It’s that time of the year again. Millions of people who thought they were done with taxes are getting letters that the IRS adjusted their refunds instead of the refund they were expecting. Here’s what to do.
Why did the IRS adjust my refund?
IRS adjusted refunds are pretty ridiculous. Especially when they happen to so many people every year.
You probably spent a lot of time on tax filing software or hiring a tax professional. Even if you filed for free, it still probably took you a few hours to do your taxes.
And now after all of that, the IRS is telling you you’re not even getting the refund you thought you deserved.
The good news is that the IRS might not be right. You might be entitled to get your full refund back.
Let’s take a look at some of the common IRS adjusted refund situations.
You Owed Money for Something Else
If you owe money, the IRS might take your refund and use it to pay another debt. The most common examples include:
- IRS taxes from other years
- State back taxes
- Unpaid child support
- Other debts to government agencies
The bad news is that it’s really hard to get this money back.
Spouses have the best chances. If your spouse owes a debt that you had nothing to do with, you may be entitled to get your portion of the refund from your joint tax return.
What you’re looking for is innocent spouse relief or injured spouse relief.
If the debt was yours, you usually can’t deal with the IRS.
If you owed the money, the money is almost always gone. But at least your debt is lower or paid off.
If you dispute the debt or the amount of the debt, whoever says you owed money has the money. So you’ll need to contact them to get it back.
The IRS Already Adjusted Your Refund
If the issue is related to your current tax return, there are two types of letters you might receive.
One is that the IRS is holding your refund until you give more information. We’ll talk about that in the next section.
The other is that the IRS has already changed your refund. This letter might tell you:
- You’re getting a smaller refund
- You’re not getting a refund
- You actually owe money
The first thing you want to do is carefully review what the IRS says is wrong. Again, they’re not always right.
- You did make a mistake in calculating your taxes
- You paid the right amount of tax but left out information to support your refund
- Someone else sent the IRS wrong information (such as a 1099 form)
- An IRS agent made a mistake (they’ve recently hired a lot of new people)
- You have a more complicated situation that can be argued either way
You Know the IRS Changes are Right
If you’ve reviewed your tax return and decided the IRS changes are right, you don’t need to do anything. You’ll get your refund within two to four weeks or as stated in your letter.
Unless of course you owe money. If you owe money, pay ASAP to avoid interest and penalties.
If you can’t pay the full amount you owe, you may want to request a payment plan from the IRS.
You Know the IRS Changes are Wrong
If you think the IRS was wrong to adjust your refund, you have the right to appeal.
Carefully review the instructions on your IRS letter. You’ll usually have either 30 days or 60 days to respond.
In most cases, you can either call the IRS phone number your letter or mail in a written explanation letter. What you’ll need to say depends on the changes the IRS made.
For example, if the IRS said you didn’t qualify for an education tax credit, you might need to show more documentation that you were enrolled in classes and paid related expenses.
Use the search tool to find more information about specific situations.
You’re Not Sure or It’s Complicated
If you’re not sure the IRS is right or you think it’s too complicated for you to handle, contact a tax professional. Again, IRS adjusted refunds are way too common, so there’s a good chance your tax pro has already seen the same situation and knows how to quickly get your refund back.
The IRS Needs More Information
In other cases, the IRS won’t change your refund right away. Instead, it will send you a letter asking you for more information.
The important thing to know here is that you won’t get your refund until you respond. So it’s important to respond as quickly as possible.
The IRS letter will usually request very specific information. This might be a tax form, a receipt, or other supporting documents.
If you have what the IRS is asking for, you’ll usually get your refund after you send it in.
If you don’t have what the IRS is looking for, try to find some other proof. For example, if you got an incorrect 1099 that the issuer won’t fix, you might want to send bank statements instead.
In rare situations, the IRS might ask for even more information after you respond. Repeat the steps above.
While the IRS will usually approve your refund after you send what they asked for, there are situations where they might reduce it. Scroll back up to “You Know the IRS Changes are Wrong.”
Frequently Asked Questions
There is no way to guarantee the IRS won’t adjust your refund. There’s always a chance the IRS can audit you randomly or make a mistake in the review process. Just do the best you can to file your tax return accurately.
IRS support works for the IRS, not you. They’ll answer basic questions but will often assume your IRS letter is right. A tax professional that you hire will look for ways to fight your IRS adjusted refund letter and get you your full refund.
You generally don’t need to wait to cash your refund check or spend your tax refund if you want to appeal your refund adjustment. You can still appeal even after you’ve received your refund.
If you missed the deadline to respond to an IRS letter, it can make things more complicated but doesn’t mean you lost your refund forever. You can still call the IRS to explain what happened or contact a tax professional for assistance.