Back in the days of stimulus money, the IRS says I received more than I did. On my return, we reported the amount I actually received. They sent me a letter saying I failed to report an additional stimulus payment and I need to pay tax on it - but I never received the payment.

My CPA was able to obtain knowledge that it was supposed to be on a prepaid debit card in the mail. I receive scanned copies of my mail by email each morning. I was able to locate the email where it had a picture of the mail in question, the prepaid debit card - but I never received the prepaid debit card. I called USPS and you know they are worthless. My neighbor at the time worked for USPS and she commented that mail theft was increasingly common, particularly in our area, but they hadn't figured out the issue yet. I documented all of this, sent to my CPA, and he attempts to get the IRS to correct the situation. Time goes on.

My CPA finally found someone at the IRS that could see it was a prepaid debit card and that the funds were never used. Per the IRS person, they sent me the prepaid debit card so I must be taxed on it - regardless if I chose to use it or not. The IRS says it's not their problem that I didn't receive it in the mail. Time goes on, my CPA keeps trying to find someone with some sense to either re-issue the money or excuse the tax on money I did not receive.

Last week I got a letter from the IRS that my outstanding tax was being turned over to collections. I decided to pay it and the penalty and then have my CPA write another letter to the IRS.

Do I have any other options here? I would love to either get the money they claim to have given me or receive a refund for the tax and penalties I paid. Tax and penalties was just under $400 so the issue at hand is the principle of the matter, not necessarily the money.

Or do I just have to suck it up and be out the money, thanks to our government?

I've had a couple of those prepaid debit cards that were rebates for something I bought lost in the mail. It was fairly easy to get them canceled and reissued. If you can figure out contact information for the card issuer that might be easier than fighting the IRS for a refund.

agcot12 said:

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I've had a couple of those prepaid debit cards that were rebates for something I bought lost in the mail. It was fairly easy to get them canceled and reissued. If you can figure out contact information for the card issuer that might be easier than fighting the IRS for a refund.

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Now that's an idea. I called them once about it back when this came up the first time. Now if only I can remember who was the issuing company…

So I was able to request a replacement card through an automated system. Awesome, right?! Well, we moved since then. I finally remembered the name of the guy that bought our house and sent him a text. Fingers crossed it shows up in "7-10 business days."

Why did you owe tax on stimulus checks in the first place?

94chem said:

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Why did you owe tax on stimulus checks in the first place?

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As I remember it, which could be a dangerous thing, the stimulus monies were based on a prior year return and sent out. It was a prepayment so to speak. Then when you did your current year return you claimed your actual stimulus payment which could be more or less than the prepayment amount received. Or something along those lines.

My gosh, this is insane. They know exactly what they're sending you when they Xerox the money, then they blame you for not sending it back. Even more crazy that we have an entire profession dedicated to accomplishing nothing in this life except understanding this insanity, and most of them are taking the same shot in the dark that I would.

one safe place said:

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94chem said:

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Why did you owe tax on stimulus checks in the first place?

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As I remember it, which could be a dangerous thing, the stimulus monies were based on a prior year return and sent out. It was a prepayment so to speak. Then when you did your current year return you claimed your actual stimulus payment which could be more or less than the prepayment amount received. Or something along those lines.

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The stimis were an advance on a tax credit given to you. On your tax return, you were supposed to show the advance as a reduction of what you paid (credit) for your tax, thus reducing the refund or increasing the payment on the filing with the IRS. If you didn't show it, then you basically got more refund (or paid less tax) than you were supposed to.

It's kind of looking at the whole thing in reverse, but the short version is that if you didn't show it, you didn't pay the amount you were supposed to. So technically, the stimulus was NOT taxed.

Did your CPA try working to resolve it though the taxpayer advocate program?

He has worked to resolve every way he knows how but I'm not sure if he used that particular program.

I did talk to my CPA after I requested a new card. He was upset that the IRS never offered that solution after his multiple attempts to resolve. We'll see if it actually works!