was about to go to court/get money taken out of my accounts/have a 500 pound weight dropped on my head.
Me: "But I have been paying you an equivalent amount to the monthly payment we agreed on!"
IRS: "No, actually, you have actually paid a greater amount than if you had stuck to the monthly payments. But, point of fact, you have not been paying as we agreed, therefore, we are going to make very bad things happen to you. "
Luckily, it was student loan check time, and I was able to pay them the hell off.

DO NOT screw with the IRS.
posted by rudd135 at 5:03 PM on June 25, 2015 [1 favorite]

I would not do any of the above on your own. I would take the letter to an accountant. A discussion and advice should cost very little. Acting on your behalf may cost more, but if you then decide to act on your own you will be properly advised and informed.
posted by megatherium at 2:37 AM on June 26, 2015

If you have trouble getting a straight answer from the IRS--or, honestly, just don't feel like sitting on the phone again--try explaining the situation to your local Congressperson (keyword: constituent services). They will have direct contacts at the IRS who can help you out, bypassing the usual public inquiry channels.
posted by whitewall at 4:31 AM on June 26, 2015

I'm going to agree with numerous others and say that this smacks of scam. It seems very convenient that the call cuts off as soon as they tell you that it was their error, just long enough to sort of reassure you but not long enough to tell you how and when to give it back. They are probably hoping that most people are like your cousin and think "finders keepers" holds up in court, or maybe that life is like Monopoly and when there is a "Bank error in your favour" you get to keep the money.

I would absolutely be calling the IRS scam line and verifying this.
I would be worried about what "identifying info" you gave the people you called over the phone.

And totally aside from the scam/real debate, I would never consider attempting to steal this money. And I am using the word "STEAL" because knowingly keeping something that isn't yours and doesn't belong to you is stealing, even if it is the government.
posted by PuppetMcSockerson at 4:48 AM on June 26, 2015 [4 favorites]

See line number 6.
http://www.irs.gov/irm/part21/irm_21-004-005r.html

They WILL be wanting the money back.
posted by Mr. Big Business at 12:18 PM on June 26, 2015