? about amending tax return to eliminate penalty

[Mr. Green]

I figure this is a long shot but on the off chance it saves me a call to the IRS it would be worth it.

Our income in 2017 was dominated by a property sale at the end of the year. We paid estimated tax on the sale, and that amount dwarfed the tax we paid on our W-2 income for the rest of the year. I did not realize I needed to file Form 2210 to show the quarterly income breakdown so when we got our refund it was short almost $200 that the IRS said we owed as a penalty for not withholding enough tax throughout the year. I've completed Form 2210 now so that it correctly shows we did pay the right amount of taxes throughout the year but I don't see anywhere on the 1040X that would allow us to properly show this change. Technically, nothing about our taxes is changing, so we don't have a differences to highlight on the 1040X. How do I go about filing for this amendment? Maybe just include a note with the 1040X and Form 2210 noting that the form clearly shows we paid the right amount of tax and asking that our penalty that was withheld be refunded?

[secondcor521]

Not sure, but from https://www.irs.gov/pub/irs-pdf/i1040x.pdf, page 2, right hand column:

"Don’t file Form 1040X if you are requesting a refund of penalties and interest or an addition to tax that you have already
paid. Instead, file Form 843, Claim for Refund and Request for Abatement."

In the instructions for Form 843 at https://www.irs.gov/pub/irs-pdf/i843.pdf:

"Use Form 843 to claim or request the following.
...
A refund or abatement of a penalty or addition to tax due to reasonable cause or other reason (other than erroneous written advice provided by the IRS) allowed under the law."

[sokoloff]

I figure this is a long shot but on the off chance it saves me a call to the IRS it would be worth it.

Our income in 2017 was dominated by a property sale at the end of the year. We paid estimated tax on the sale, and that amount dwarfed the tax we paid on our W-2 income for the rest of the year. I did not realize I needed to file Form 2210 to show the quarterly income breakdown so when we got our refund it was short almost $200 that the IRS said we owed as a penalty for not withholding enough tax throughout the year. I've completed Form 2210 now so that it correctly shows we did pay the right amount of taxes throughout the year but I don't see anywhere on the 1040X that would allow us to properly show this change. Technically, nothing about our taxes is changing, so we don't have a differences to highlight on the 1040X. How do I go about filing for this amendment? Maybe just include a note with the 1040X and Form 2210 noting that the form clearly shows we paid the right amount of tax and asking that our penalty that was withheld be refunded?

Form 1040, line 79 is changing (or equivalent on other master forms). It's not changing versus what you originally filed, but it is changing from what the IRS changed it to on your behalf. I'd file the 1040X, 2210, and include a statement (just typewritten, not on Form 8275) as to why you are amending the return.

I think Form 843 doesn't apply in this case, because you are amending a figure that the IRS adjusted on your behalf on your original return. (I'm not a tax pro, and I admit that I use a paid preparer [one of the few areas where I don't DIY], so I'd just tell him to do it and send me a bill.)

[Mr. Green]

After reading over the 1040X and 843 more closely I think I'm of the mind that Form 843 is the way to go. With the 1040X I wouldn't be changing a single column, except for at the very bottom where I'm supposed to enter the amount of my refund as adjusted by the IRS, and what I expect my new refund to be. And there is certainly the information in the 1040X instructions that secondcor521 pointed out, and it is a refund of a penalty that we're seeking. I'm able to fill out Form 843 in a manner that makes it feel like a more complete document that I would be able to with Form 1040X. I'll mail in Form 843, along with my now completed Form 2210 and see what happens. I'll be sure to report back my results.

[ISawTheLight]

Did the IRS send you a letter indicating why the actual refund amount is different than what was claimed on your original return?  Or what other way did you discover that the refund was lowered by this particular penalty?  If they sent the letter, then you should just respond to that.  The IRS letter should include directions on how to respond.  You wouldn't need to file a 1040X or 843 or anything like that, just type up a nice letter and send it in with a copy of the 2210 that you have now completed and ask them to remove the penalties from your account.

(I say this because it has been my experience that the IRS sends these types of letters and simply responding to the letter is the easiest way to resolve the issue.)

[Wile E. Coyote]

Did the IRS send you a letter indicating why the actual refund amount is different than what was claimed on your original return?  Or what other way did you discover that the refund was lowered by this particular penalty?  If they sent the letter, then you should just respond to that.  The IRS letter should include directions on how to respond.  You wouldn't need to file a 1040X or 843 or anything like that, just type up a nice letter and send it in with a copy of the 2210 that you have now completed and ask them to remove the penalties from your account.

(I say this because it has been my experience that the IRS sends these types of letters and simply responding to the letter is the easiest way to resolve the issue.)

Agreed.  I would follow the instructions in the notice.  If there is a number to call, you can try that.  Otherwise, respond to the notice.  If you read the instructions to Form 843 it indicates "If you received an IRS notice notifying you of a change to an item on your tax return, or that you owe interest, a penalty, or addition to tax, follow the instructions on the notice. You may not have to file Form 843."

[Mr. Green]

Did the IRS send you a letter indicating why the actual refund amount is different than what was claimed on your original return?  Or what other way did you discover that the refund was lowered by this particular penalty?  If they sent the letter, then you should just respond to that.  The IRS letter should include directions on how to respond.  You wouldn't need to file a 1040X or 843 or anything like that, just type up a nice letter and send it in with a copy of the 2210 that you have now completed and ask them to remove the penalties from your account.

(I say this because it has been my experience that the IRS sends these types of letters and simply responding to the letter is the easiest way to resolve the issue.)

The notice mentioned the possibility of filling out Form 2210 to reduce or eliminate a penalty but it gave no mention of how we would go about filing that form. Form 2210 does not clearly identify how it should be filed, that I could find, because it assumes we are filing it with our taxes like normal.

It's interesting that we ended up in this situation because nothing about filling our 1040 intuitively indicated we would pay a penalty. I had substantially overpaid our estimated taxes on the property sale at the end of 2017 so we were getting almost a 5-figure refund. I just stopped there because Line 79 for penalties looks like it's part of the "you owe taxes" section of Form 1040 based on the dark lines separating sections.

[secondcor521]

The notice mentioned the possibility of filling out Form 2210 to reduce or eliminate a penalty but it gave no mention of how we would go about filing that form. Form 2210 does not clearly identify how it should be filed, that I could find, because it assumes we are filing it with our taxes like normal.

I'll just comment here that although most IRS forms are filed with one's taxes, there are a few that can be sent standalone under certain circumstances.  I forget what those circumstances are, but I do recall that Form 8606 can be filed independently of a tax return - you can just fill it out and mail it in.  Form 2210 might be another one.

Since your name and social security number and the year of the form are all there, they should be able to match it up to your account even if it doesn't have an associated tax return.