Tax question - I messed up, but how do I pay this?
April 11, 2016 12:57 PM   Subscribe

I goofed on my taxes and want to make it right, expert help appreciated.

I know you are not my accountant or with the IRS.

I did my taxes with Turbo Tax and took a healthcare deduction I shouldn't have taken. I realized it after I had filed it electronically and it said I had to print up and mail in a form (Form 8885 - Health Coverage Tax Credit) to verify that tax credit. (Insert facepalm) I don't have that form and so I wanted to do an amended tax return right away, but Turbo Tax suggested waiting until my return was accepted to do that. So a few days later, I did an amended tax return, but I have to mail it in (can't be done electronically) and now I owe money: The 1040X accounts for my $3k refund, and then says I owe $725 - which is the difference now that I can't take the deduction. So I figured I wait until I get my $3k refund and send them back $725 of the refund and file the amended tax return at that time. Even stevens.

My problem is that I haven't gotten my refund yet - I filed 2 1/2 weeks ago and really don't have the $725 available now to pay out of pocket like that by this Friday, April 15th. I mean "technically" I don't owe any money because the government hasn't paid me my refund yet and still has my $3k that the $725 comes out of, so....

What do I do here? Do I HAVE to file the amended return by 4/15 for this year? Any suggestions would be appreciated.
Just occurred to me, is my refund being held up because I never sent in that form (8885) I don't have and why I needed to amend?
Thanks in advance.
posted by NoraCharles to Law & Government (6 answers total)
From the IRS website: "If you owe more tax, file your Form 1040X and pay the tax as soon as possible. This will reduce any interest and penalties."

So worst case scenario, you may get a bit of a hit for interest, and will have to pay a bit more. You don't have to file it immediately.
posted by xingcat at 1:03 PM on April 11, 2016

I don't know that it will make much a difference here, but taxes are due April 18th this year, so that gives you a few extra days to file within the deadline.
posted by brainmouse at 1:25 PM on April 11, 2016 [1 favorite]

Check your refund status here:

If you're not going to get your refund before Monday, ask to set up an installment plan. They can divide it by 72, so the first payment should be $10 or so. If you pay it off within 120 days it shouldn't* cost you anything

*I'm not a tax accountant, but they're all too busy this week to read AskMe anyway. I have corrected a couple of returns in my time and while I didn't do the installment option, I did consider it a few years ago in a similar situation to yours and this was my plan then.
posted by IanMorr at 1:47 PM on April 11, 2016

Former IRS Tax Examiner, this advice is my own and not that of the Service. I 'm having trouble understanding your problem.

If I understand you correctly on your original return you took a health care deduction you were not entitled to, and that resulted in a $3000 refund.

You then realized your mistake, and are now ready to submit a Form 1040X with a supporting Form 8885 which will result in a balance due of $725.

The only way I can figure for a taxpayer to go from a $3000 overpayment of tax on their original return to $725 underpayment of tax on their amended return is if the change in tax on your Form 1040X is $3725. Is that the case?
posted by Rob Rockets at 12:41 PM on April 12, 2016

Sorry, let me try again. This is not my forte at all, I really appreciate your help.

Usually Turbo Tax e-files my taxes and I'm done. This year, it said, "Ok, print up this 8453 form that you now have to mail with the 8885 supporting document that proves you get the deduction." It was then I realized I made a mistake, I didn't have an 8885 (Health Coverage Tax Credit) document to submit. I went back into Turbo Tax and clicked "Amend". I took out that Health Coverage Tax Credit and recalculated and now my refund should be $2275 ($3000-$725 difference). Ok no problem, I still get a refund.

But I had e-filed and have to send the amended one in the mail, I figured the refund would be on its way to me before the amended mail one was even opened (In hindsight, I see my assumption was a huge mistake). If I had been able to amend electronically and fix it right away, I wouldn't have this dilemma.

On the 1040X, on line 20 "Amount you owe", it says $725 - which I do owe, and will pay. Like I said, I figured because I didn't mail the amended one yet, that my original $3000 refund would be processed without a problem and then I'd mail back a check for $725 with the amended return.

I'm starting to think that because the IRS is waiting on that 8885 form and doesn't know I'm amending, my refund is taking so long. I probably should have mailed the amended one asap without the check. So now I don't want to mail a check for $725 and then find out the IRS found my mistake and only refunded me $2275, instead of $3000, and then I'd have to get my $725 back. I'm afraid if I don't send a check for the difference the IRS will think I am refusing to pay.

Next year I'm getting an accountant.
posted by NoraCharles at 2:47 PM on April 12, 2016

OK, that makes sense.

As originally filed you were due a refund of $3000. You then found a mistake, you inadvertently took a deduction that you were not entitled to take. No biggie. You calculated the amount to be $725, so you have overpaid your taxes by $2275 ($3000 - $725). I believe that if you send in another $725, the IRS is going to refund you $3000. So I would not do that.

Let me offer an example. In the course of work I would receive Forms 1040X with just the entity information and the reason for the amendment filled in, and it was up to me to do the math. Let's say you filed your Form 1040X with your Form 8885 and your reason for amending your return was "Form 8885" with no entries in Lines 1 through 23. I would adjust your taxable income, adjusted gross income, and tax appropriately, and that would reduce your overpayment to $2275. My manual adjustment to your tax amount would release any freezes or your tax module, and your refund of $2275 would go out.

So I agree the missing Form 8885 is probably creating a hold on your refund. Send it in, but don't send in another $725. The fact that it has been 2.5 weeks and you haven't heard anything yet doesn't surprise me, it's the equivalent of the Christmas rush at the IRS now.
posted by Rob Rockets at 8:53 PM on April 12, 2016

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