47.8 Penalty for Filing Excessive Refund Claim

A 20% penalty can apply to an excessive claim for refund or credit that you claim on an original return (46.4) or amended (47.1) return. The penalty is 20% of the “excessive” amount, the excess of the refund or credit claimed over the amount allowed. For example, assume that you mailed your 2011 Form 1040 to the IRS on April 13, 2012, and included a $400 check to cover the tax due. On June 10, 2013, you file an amended return and claim a $2,000 refund based on an increase in itemized deductions. The IRS reduces the refund to $1,000. If you cannot show that you had a reasonable basis for making the additional $1,000 claim, the IRS will assess a penalty of $200 (20% of the $1,000 excess).

There are exceptions. The penalty does not apply if the claim has a reasonable basis. It does not apply to claims relating to the Earned Income Credit (25.10) or to any portion of the excess that is subject to the accuracy-related penalties (including the penalty for understatements due to reportable or listed transactions), or the fraud penalty, discussed at 48.6.