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I made a real mess of my taxes this year. I filed an amended return with the IRS that turned out to be incorrect. The amended return included a sale of restricted stock units. Unfortunately, I got the cost basis wrong. The taxes were paid at the grant time, so the cost basis should've been the same as the final sale price, but I mistakenly listed the cost bases as 0 dollars. I got a letter from the IRS saying that I owe an additional $500 dollars due by April 27th. This amount is consistent with the amended return that I filed. The letter says that I can write back to the IRS and contest the amount if I believe it to be incorrect, but I'm not sure how to proceed.

  1. Write back to the IRS and explain that the amended return was incorrect - my taxes were right the first time. - I don't believe it's possible to withdraw an amended return though
  2. File a 2nd amended return that corrects the mistake I made on the 1st amended return

There's a 2nd orthogonal decision I have to make too:

  1. Pay the $500 before April 27th and try to get it back later
  2. Don't pay the $500 because I don't actually owe the IRS that money

What is the correct action here? Should I write a letter contesting the amount? Should I file a 2nd amended return? Both? Do I pay the $500 before April 27th? Is it possible to withdraw an amended return?

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File a 2nd amended return that corrects the mistake I made on the 1st amended return

This.

Pay the $500 before April 27th and try to get it back later

This.

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