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amended returns

Q&A: Foreign tax credit delays substantial IRS refund

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Dear Liz: My tax professional submitted amended tax returns for 2023, 2022 and 2021 a year ago. I’m supposed to receive a nice refund for those years but I have heard nothing from the IRS and cannot get any information from its website. I asked my tax professional about it and she said the foreign tax credit claimed on the amended returns must be reviewed by the foreign tax department, which is very far behind. This just feels like a black hole. The IRS wants me to pay my taxes but drags its feet on giving me my refund.

Answer: The foreign tax credit is designed to prevent double taxation. If you earn income abroad, you may be able to deduct taxes paid to another country on your U.S. tax return.

Unfortunately, this is an area where there has been substantial fraud and noncompliance. That raises the odds of a manual review and potential audit. The fact that you’re claiming large refunds, and doing so by amending returns, also increases the chance your filings will be scrutinized.

Still, a year is a long time to wait. Consider reaching out to the Taxpayer Advocate Service, which may be able to help you break the logjam.

Q&A: Don’t file an amended return after the stimulus tax break. The IRS is begging you

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Dear Liz: You might want to inform your readers that they do not need to file an amended return if they filed before Congress passed its most recent stimulus plan, which excludes the first $10,200 of unemployment benefits. The IRS will automatically recalculate their taxes and refund the taxes paid on that amount of benefits.

Answer: In fact, the IRS is begging people not to file amended returns. (An exception, the IRS has said, is for those who the tax reduction would make newly eligible for the earned income tax credit or other tax breaks for lower income people.) The agency is still processing a backlog of returns and correspondence while issuing a third wave of stimulus payments and gearing up to send monthly child credit payments to millions of families.

You may need patience, however. The IRS has promised to refund any taxes paid on the first $10,200 of unemployment benefits earned last year, but has said the money will go out “this spring and summer.”