IRS sent me unexpected refund. From the tax transcript it looks like they used the wrong value ("0") for Unrecaptured 1250 (should be non-0 per D 19). How do I proceed?

[denis9]

I double-checked my filed return, and schedule D line 19 has a non-0 value (Unrecaptured Section 1250).  Then I looked at the tax transcript and they apparently used a value of 0. This means that the amount was incorrected taxed at a lower rate (the capital gains rate) than it should have been (the income tax rate).

I don't want to cash this check since it looks like a mistake (on their end).  How do I get it corrected? (or perhaps confirm if they had a valid reason to do that).

[Mike9241]

if the iRS changed your return which it apparently did you should have gotten a notice of the changes.   we can't see your return so can't say for sure that the IRS is in error.  the IRS does make errors.  so the best bet is to call the IRS 

[phone number removed]
First choose your language.
Then 2
Then 1
Then 3
Then 2
When asked for SSN do nothing it will ask twice
Then 2
Then 4
You should then be transferred to an agent, but there is likely to be a long wait. I should also add that due to IRS understaffing you may get disconnected 

your other option is to write void on the check and send it back with a letter of explanation along with the section 1250 worksheet and capital gain and qualified dividend worksheet. because the IRS is far behind in processing returns it could be more than 4 months before you hear from them. 

[denis9]

I will try calling the IRS. I did not receive a notice. Is there a way to check online if a notice was sent out?  

For the discrepancy, the possibilities are:

A) TurboTax made a mistake in computing the value, and the IRS caught it

B) TurboTax correctly computed the value, but made a mistake in reporting it, and the IRS caught it

C) the IRS made a mistake taking a number from the reported return

I believe it should be easy to confirm which scenario it is, and seems to me it behooves Intuit to validate that the mistake is not in TurboTax (or to tell me how to validate).  In fact, it may be as easy as someone confirming which tax transcript lines should copy values from which part of the return.

Specifically, from the tax transcript:

28% RATE GAIN:...........................................................$0.00 

UNRECAPTURED SECT: 1250 GAIN:............................................$0.00 

SCH D 15% TAX CMPTR:.................................................(CG * 0.15)

The TurboTax Schedule D Worksheet shows this:

11.a. Enter the amount from Schedule D, line 18 = 0 

11.b. Enter the amount from Schedule D, line 9 = U

31. Multiply line 30 by 15% =  ((CG-U) * 0.15)

where U = unrecaptured section 1250 amount (which is NOT 0) and CG = capital gains amount. The final capital gains calculation in the tax transcript also is consistent with using "CG" instead of "CG-U". I verified that in the filed return, Schedule D Line 19 shows the value "U".

I can easily compute by hand that if you use "Unrecaptured 1250 = 0" you get the tax owed number the IRS reports in the transcript, and if you use "Unrecaptured 1250 = U", you get the tax owed number computed by TurboTax. The difference between those two numbers is what the IRS refunded.

Thank you!

[JohnH1]

If they made a correction they would notify you. The phone call will answer that if it got lost in the mail. I had the state make an error once and they sent me a check for 6K. I called them and said it was an error but they said to keep the money. They found their error 4 months later (probably from someone saying where is my 6K) and they asked for it back (which I expected would happen). No free lunch that time.

[JohnH1]

Ive learned from experience the if they make a correction to just a line item they will send you a letter even if there is no change in the amount you pay or get back.