I've seen a similar situation where the IRS posted estimated
payments to the wrong year (similar in that penalties &
interest were assessed when there should have been enough to
pay the tax due). Finally got it straightened out but had
to go through the taxpayer advocate's office and took almost
a year.

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Lance Mannion wrote:

- quote -

Over the years, I've had similar situations with clients'
returns. I have always told these clients to file the
returns in order and a week or so apart. This is to give
IRS time to process the return with the overpayment before
the later return gets into the system.

I've never had a client ignore this advice, so I've never
had the specific problem. However, from what I know of IRS
policies and procedures, I doubt you can get them to change.

What you may be able to do is to get IRS to abate penalties
and interest on the subsequent return(s). I have had them
make adjustments to their assessments on this basis.

Lanny K. Williams, CPA
Nawarat, Williams & Co., Ltd.
Income Tax Services for Expatriate Americans

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On April 1, 2004, I submitted returns for 2000 and 2001. I
elected to carry forward 2000's refund of $8,000 to 2001.

However, they processed 2001's return first, and so they
sent me a letter regarding the 2000 return saying: "Your
2001 tax return has already been processed. We are not able
to apply credit elect to a tax year for which a return has
already been filed and processed".

At the walk-in office today, they said I should be getting a
check for the 2000 refund (it was lost, and I had to submit
a Form 3911). But they weren't sure I could "refuse" the
check when I get it, and apply the credit to 2001, (as I
originally elected on the 2000 return) which is what I
prefer, to prevent heavy penalties on the 2001 return.

Is this just a processing issue that I can request they
resolve at the walk-in center when I get the 8k check?

Thanks

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