If my son made an error in not claiming unemployment income in 2021 and he can't pay the full amount, how should he proceed with filing the amended return?

[brian_amy523]

It was just brought to my son's attention that he failed to include unemployment income from 2021 on his taxes.  He received a large federal refund and state refund, but with this change he will owe both.  The state amount is pressing as that's how he learned of the error, but it is also a more manageable amount.  Should he immediately file an amended federal return and set up a payment plan for that larger amount that he now owes?  Is there any way for a 2022 refund to go toward the amount he owes? I'm not sure how to advise him in this.

[rjs]

Yes, filing an amended return now and setting up a payment plan is exactly what he should do. If he gets a refund for 2022, I think the IRS will automatically apply it towards the amount that he owes for 2021, but that's not going to happen until he files his 2022 tax return in 2023.

[Mike9241]

if the IRS has already caught the error and sent a bill, there is no need to file an amended return. just set up a payment plan. 

[brian_amy523]

We received notification from the state tax department, but nothing yet from federal. I was not going to amend state for that reason, just federal made more sense. Is that correct?

[Critter-3]

Since the state has already caught the error then he only needs to amend the federal and the sooner the better.  He should pay what he can with the amendment and then get on a payment plan when billed for the balance by the IRS.