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What if your tax refund is wrong?

Taxes » Tax Refund » What If Your Tax Refund Is Wrong?

Most of us get refunds at tax time. And most of the time, those refunds are just what we had been eagerly awaiting.

But occasionally, the amount on an Internal Revenue Service check is not what we expected.

In some cases, it's less than we figured on our 1040s. Every now and then, it's more.

Regardless of whether the refund discrepancy goes against you or favors you, some steps can be taken to resolve the matter. That way, even if you or the tax collector aren't necessarily satisfied with the eventual amount, you'll at least understand the mathematical misinterpretation.

Explanation en route

First, don't panic. There's usually a logical explanation for why you and the IRS came up with different numbers.

The IRS will send you a written explanation for the unexpected amount. The only problem is that the explanation doesn't always accompany the check. Such coordination of cash and comment is particularly difficult with directly deposited refunds, which are likely to show up unexplained in your account first.

Why your refund might be an unexpected amount:

  • Math errors were made in computing your tax bill.
  • Incorrect credit or deduction claims were made.
  • Estimated tax payments were not credited properly.
  • Other federal debts, such as a student loan, are collected.

Since the letter and check or direct deposit usually don't arrive simultaneously, you can always call the IRS if you get a refund check and have questions about the amount.

The main IRS toll-free number is (800) 829-1040 or (800) 829-4059 (TDD) for the hearing impaired. You also can call or visit your local Taxpayer Assistance Center. The IRS website has an interactive locator page to help you find the nearest one.

According to experienced tax pros, the best time to call is about an hour before the IRS office is scheduled to close. Mornings usually are very busy, and during tax-filing season, you'll probably be in for a long wait on hold at any time of the day.

Cash or hold the check?

As you're waiting for the explanation letter to clear up the refund issue, you also have to decide what to do with the more, or less, money you received.

"It's usually not a problem to cash it, especially if it's a smaller difference" says Bob D. Scharin, senior tax analyst for the Tax & Accounting business of Thomson Reuters.

In fact, if the check is less than you expected and it turns out that you were correct, once you and the IRS resolve the matter in your favor, the agency will make up the difference (plus a bit of interest if it takes more than 45 days to correct the error) and send you another check for the balance due.

If, however, the difference is larger or your refund is much more than you believe you should have received, it's generally a good idea to hold off cashing the check or spending the money until the issue is resolved.

"Recognize that you could be asked to send it back if the amount is more than you expected," says Scharin. That's easier to do if you still have all the IRS' mistakenly refunded money in hand.

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