Applying some of refund to next year

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ketanco
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Applying some of refund to next year

Post by ketanco » Mon Apr 02, 2018 2:33 am

Is there an advantage of applying some of your tax refund to next year, other than not having to remember to not miss the estimated tax payment dates? If I do this when filing my tax return now, is there another paperwork or form to be filed too because of this, or we do nothing else and when doing taxes next year this amount will just carry to 2018 automatically?

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FiveK
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Re: Applying some of refund to next year

Post by FiveK » Mon Apr 02, 2018 9:31 am

ketanco wrote:
Mon Apr 02, 2018 2:33 am
Is there an advantage of applying some of your tax refund to next year, other than not having to remember to not miss the estimated tax payment dates?
No, and even the estimated tax "advantage" may not apply if you intend to do four equal payments and the refund is not the "correct" amount.
If I do this when filing my tax return now, is there another paperwork or form to be filed too because of this, or we do nothing else and when doing taxes next year this amount will just carry to 2018 automatically?
You just need to ensure the amount gets included on line 65 of Form 1040. No extra form, but it probably won't happen automatically.

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ResearchMed
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Re: Applying some of refund to next year

Post by ResearchMed » Mon Apr 02, 2018 9:37 am

FiveK wrote:
Mon Apr 02, 2018 9:31 am
ketanco wrote:
Mon Apr 02, 2018 2:33 am
Is there an advantage of applying some of your tax refund to next year, other than not having to remember to not miss the estimated tax payment dates?
No, and even the estimated tax "advantage" may not apply if you intend to do four equal payments and the refund is not the "correct" amount.
If I do this when filing my tax return now, is there another paperwork or form to be filed too because of this, or we do nothing else and when doing taxes next year this amount will just carry to 2018 automatically?
You just need to ensure the amount gets included on line 65 of Form 1040. No extra form, but it probably won't happen automatically.
Isn't the tax refund, if applied to the next year's tax, treated like IRA/etc., withdrawal withholding, and considered as payed throughout the year?
That is, doesn't it reduce the amount of tax paid, with any remaining still needing to be paid as timely withholding or through the quarterly payments?

RM
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Carefreeap
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Re: Applying some of refund to next year

Post by Carefreeap » Mon Apr 02, 2018 9:49 am

ketanco wrote:
Mon Apr 02, 2018 2:33 am
Is there an advantage of applying some of your tax refund to next year, other than not having to remember to not miss the estimated tax payment dates? If I do this when filing my tax return now, is there another paperwork or form to be filed too because of this, or we do nothing else and when doing taxes next year this amount will just carry to 2018 automatically?
We do it. The minor amount of interest we could earn over a few months (we are expecting a $100k installment in July) isn't worth the risk of incurring a penalty forgetting to make an ES by Sept 15th.

Our return is professionally prepare and there's a line (too lazy too look up) stating if you want any of your refund applied to next year's taxes.

On next year's return there will be a line for you to reference your past payments.

I have had additional payments and estimated payments mixed up before but I have to confess that it was due to my open stupidity of sending both to the same IRS P.O. Box. Eventually it was straighten out with no penalty (since they had the money in time, just not posted to the correct account). I've been a lot more careful since making that mistake.

Iorek
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Re: Applying some of refund to next year

Post by Iorek » Mon Apr 02, 2018 9:51 am

If you use the same tax software this year and next year the software should automatically carry over the prepaid amount (at least turbotax does).

I don't pay estimated tax so sometimes if I have a refund coming this year and extra income coming next year I will throw $500-1000 at next year's taxes.

Given today's interest rates I personally don't mind prepaying a little if it's convenient and avoids underpayment later but ymmv.

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FiveK
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Re: Applying some of refund to next year

Post by FiveK » Mon Apr 02, 2018 9:52 am

ResearchMed wrote:
Mon Apr 02, 2018 9:37 am
Isn't the tax refund, if applied to the next year's tax, treated like IRA/etc., withdrawal withholding, and considered as payed throughout the year?
That is, doesn't it reduce the amount of tax paid, with any remaining still needing to be paid as timely withholding or through the quarterly payments?
That's possible - haven't dived all the way to the bottom of this particular rabbit hole - but based on the Instructions for Form 2210 (e.g., see line 6 and line 19) withholding is withholding, while the application of last year's refund is treated merely as a quarterly payment.

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midareff
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Re: Applying some of refund to next year

Post by midareff » Mon Apr 02, 2018 9:55 am

I simply multiply this years number (file early) by 110% and divide by 4. Schedule EFTPS against an Ally 1.45% interest account I use to escrow for this type of stuff.

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dratkinson
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Re: Applying some of refund to next year

Post by dratkinson » Mon Apr 02, 2018 11:22 am

Is an overpayment carried forward to next year good for anything?

Yes. When the paper saving bond tax refund game was more popular, some reported that the IRS computers couldn't round to zero so they didn't receive their refund as Ibonds, instead they received a check for the same amount. So I learned from that to leave a little with uncle sugar to avoid the problem. It worked and I was a 3x winner, until I decided savings bonds were no longer the way I wanted to go.



How do you apply a portion of your tax refund this year, to next year?

The form 1040 has changed and the amount carried forward is now hidden in the difference between...
--line 75, amount your overpaid, and
--line 76a, amount you want refunded to you.

Checking the box on line 76a invokes the form to play the paper saving bond tax refund game. Leaving the box unchecked gets you a DD (if you supply your bank account information) or a mailed check.



