The IRS is holding our stimulus money plus approximately $5000 refund from our 2007 taxes. The reason for the hold is that we didn't realize that a change in our investment meant that a portion of it was considered income in 2005 and 2006. We have been through several hoops and have been told to re-amend the 2005 taxes. Why won't they accept our direction to deduct taxes owed from the refund they owe us? They keep adding interest instead. Please help us get through this. -Lynda
It is standard for the IRS to not issue refunds or stimulus payments if you have an outstanding balance with them. It's likely that they're not applying your refund yet because the amount you owe is still in dispute.
From what you've said about amending, it sounds like you don't necessarily agree with the amount of tax the IRS says you owe. I recommend that you file your amended returns as soon as possible so you can get closer to a resolution with the IRS. The sooner you and the IRS agree on an amount due, the sooner they can apply your refund to what you owe.