Two Common Scenarios of Paying Taxes Twice and How IRS Handles It

When it comes to tax payments, understanding what happens if you pay your owed taxes twice is crucial. Whether due to a simple mistake or unexpected complications, this article will provide clarity on how to handle such situations, including the implications of an incorrect EIN and how the IRS addresses issues like unauthorized return investigation.

Scenario 1: Paying Taxes Twice

What happens if an individual ends up paying their owed taxes twice to the IRS? Typically, the IRS will either refund the excess amount or apply it to the next year's taxes as a credit.

Option 1 - Refund: If you have paid an amount that exceeds your tax liability, the IRS will automatically refund the excess once your tax return is fully processed. Simply put, if you paid too much, they will send you a refund.

Option 2 - Future Tax Credit: Alternatively, the IRS may apply the extra payment to your next year's taxes. In this scenario, when you file your following year's return, you can indicate the amount that should be applied, and your tax liability for that year might be reduced by that amount.

Scenario 2: An Incorrect EIN and IRS Investigation

In another common scenario, a taxpayer might encounter an incorrect Employer Identification Number (EIN) for their 2020 tax return. When this error is discovered and corrected, the individual may face potential delays or complications.

Incorrect EIN Scenario: If a return is filed with an incorrect EIN, it can lead to additional scrutiny from the IRS. After identifying the error, the tax return can be ‘investigated’ and held by the IRS for an extended period. This can sometimes be due to an inquisitive taxpayer service representative or even an overzealous investigation.

Abuse of Authority: There have been cases where the IRS representative investigating the return has been accused of using their authority improperly. For instance, one taxpayer recounts a situation where a service representative was attempting to gather information that they shouldn’t have. In this case, the individual had to file a complaint or seek assistance from a legal advisor.

Handling the IRS Investigation and Extra Payment

If your taxes are incorrectly returned by the IRS due to an incorrect EIN or any other issue, here are steps you can take:

File a Complaint: If you suspect abuse of authority, file a complaint with the IRS. You can do this through the Whistleblower Office or by contacting their ombudsmen.

Call the IRS: In some cases, simply calling the IRS to resolve the issue might expedite the process. Calling early in the morning and being aware of potential long hold times can be beneficial.

Seek Professional Guidance: Consulting with a tax professional or legal advisor can provide additional support and ensure that your rights are protected.

IRS Contact Information: For those who need to contact the IRS immediately, their main number is 1–800–829–1040. Early morning calls may yield better results due to potentially shorter hold times.

Conclusion

To summarize, both situations – paying taxes twice and receiving an incorrect EIN – can be stressful. However, knowing the IRS processes and maintaining patience can help resolve these issues more efficiently. Always document any interactions with the IRS and consider professional help if necessary.

The IRS is also behind due to delays caused by the pandemic and a partial closure. So, if you haven't received any communication within a reasonable timeframe, it's advisable to reach out and inquire about the status of your tax matter.