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What should I do in a case like this? I'm thinking of calling them and saying "Look, it's not my fault you messed up ... I don't have much extra money but I can pay you $100 a month..." or something like that. Will that work? I'm going to go over all of this with my accountant but it looks like they just totally screwed up. AND now they are trying to say that I owe penalties and interest too!

Step one is to figure out what you're dealing with. There are two types of erroneous refunds: assessable and unassessable. Unassessable erroneous refunds can only be involuntarily collected by suit initiated within 2 years of the refund. Assessable ones can be collected in the same manner as tax. You are in a much stronger position if it's unassessable, given the difficulties of bringing suit.

Clear this up first with your accountant. If (s)he doesn't know what you're talking about, find someone who does. I'd suggest a search at for some leads.

Phil Marti
Retired IRS Collection officer
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