What should a taxpayer do if the IRS sends a refund that seems wrong while an old balance is still unresolved?

Question

AcadiFi · Accepted Answer

If a refund appears inconsistent with the taxpayer's actual account history, the safest move is to verify before using the money. An erroneous refund can create a second problem if the taxpayer assumes the payment is final and then spends it. The practitioner should compare the notice with the taxpayer's account records, review any installment agreement status, and verify whether the refund reflects a real credit, offset reversal, or processing mistake.

Example: Harborline Design still owes about $10,400 from a prior business debt and is paying under an installment arrangement. A current-year return based only on W-2 wages would not normally suggest a surprise refund of $7,800. Before touching the funds, the taxpayer should review transcripts, confirm whether the account shows a legitimate overpayment, and contact the IRS or the taxpayer's representative channel if the refund seems inconsistent.

The EA principle is simple: questionable refunds are verification problems first, spending decisions second. A refund check or deposit is not proof that the IRS meant to forgive or forget a separate liability. In practice, leaving the funds untouched in a separate account is often the safest short-term move. Document the discrepancy, confirm the account, and only then advise the taxpayer how to proceed. Practice more in our EA question bank.

What should a taxpayer do if the IRS sends a refund that seems wrong while an old balance is still unresolved?

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