IRS owes us a refund from a 2017 return audit. On Jan 18th we received letter informing of this balance due to us, but no check since. How to apply credit to 2020 return?

[luisfdc]

A couple of months ago we received a check of a lesser amount that we believe corresponds to the interest generated since 2017 (there was no letter or additional details, just a check of $300) but not the $2,715 owed to us from 2017 return. There is a phone number in the notice letter but it is a trap, there is no way to speak to an actual human being. Instead of keep trying to contact them about this, we'd like to apply this credit to 2020 return and attach the notice letter we received stating this balance due to us. But I don't seem to find a place where to include this in turbotax. Thanks!

[ErnieS0]

Interest paid by the IRS is taxable just like interest earned from a savings account. You cannot use it as a credit against your additional 2017 refund. Federal refunds are not taxable anyway.

You have to claim the $300 as interest income in Interest and Dividends.

• Type 1099-int in Search in the upper right
• Select Jump to 1099-int
• Say Yes to Did you receive any interest income?
• On Let’s import your tax info go to the bottom and click Change how I enter my form
• On How do you want to add your 1099‑INT? choose Type it in myself
• Enter U.S. Treasury (or IRS) and the amount

If you cannot reach anyone with the number on your notice, call 1-800-829-1040.
 

[luisfdc]

Thank you for letting me know I have to report this interest paid to me. I didn't, so I'll go ahead and add them as you say.

However, I am not sure if you understood my question. IRS still owes me $2,715 from my 2017 tax return. I have to pay $2300 for my 2020 tax return. Can I add this amount to my 2020 tax return so IRS pays me $415 and we are even? I have my IRS letter informing me that this amount is owed to me. I'll try this alternative phone number right away.

Thanks!

Luis

[VolvoGirl]

Better make sure that 300 was for interest.  I think it would say the tax year and Int on the check.  And you should get a 1099 from the IRS for interest they pay you.  When did you get it?

[VolvoGirl]

If it was interest and you got it this year in 2021 it will go on your 2021 return NEXT year so you won't get the 1099 until the end of the year.  So don't report it now.

[luisfdc]

I see. Yes it said INT in it, that is why we assumed it was for interests. No form 1099 whatsoever. We got it a couple of months ago. I understand it has to go on 2021 tax return. 

Any idea on how to substract the amount owed to me by IRS from my tax payment this year using turbotax? Thanks!

Luis

[VolvoGirl · Accepted solution]

Don't think you can.  You would have to ask the IRS.  Seems strange you got paid interest on it but not the refund.  Although there is a place to apply an overpayment but that might just be for the prior year 2019.  So unless the IRS told you to enter it on your tax return I wouldn't chance it.  And since they sent you the interest in 2021 maybe it gets applied to your 2021 return too.