How do you record the amount carried forward from the last tax year, for use this tax year?

It gets reported on line 65, "estimated tax payments and amount applied from last return".

Every year I've needed to ensure this entry was made in the tax s/w as it's never been made it for me. Not even when I've used the same tax produce in consecutive years.

So as a reminder, on my paper copy of my tax return, I write "Fed carry forward to next year: $XXX."
Last edited by dratkinson on Tue Apr 03, 2018 12:34 pm, edited 1 time in total.
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neilpilot
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Re: Applying some of refund to next year

Post by neilpilot » Mon Apr 02, 2018 11:39 am

dratkinson wrote:
Mon Apr 02, 2018 11:22 am

How do you record the amount carried forward from the last tax year, for use next year?

It get reported on line 65, "estimated tax payments and amount applied from last return".

Every year I've needed to ensure this entry was made on the tax s/w as it's never been made it for me. Not even when I've used the same tax produce in consecutive years.
I've used H&RB software for the last several years, and the carryover from TY2016 was entered by the software into my TY2017 return.

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dratkinson
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Re: Applying some of refund to next year

Post by dratkinson » Mon Apr 02, 2018 12:39 pm

neilpilot wrote:
Mon Apr 02, 2018 11:39 am
dratkinson wrote:
Mon Apr 02, 2018 11:22 am

How do you record the amount carried forward from the last tax year, for use next year?

It get reported on line 65, "estimated tax payments and amount applied from last return".

Every year I've needed to ensure this entry was made on the tax s/w as it's never been made it for me. Not even when I've used the same tax produce in consecutive years.
I've used H&RB software for the last several years, and the carryover from TY2016 was entered by the software into my TY2017 return.
For the last few years I've used OLT (IRS freefile option: 2015-2017). For "free" I don't mind remembering to make an entry. :)

Seem to recall needing to do it with the paid TaxACT too. (Last used in 2014.)
d.r.a., not dr.a. | I'm a novice investor, you are forewarned.

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Epsilon Delta
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Re: Applying some of refund to next year

Post by Epsilon Delta » Mon Apr 02, 2018 3:16 pm

FiveK wrote:
Mon Apr 02, 2018 9:52 am
That's possible - haven't dived all the way to the bottom of this particular rabbit hole - but based on the Instructions for Form 2210 (e.g., see line 6 and line 19) withholding is withholding, while the application of last year's refund is treated merely as a quarterly payment.
Unless you are dealing with some serious weirdness, It's treated as a first quarter payment. A first quarter payment is more favorably than withholding, except possibly in the amount of detail that needs to be waded through to see that a first quarter payment is better, or at least no worse, than an equal amount of withholding.

One of the advantages of applying a refund as a first quarter payment is if you need to file an extension. The applied payment is still counted as a first quarter payment even if you don't file your return until October. This is better for your cash flow than making a separate first quarter payment and then getting your refund around thanksgiving.

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FiveK
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Re: Applying some of refund to next year

Post by FiveK » Mon Apr 02, 2018 6:49 pm

Epsilon Delta wrote:
Mon Apr 02, 2018 3:16 pm
A first quarter payment is more favorably than withholding, except possibly in the amount of detail that needs to be waded through to see that a first quarter payment is better, or at least no worse, than an equal amount of withholding.
Well, it depends on the metric one uses. No estimated payment, made in the first quarter or otherwise, can preclude the need to file Form 2210 as well as withholding can.

Once one has a spreadsheet built, 2210 doesn't seem all that bad, but there are those who would prefer a root canal than have to deal with it.

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Epsilon Delta
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Re: Applying some of refund to next year

Post by Epsilon Delta » Mon Apr 02, 2018 10:20 pm

FiveK wrote:
Mon Apr 02, 2018 6:49 pm
Epsilon Delta wrote:
Mon Apr 02, 2018 3:16 pm
A first quarter payment is more favorably than withholding, except possibly in the amount of detail that needs to be waded through to see that a first quarter payment is better, or at least no worse, than an equal amount of withholding.
Well, it depends on the metric one uses. No estimated payment, made in the first quarter or otherwise, can preclude the need to file Form 2210 as well as withholding can.

Once one has a spreadsheet built, 2210 doesn't seem all that bad, but there are those who would prefer a root canal than have to deal with it.
Read the flow chart at the top of form 2210. Owing a penalty does not trigger a 2210. The timing of estimated tax payments also does not trigger a 2210. The IRS knows when estimated tax payments are made, so there is no need to tell them. Indeed the only payment timing that can trigger a 2210 is the timing of withholding (since the IRS does not have the detailed timing of withholding).

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FiveK
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Re: Applying some of refund to next year

Post by FiveK » Mon Apr 02, 2018 10:38 pm

Epsilon Delta wrote:
Mon Apr 02, 2018 10:20 pm
Read the flow chart at the top of form 2210. Owing a penalty does not trigger a 2210. The timing of estimated tax payments also does not trigger a 2210. The IRS knows when estimated tax payments are made, so there is no need to tell them. Indeed the only payment timing that can trigger a 2210 is the timing of withholding (since the IRS does not have the detailed timing of withholding).
Ok, reading line 6: Withholding taxes. Don’t include estimated tax payments

Back to you. Remember the question that started this: "Isn't the tax refund, if applied to the next year's tax, treated like IRA/etc., withdrawal withholding...?" The answer to that is "no" - correct?

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