Refund of estimated income taxes

[JON]

Client applied way too much to 2008 income taxes. Year is terrible and will not get return done (2008) until sometime next summer. Is there any way to get some of the estimate back? 1040X? He(we) did not try to be protective for 2008 estimate, but left $40,000 in and he now realizes how bad the year is going to be.

Thank you.

[Burke]

Nope. Once it is applied, it is the same as if he wrote them a check and mailed it. You only get it back when you file (and there is an overpayment.)

[Beth]

Refund of estimated income taxes

You might file really early and get the refund, then file an amended later in the summer...

[thomtax]

You might file really early and get the refund, then file an amended later in the summer...

Beth - I'm not saying that I completely disagree with you, but just playing "devil's advocate", how much do you not put on the original return to get the refund without filing a fraudulent return? Based on the fact that you intend to amend it later, you will obviously have knowledge that the return is incorrect.

I'm not saying that in certain circumstances I would completely rule it out, but think that this is something that should be considered before making this decision.

LT

[Lion]

Bad Year

If it's a bad year, you might be able to get numbers quickly, especially if little activity from now to the end of the year. Or, if the numbers are very low, estimations would be pretty close by 2 January. Poster already knows that $40,000 is too much tax, so client might have enough information to file fast.

[Beth]

Refund of estimated income taxes

I am suggesting only you file what you believe may be real as early as possible.

As I understand it, estimates were over paid, so I am assuming revenue is not what was expected. Filing what you think is real, then amending is the only logical way to get what is expected to be refunded.

I agree, you certainly do not want to file a false return just to get a refund.

[Burke]

I thought of that too, and discarded the suggestion. I don't know of a preparer who would be willing to sign off on a return under the new code of ethics rules knowing they were just guessing at numbers. Same goes for suggesting taxpayer do it himself. After all, you don't know if he would ever file the amended, for one thing.

[fliszt]

Years ago I asked

the same question about filing a return early in order to get client's money back and then filing an amended return later and was told that was illegal. I never saw the Pub but would guess it's in the ethics section.

[Lion]

Burke

But, Burke, why would you leave the amendment to the client? You'll know the final numbers by the time you do the amendment. Why would you refuse to do the amendment? You should have no trouble signing it as accurate.

If the poster already knows that the taxes are too much for the income expected, why can't you have final numbers in time to file a tax return before next summer? If his business was much less, you should have income and expense numbers in much less time than usual.

[taxea]

Refund of estimated income taxes

Did I miss something? I thought the original post stated that the estimated payment was made by a retention of the prior year refund. If this is so I would suggest either amending the return or filing a refund request form with a letter of explanation.

I gotta tell you, though, it could take up to six months for the IRS to process this and that would put you in the middle of the upcoming tax season so you may as well leave the estimated tax there. Client will probably recoup the money faster with 2008 return than by any other means.taxea

[JohnH]

You're right. Any sort of filing which requires special handling at this time has a high probability of doing nothing but gum up the works. A few days ago I was asking IRS about a transcript for an amended return filed 6 weeks ago, and the person candidly told me it could be sometime after the end of this year before the 1040X will be processed. This is primarily due to Stimulus Payment spillover and end-of-year issues related to gearing up for the upciming filing season (and maybe more meddling by Congress before 12/31). The last thing your client wants is to have the refund held up in the system in limbo because a 1040X is being processed but unpaid while at the same time he's trying to claim the credit on the 2008 return.

Your client would be much better off to get ready to file as soon as possible after Jan 1.

[Burke]

Did I miss something? I thought the original post stated that the estimated payment was made by a retention of the prior year refund. If this is so I would suggest either amending the return or filing a refund request form with a letter of explanation.

Won't work. You can amend the return to change information, but you cannot retrieve the taxes already applied to the next year.

[Burke]

But, Burke, why would you leave the amendment to the client? You'll know the final numbers by the time you do the amendment. Why would you refuse to do the amendment? You should have no trouble signing it as accurate.If the poster already knows that the taxes are too much for the income expected, why can't you have final numbers in time to file a tax return before next summer? If his business was much less, you should have income and expense numbers in much less time than usual.

I would not refuse to do the amendment. My point was that if you either did the original return, or suggested that the TP do it himself so that you did not have to sign off on it, you had no guarantee that he would return to you to do the amendment. Other things could also occur, say, perhaps he died in the meantime. What incentive would his heirs have to take care of it (or even know it needed to be taken care of)?

[Roland Slugg]

Although some might do as suggested above, I would not agree to prepare a return early, knowing some information was incorrect or missing, with the "real" return to be filed later. Instead I would encourage the client to do his best to get all needed information as soon as possible so a correct return could be prepared and filed at the earliest possible date.

It's worth noting that corporations can request a quick refund of overpaid taxes by filing F-4466 after its tax year ends ... even the very next day ... but not later than 2½ months after the year-end. Such refunds (if legitimate) will be made within 45 days after F-4466 is filed (Code §6425(b)(1) and (2))