When to file an amended return when I am claiming a lower refund?

[bigcoach92]

I recently filed my 2024 CA tax return with a big mistake that incorrectly increased my refund by several thousand dollars.  For purposes of using whole numbers, let's say I thought my refund was $5000 when I filed, but my actual refund should only be $1000.

When should I file this amended return? I know most people say wait until your tax return finishes processing until you file the amended return - and I totally agree with that. Ideally, I would either like to wait to receive the $5000 and file my amended return with a $4000 payment OR let them catch it, have it rejected, and file an amended return with a refund claim of $1000.

However, I'm particularly concerned about long processing times on my original return, which would essentially force me to pay $4000 out-of-pocket with the amended return if I don't receive my $5000 refund by April 15 if I want to avoid penalties.  Therefore, I'm not sure which is the best course of action. Thank you!

[pk]

@bigcoach92  generally preferred  path is to wait till the processing of the return is complete  ( assuming of course that the returns have been accepted for processing ).  Thereafter  file the amended return along with any taxes due.

Note that when you prepare the amended return, TurboTax will assume that  you have received the full refund when computing  the  difference amount to be paid.

[MindyB]

It's advisable to do as you mentioned- wait until the original return is fully processed (meaning you receive your refund) until you file an amended return. If the return is rejected that would make the  fix much easier, but if it is accepted, wait for the refund.

Here is an article you may find useful: How do I amend a California state return in TurboTax Online?

[bigcoach92]

Thank you! I guess then my next question would be: if the original return has not finished processing by April 15, is there a penalty on the $4000 I owe from filing an amended return AFTER 4/15?

I know this is a moot question if everything is done by 4/15, but I've heard some people reporting that the state is particularly understaffed this year and that refunds may take up to 7 weeks. 

[pk]

@bigcoach92  there should not be any penalty but there could be  interest charges.   But that should be  minimal ( I hope ), if any.

Good Luck 

[bigcoach92]

Thanks @pk. The penalty for unpaid state tax, so I've read, is 5% of the total + 0.5% for each month late. Would this be counted as an unpaid state tax (underpayment), however? 

EDIT: Looking this up and the IRS calls it an "excessive payment" for which they do impose a penalty. Can't find anything about the state, though. Fortunately my federal return was correct. 

[pk]

@bigcoach92  that is what I was  afraid of -- States are often quite stickler  in collecting  interest payment.  You can always  make a 1040-V / equivalent payment to the state., On the good side , States are often more willing to talk -- perhaps you can call the  Department of Revenue ( or the equivalent in your state ), tell them the issue  and  get them to accept  extra payment to forestall the interest charges.  At least there  is no harm.

Is there more I can do for you ?

[bigcoach92]

The idea of sending in an "extra payment" to forestall any interest, however, circles back to my original question and is one avenue I'm trying to avoid. In my example, the state owes me a $1000 refund at the end of the day. Until it's done processing and the state has made their "decision" on what they want me to do (which hopefully comes before April 15), I don't feel it would be right to have to pay more into the government and wait further for my refund. At the same time, I don't feel there should be a penalty/interest required if things spiral out of my control; I've recognized the error before the filing deadline, plan on amending as soon as needed, and am trying to be diligent to get this resolved ASAP. It's not like I'm planning to keep the government's $4000 for as long as possible.  

Also, in your very first response, you said "TurboTax will assume that  you have received the full refund when computing  the  difference amount to be paid." Is this always the case? Is there an option to file an amended return without making a payment? That way the state would have record that I recognized and amended the error, but they could bill me later after they sort out what I should pay. 

I admit I made a big but honest error, but surely there has to be some precedence for this. It can't be that uncommon in a state of ~20 million taxpayers. I'm just thinking out loud. Thank you for all your help!

EDIT: @pk there are 2 more questions you can answer:

1. When filing an amended return with TurboTax, does the software include any penalty/interest as part of the amount you have to pay back? For example, will the software know that it is past April 15 and either know the fees I owe or require me to add them in? If not, maybe there's a possibility I can pay the $4000 back after April 15 without interest if it turns out to take that long? 

2. Also, in your very first post you said "TurboTax will assume that  you have received the full refund when computing  the  difference amount to be paid." Is this always the case? When preparing an amended return, is there an option to file it but not send payment? That way the state could have on record that I recognized and amended the error, but I wouldn't have to pay out-of-pocket until they figure it out for me.