Which Year is Which?

[buzzardbreath]

Client pays estimated taxes every quarter.

Filed an amended return for 2011 resulting in a large refund. In accordance with the instructions on Form 1040-X, we applied the refund to 2013 estimated taxes.

But instead, IRS mailed him a check. By the time everything was processed, it was May 25th. Client did not cash the check but returned it to gov't, and again asked that it be applied to 2013 estimated taxes.

After two letters which said they needed more time to research his request, they finally responded and said the amended return could only be applied to the next year (2012) and that's why they sent the check. They DID apply the returned check to his 2013 estimated taxes, but with an effective date of May 25th.

This effective date means that he will be 40 days late to the extent his credit should have began effective April 15, 2013. This will cause him a penalty. But the line item on Form 1040-X allowed him to credit any year he so desired.

If you've read this far, thank you. But why would they deny treatment if the Form allowed it?

[JohnH]

IRS has a hard enough time keeping things straight year-over-year. To ask them to skip a year like this is just inviting trouble. I'm not defending them, just being a realist.

The client compounded the problem by returning the check. He should have cashed the check and then mailed his own check to pay the estimated tax. He will be lucky if there aren't additional problems resulting from this mistake. Best thing to do would have been to stop obsessing about the estimated tax penalty - it's a relatively small matter in comparison to the many ways IRS can mess this up.

[Roland Slugg]

Client pays estimated taxes every quarter.

Filed an amended return for 2011 resulting in a large refund. In accordance with the instructions on Form 1040-X, we applied the refund to 2013 estimated taxes.

In accordance with the instructions? Better look again. Here's what the instructions say:

Line 22—Overpayment Applied to Estimated Tax Enter on line 22 the amount, if any, from line 20 you want applied to your estimated tax for next year. Also, enter that tax year in the box indicated. (Emphasis added.) The reason you need to enter the year is because F-1040X can be used for multiple years.