Made payment with extension, then filed taxes. IRS sent letter saying I owed money because letter claimed I didn't make the extension payment

[cathy_f]

I sent a check along with my request for extension, with a very conservative overestimate of what I thought we would owe -- $1900. The check cleared at our bank on May 3.

We filed on April 27, and have an $835 refund when you add in the $1900 extension payment.

We received a letter dated May 23, in which the IRS agrees exactly with the tax calculation, but they do not include the $1900 extension payment as part of "payments you made." So they are claiming that we owe $1065+another ~$59.92 in interest and penalties.

I called through the automated system, got a PIN, and was able to get to confirmation that they credited our account with $1900 on April 24.

Now what should I do?

The last day to respond to the letter is July 22, so I think we have some time? I'm hoping that if I wait then all of the various IRS computers will catch up, they will send our refund via direct deposit, and another letter recalculating and telling us no penalties. Is that how it works?

How long should I wait? The phone system is obviously hopeless as far as talking to a real person, so I will need to send a registered letter. Is July 15 safe? (A week before.)

[Mike9241]

follow the instructions in the notice to contest the IRS findings. this would include sending a copy of the front and back of the canceled check. enclose a letter that is signed and dated saying that you are enclosing a copy of the extension payment you made in the amount of $1900 that has not been included in the payments shown in the notice and assuming the extension payment was timely state that in your response 

in the future you may want to use the IRS website to make an electronic payment on the date you specify. you can get an automatic federal extension without filing form 4868 by making an electronic extension payment.

[NCperson]

sounds like there was a timing issue with when the letter was created and the check posted.(this happened to me recently as well)

Just look at your transcript at IRS.Gov..  See what the balance is.  

if there is a credit, I wouldn't even sent back a letter of dispute until mid-July.  Let's see if the refund is issued by then and everuthing zeros out. 

what is going to matter is the account balance listed on the transscipt not the letter that is outdated. 

[cathy_f]

NCperson -- I was able to confirm that the IRS knows that they have the $1,900 using the automated system. My instinct is to wait until closer to the deadline to see if our refund arrives, a new letter arrives, etc, with everything straightened out.

Between 20 and 30 years ago I was self employed and so paid estimated taxes. I always shot for over estimating, and so would get a hefty refund. I would use one year's refund as the next year's first estimated payment.

About 25 years ago we were on an extended out-of-town trip for 7 weeks in June and July. We came home to a huge pile of mail, including an IRS letter demanding money that had arrived a week after we left, which had been followed by another letter right before we got home that basically said "never mind" that had an equal/opposite adjustment. Because of how the mail was piled up I saw the second letter first.

So I do know that at least 25 years ago the IRS was sending out letters and then correcting things, all obviously automatically. And it was better to just let the computers do their thing without getting any human intervention to screw things up.

The letter has an 8 week response time, which is convenient if the computers can just figure it out in time.