Alright, it's a weird complaint, I know. But I just checked on the status of my refund on the IRS Refund Status website, and the IRS had corrected upward the refund I filed for by a lot. Based on the correction note (relating to the "calculation of net profit or loss" on Schedule C) and the amount, it looks like they took all of the income from my freelancing and straight up zeroed it out for some reason, so I'm paying $0 tax on everything but my main job. A majority of this income was on 1099s but not all of it.

I'm a little worried about receiving the direct deposit in a week and then having to both return the money and pay a fee. I've been trying to call the IRS but their lines are jammed, naturally.

What should I do at this point? I figure this will get sorted out eventually, but how worried do I have to be about getting it solved immediately? Or if I wait until their lines are clear (by which point I've probably received the money, and it's set up for direct deposit so it won't be a check I can just not deposit) is that likely to be okay?

Edit: I have managed to talk to the IRS and it turns out they amended my return to double-count all of my 1040ES payments. Odd! In any case, they said that it would be fine to wait until I receive the refund, and then send them a check for the excess, along with an explanatory letter. I can then file a 1040X later to correct the record.

  • Are you certain they've made a mistake? Was the Schedule C income that you recorded reported on a 1099, and if so, which boxes were populated? – Hart CO Apr 22 '19 at 18:33
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    Can you clarify the identity of "they" and "it" that changed the return amount? And how you were notified of the correction? In the past I've had the IRS once decide they owed me extra money, and they sent me multiple letters first to ask for clarifications and inform me of the change before they sent the money; never had them do it all at the same time as a return. But in general if this was something the IRS decided to do you don't have to worry about trying to stop them from depositing the money, just don't spend the excess until you've figured the situation out fully. – BrianH Apr 22 '19 at 18:44
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    @NickCHK thanks for the clarification, but it would also be very helpful if you were to edit the question as well as that would leave no room for misunderstanding who you mean. – Captain Man Apr 22 '19 at 22:18
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    @BrianH: OTOH, I've several times had them decide they owed me a bit extra. (I never seem to get the capital gains worksheet right :-() However, it's always been several weeks to a couple of months after I got the refund I'd calculated on my 1040, and they simply sent a check with an explanation. – jamesqf Apr 23 '19 at 4:30
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    Is it possible that you're a big beneficiary of the new Qualified Business Income deduction? – R.. GitHub STOP HELPING ICE Apr 23 '19 at 17:13

According to the IRS, in "Tax Topic 152: Refund Information",

Not Entitled to Refund Received

If you receive a refund to which you're not entitled, or for an amount that's more than you expected, don't cash the check until you receive a notice that explains the difference; then follow the instructions on the notice. For a direct deposit that was greater than expected, review the notice to determine if the difference was correct, and follow the instructions on the notice. For information about returning an erroneous refund, see Topic No. 161.

So, at some point, you should receive a notice in the mail describing the changes they've made. That notice should include some sort of instructions for what you should do if you disagree with their changes. You may want to see the IRS's information on "Understanding Your IRS Notice or Letter". As that page says, that notice will include a contact phone number you can use if you want to discuss what's going on with them.

That notice may include deadlines for taking action. There's no real need to do anything "immediately" before you get the notice, as generally the IRS handles issues via mail. (And they never make an initial contact with you by phone or email, though scammers will try!)

Obviously don't spend the money until you're sure that you're supposed to get it, since you may need to send it back once everything's straightened out.

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    They said that they're sending a notice of changes, but it should come at about the same time that the money itself is. I'll make sure to tuck the money away and not spend it until everything is ironed out. Thank you! – NickCHK Apr 22 '19 at 18:57
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    Tuck it away in a savings account! Not necessarily to earn interest (especially at today's interest rate on savings), but to help avoid thinking you have more money in your checking account than you can really use.... – Mark Stewart Apr 22 '19 at 19:21
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    Right. IRS doesn't penalize you for their mistake. They may charge you interest because IRS does not consider interest to be a penalty... but it'll be 6%. – Harper - Reinstate Monica Apr 23 '19 at 15:06

Depending where you live, sometimes it is convenient to go into a local IRS field office. In the past, I arrived a couple hours before they opened, and was the first person in line. Once they opened, a member of the staff made a few clicks on the computer and fixed the problem.

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  • @NickCHK I think you are making a mistake in not considering this. It will just take a few hours, it will be free, and requires very little paperwork. – axsvl77 Apr 24 '19 at 17:34
  • Thanks for the tip! I managed to get them on the phone and have things cleared up. – NickCHK Apr 24 '19 at 18:48
  • @NickCHK You should add your own answer, and mark it as the correct answer. The answer above isn't as good as just calling immediately. – axsvl77 Apr 24 '19 at 18:48

Compiling several answers and comments above, plus what I have learned from the IRS:

  1. The quickest resolution to the problem was by calling the IRS at 800-829-0582, extension 732. They were able to figure out where the problem was and direct me to the proper solution.

  2. Since my refund was coming direct deposit very soon after I noticed the problem they instructed me to wait until the direct deposit was made (this answer may not apply if a check is being sent, or if the direct deposit is far in the future), and then...

  3. Immediately send a check back for the excess amount:

    1. To the same address I sent my 1040 to
    2. With an explanatory letter explaining the issue and including my name, DOB, SSN, and address
    3. With my name and SSN also on the check
  4. I was told that, if I sent a check back with the excess and an explanation quickly, that no fees or interest would be charged.

  5. I was also instructed to fill out a 1040X that would reflect the proper refund amount. However, because the IRS has made amendments to my 1040, I have been told to wait until I receive a copy of the amended 1040 before preparing the 1040X, even though this will take several weeks. I had to ask on the phone for a copy of the amended return to be mailed or faxed to me; this was not automatic.

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