The “Joy” of 1959 Technology

Clients of ours (call them John & Betty) just received their IRS refund.  It was off by $1,250, exactly the amount of an estimated tax payment they made.  They made that payment using IRS Direct Pay (and I saw their transaction receipt), so it wasn’t a question–as it often is–of whether or not the clients made that estimated payment.  Why didn’t the IRS see that estimated payment?

Betty made that estimated payment in early January, noting it was for the 2023 tax year.  She used her social security number, so she did everything correctly.  However, she didn’t reckon with the IRS’s antiquated technology: The main IRS computer system dates to 1959.

You read that correctly.  The main IRS computer system is likely older than most of the readers of this blog.

On John & Betty’s tax return, John’s name is listed first (along with his social security number).  Betty made that estimated tax payment using her name and her social security number.  “But my name is right on the tax return; why can’t the IRS match that payment with the return?”  There is no good answer to that question, but the correct answer is because the main IRS computer system dates to 1959 and cannot handle this.

There was another issue with their refund: they received no explanation of why their refund was short $1,250.  I explained to them that the refund is issued from one IRS office while the explanatory notice comes from a different IRS office; the notice can come four weeks before to four weeks after the refund.

“How do we get that refund?” Betty asked.  The only way is to call the IRS, explain the situation, and the IRS agent can verify that the estimated payment is sitting in Betty’s account and move it.  It will then process, with a second refund being issued (by check) with interest.  John asked, “We’ll really be paid interest on that?” I told them they will–interest works both ways–but that interest is taxable.

I told them to prevent this in the future they should use John’s social security number for making estimated payments.  They’ll do that this year.  But this exposes another issue: What should taxpayers do who sometimes file jointly ans sometimes file separately do?  There’s no good answer today for them (nor is there for taxpayers having marital issues); my current advice is to make estimated payments under each name/social security number but realize a phone call to the IRS will likely be needed after the return is filed and processed.  The long-term solution is for the IRS to have better technology.  That’s coming, but whether it will come soon is quite another question.

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